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Bankruptcy and protected assets

When Florida residents are trying to deal with large amounts of debt, there are several debt relief options that are available to them. If someone is not making enough money to be able to realistically pay back what they owe, they may consider filing for bankruptcy. The benefits of bankruptcy are that people's unsecured debts can be mostly or completely wiped out. In many cases, individuals are not required to pay anything else to creditors after filing.

It is important to note that while bankruptcy may not require someone to pay anything else to their lenders after debts are discharged, there are some cases where their assets may be used to help pay off their debt. There are times where people may be required to sell assets, such as boats or real estate, to reduce what they owe to creditors as a part of their bankruptcy. Money in people's checking and savings accounts may also be used to this end.

However, there are some assets that are exempt from being used to reduce debt, such as 401(k) retirement accounts. Even if someone has a large amount of money invested in one of these accounts when they file for bankruptcy, the money will not be touched. This means that someone who is older can still file for bankruptcy and expect to retire at a reasonable age.

Each state has their own rules for how assets are handled during a bankruptcy. A lawyer could help someone understand what property of theirs is safe and what could be used to pay off a creditor. Additionally, lawyers could also help ensure that bankruptcy paperwork is filed correctly.

Source: Fox Business, "Will my 401(k) be Safe if I File for Bankruptcy?", Justin Harelik, June 19, 2013

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