Senior raids retirement account
CLIENT is 65 and still works as a registered nurse with $70K annual gross. She divorced 5 years ago. At that time, there was community property credit card debt of $60K. By divorce judgment ex-husband was to pay half, but never did. Client made monthly payments of $1900 for the last 5 years to keep the cards current to protect her credit score. She had no problem paying until 3 years ago when she lost a 2nd job from which she derived $30K of additional income. Obsessed with protecting her credit score, she raided her $200K retirement account to make the $1900 minimum credit card payments. Thus, in the last 3 years, she liquidated $68K of her retirement account to keep her credit cards happy. But then, last month, she audited her credit card debt and was surprised that she still owed $60K of principal, after having paid $68K from her retirement account! It was a double whammy, so to speak. She used retirement account money, which is for what? For her retirement, that’s why it’s called a retirement account. She used retirement money to pay interest on credit card debt. That’s a big mistake.
It’s a big mistake because retirement accounts are exempt under bankruptcy law up to $1.0 M, and credit card debts can be wiped out in bankruptcy. If client did not liquidate $68K of her retirement account, she would still have that cash in her 401K, growing at a healthy rate. If she had not used the $68K, if it grew at 8 percent a year, it would have grown to $85K in 3 years, and she would still be able to get rid of the $60K credit card debt now with a Chapter 7. Her retirement account will have a larger amount, she would not have paid taxes to the IRS for $68K of 401K liquidation of income in the last 3 years, and she will wipe out all of her credit card debts now with a Chapter 7 discharge.
She only realized that she made a big mistake by raiding her retirement account to pay for credit card debt, when she saw that her $70K salary would be reduced by half, when she stopped working next year, and starts receiving social security. If she had not raided her retirement account the last 3 years, her 401K now would be close to $280K. Instead, her 401K is now only at $175K. As a senior about to retire, she should be able to depend on her 401K giving her income in addition to social security. Her mistake in raiding her retirement account means she has $85K less in her retirement. Even at 5 percent annual growth, that $85K she used up to pay interest on credit cards would generate another $300 of monthly income. She can certainly use $300 of monthly income in retirement. To add insult to injury, she still owes the same $60K of credit card when she divorced, after paying $68K of minimum payments in the last 3 years! Fortunately, she can rely on a Chapter 7 discharge to get rid of those credit cards and retire in peace, although with $300 less money in her pocket every month during her golden years. Besides, after 10 years when she is 75, her credit score would be perfect again because after 10 years, bankruptcy is removed completely from credit report. Even after 3 years, her credit score will be about 650 which is not that bad. On the 4th year, it will be 680, which is ok. On the 7th year, it will be 730, which is very good.
Undocumented immigrants qualify for Obama amnesty
The OBAMA AMNESTY which allows people who are here without legal status provided they have a qualifying child who is an American citizen or legal permanent resident, to get a work permit valid for 3 years and renewable for periods of 3 years per renewal is getting into higher gear because the USCIS was directed to start accepting applications by February 19, 2015. A typical circumstance that is often asked is does an undocumented immigrant qualify under this executive order? Most people enter the United States with their foreign passports. Once they enter, whether by plane, boat or car, they present their passport to immigration at the port of entry whereupon a record of their entry is made. If this is how you entered the United States, you have official documents to show how you entered. You have your stamped passport or your I-94. But what if you crossed the border illegally from Mexico, after having flown there from your country of origin? Or, what if the passport you used to enter the United States used a name that was not yours because that passport already had a visa stamped on it? In other words, you assumed another identity when you entered the United States. Under these circumstances, can you still qualify for amnesty and get your work permit?
Assuming you meet all the other circumstances required by the executive order to qualify, you should be able to get your work permit. However, applications are decided on a case-to-case basis. Thus, I suggest you see a lawyer you are comfortable with to prosecute your case.
“You are my Lamp, or Lord; the Lord turns my darknewss into light.” – 2 Samuel 22:29.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointme nt at 1000 S Fremont Ave Mailstop 58 Bldg A-1 Suite 1125 Alhambra, CA 91803.
