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Will I lose my retirement account in a bankruptcy?

While the United States economy appears to be in a fairly good state at present, there are still many Kentucky residents who are struggling with out of control debt loads.

Many of these individuals could potentially benefit from filing for bankruptcy to get their finances back in order, yet for various reasons, some still hesitate to take the plunge. One of the reasons may be that they worry that their retirement accounts and pensions will be wiped out in a bankruptcy filing. Should they be concerned?

Avoiding Chapter 7 in credit card debt cases

Most American households carry some form of credit card debt. Here in Kentucky and elsewhere in the nation, however, this debt can take a serious financial and psychological toll on those who carry it. Understanding how credit works and how best to pay it back is the first step toward solving a debt problem, in advance of more involved solutions like Chapter 7 bankruptcy. 

Research conducted by a prominent financial publication suggests that, of all households with credit card debt, some 35 percent made only the minimum payment toward their bill each month, with a further 8 percent making less than the minimum. This is widely regarded as the worst way to pay down credit debt, as paying less than the minimum can count as a missed payment, and paying the minimum typically covers the accrued interest, with very little going toward the principal. In addition, paying only the minimum means it will take years and sometimes decades to pay down the principal.

Handling credit debt in advance of Chapter 7

The average household in the United States spends thousands of dollars every year on what many refer to as "nonessentials," including entertainment, dining out and subscription services. Here in Kentucky and elsewhere in the nation, those with credit cards are statistically more likely to spend even more than the average on these items. Before those expenses turn into debt that can only be solved through Chapter 7 bankruptcy, there are several ways consumers can cut back. 

Often, people will hear the old refrain about not buying a latte every day, but some financial experts suggest that these minor cost-cutting measures are less useful than advertised. Granted, saving $6 a day can add up over a long span of time, but from a month-to-month standpoint, this generates very little wiggle room for the average family. It's more important to pay attention to larger expenses, especially those that may be billed automatically. 

Seeking debt relief through Chapter 7 and other options

Debt is no stranger to the American people, with credit card debt and medical debt making up a large portion of the amount owed on a national scale. Recently, one Reddit user revealed that a medical emergency led to him accruing some $16,000 in debt by the time he was in his late 20s. This is a common situation for many Kentucky residents who may be seeking relief from serious debt issues. There are a variety of ways to tackle debt depending on the severity of the amount owed, from planning effectively for the future to Chapter 7 bankruptcy protection. 

Mindset is one of the most important elements when it comes to paying down debt. Many experts agree that the idea of paying debt down "later" is an unhealthy one, leading many people to continue negative spending habits. A good start to dispelling this mindset is to create a comprehensive list of all monthly expenses, from rent and car payments to gym and streaming service memberships. Understanding where money is going is a great first step to determining how to fix debt. 

Chapter 7 just one form of debt relief

Most Americans carry some form of debt, with medical bills and credit card debt often being the most prominent. Here in Kentucky, some residents are finding it harder and harder to pay down the debt they have accrued. Thankfully, there are a variety of ways to handle mounting debt that are not just limited to Chapter 7 bankruptcy. 

One possible option is to consider a balance transfer. This involves moving all outstanding balances from multiple credit cards onto a single card, preferably with a lower interest rate. Some cards offer introductory APRs that allow zero interest for a given time period, which can allow a borrower to pay down the principal balance of his or her debt without being waylaid by interest payments. It is important to note that a transfer fee amounting to a percentage of the balance being transferred is sometimes applied, depending on the card. 

Steps to take after losing your job

If you are a Lexington resident who just lost their job, whether it was a planned lay-off or came like a bolt out of the blue, your personal world has been rocked. The shock of sudden unemployment can leave you feeling as dazed as a deer caught in the headlights of an approaching semi.

While it certainly might feel like it's the end of the world, rest assured that it is not. Below are some steps you can take to minimize the negative consequences of a job loss and regain your financial equilibrium.

Millennials may turn to Chapter 7 for debt recovery

For years, the so-called millennial generation eschewed credit cards in favor of paying down mountains of student debt. But more recently, young adults in Kentucky and elsewhere have fallen prey to the siren song of credit cards to help make ends meet. As a result, they now inhabit the demographic most likely to require debt forgiveness plans like Chapter 7 bankruptcy in order to dig their way out of unmanageable debt. 

Credit card debt is, of course, one of the most insidious forms of debt. It contributes little to equity and with high interest rates, it is notoriously difficult to pay down. With an average national interest rate of some 17%, many millennials are finding themselves increasingly stuck paying very little toward their principal, as monthly minimums usually only cover the card's interest fees. 

Managing credit debt a potential option before filing Chapter 7

Despite an uptick in the national economy, many American households are still laboring under the burden of credit card debt. According to some sources, the average Kentucky debt is somewhere around $6,500 per card. This has caused concern for consumer advocates, who worry people will find themselves in a serious financial position should the economy slow. While Chapter 7 bankruptcy is always an option in cases of significant debt, there are other options available as well to curb the tide. 

One possible strategy for those struggling to make credit payments is to reach out to the creditor directly. In some cases, a credit card company will agree to a temporary interest reduction or a lower minimum payment. This is widely regarded as a good first step toward mitigating debt. In other cases, seeking support from a reputable nonprofit credit counseling agency can be helpful as well. This can help many people in debt learn to budget to make more payments. 

Chapter 7 not the only way to discharge debt

Many Americans are keenly aware of the prevalence of credit card debt in modern society. In fact, most families in Kentucky carry some form of credit card debt, sometimes into the tens of thousands of dollars. There are a variety of ways to tackle debt of this nature, including filing for Chapter 7 bankruptcy, but it is always worth looking into multiple options before deciding on a course of action that best suits the borrower. 

For example, a balance transfer is an underused form of debt consolidation that only some 38 percent of responders to a survey have actually attempted. A balance transfer involves moving the balance on one or more high-interest cards to a card with a lower interest rate, or one which offers a zero % interest rate for a set period. The idea is to transfer the balances onto such a card and then pay down as much debt as possible while not paying interest. 

Personal loans, Chapter 7 and other ways to clear debt

For some Americans, credit card debt has become a major day-to-day problem. Thankfully, Kentucky residents can rely on a variety of different options for helping to pay down this debt. For some people, a personal loan is a good place to start. For others, debt consolidation or a Chapter 7 bankruptcy filing may be a more appropriate option. 

Personal loans are widely regarded as a positive tool in the journey toward debt reduction. For one thing, personal loans typically have lower interest rates than credit cards. A personal loan can start as low as 5% interest and usually does not require collateral. Finally, a personal loan is amortizing, which means every amount paid is put toward the principal and interest. 

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