Breaking the Bank to Avoid Bankruptcy

Image courtesy of  TravisJuntara  (Flickr)

Image courtesy of TravisJuntara (Flickr)

“Breaking the bank” is an idiom that is used when one makes a purchase exceeding one’s budget.    

I did not know this, but “break the bank” is actually a gambling term used to describe the (rare) situation when the casino bank does not have the cash to cover the winning bet.  I was not aware this could happen but okay.  

I was incorrectly under the impression that this term referred to the “childish behavior” of smashing a piggy bank to get at the coins inside.    

I prefer to think of this term in this more literal sense.  When I hear “break the bank,” I think of someone literally breaking their bank to access needed money to fund a purchase, service or to pay off a bill.

This is sometimes very bad.

The Powerful Piggy Bank

Too many individuals are financially illiterate and I blame that on the complete lack of financial education in our society today.   

Financial education must start at home (as it exists nowhere else) and the piggy bank is typically a child’s first introduction to personal finance.  It is strategic, empowering and teaches the most basic (but also the most valuable) lesson of personal finance.

The piggy bank teaches you to save for the future.  It holds actual, physical money.  It’s plain, simple and effective and it is undeniable that breaking the piggy bank has consequences.  

Retiring With the Piggy Bank in Tact

As adults we no longer save our money in piggy bank.  Our version of the piggy bank is our retirement savings.  Too many people have none, but that is a discussion for another day.

Many are enrolled in mandatory or voluntary retirement plans through their employers.  Others started saving early for retirement and have built up a decent portfolio.  

Unfortunately too many people deplete their retirement savings well before retirement to pay off debt.  Nothing breaks my heart more than when I consult with an individual who has pulled money out of their retirement in an attempt to pay off debt and avoid bankruptcy.  

You see, under Montana law, retirement accounts are typically 100% exempt from creditor confiscation in bankruptcy.  

So, by selling off your retirement funds to pay back debt, you are transferring to your creditors money they would have otherwise had no ability to access.  You have converted an exempt asset (the retirement) into a non-exempt or partially exempt asset (cash).  

You have essentially broken your bank and that should not have happened.   

Before deciding to cash in hard earned and properly saved retirement funds, consult with an experienced bankruptcy attorney to explore all of your options.  

Do not break the bank unnecessarily.