Filing for Bankruptcy in Retirement

Retirement is supposed to be a time to relax and enjoy the fruits of your lifelong labor. Unfortunately, new research shows that retirees appear to be turning to bankruptcy more frequently to help them resolve their debts.

A University of Michigan law professor documented the rise of retirees filing for bankruptcy over the last few years. This research shows retirees are increasingly burdened with credit card debt. Mounting interest charges and late fees can spell financial disaster.

Filing for bankruptcy can be a promising solution for some retirees. Bankruptcy offers the chance to discharge unsecured debt, such as credit card and medical bills. For retirees, these two categories often account for a substantial portion of outstanding debts. In many cases, these debts can be wiped clean. Or, depending on your financial status, you could only have to pay a small percentage of the amount owed.

An important concern for retirees is protecting Social Security and retirement accounts. In Chapter 7 and Chapter 13 bankruptcy, your retirement accounts are protected. Funds in 401(k) and 403(b) accounts are protected, as well as profit-sharing, money purchase or defined-benefit plan benefits. IRAs are protected for all amounts less than approximately $1.2 million.

While bankruptcy has restored financial health for countless retirees, it is not the right decision for everyone. A careful review of your financial situation can help you weigh the pros and cons of filing for bankruptcy. Our attorneys at Harold Shepley & Associates are available to answer your questions about debt relief. You deserve a happy and stress-free retirement, and we are here to help.

By Harold Shepley | Published June 14, 2013 | Posted in Chapter 13, Chapter 7 | Tagged 401(k) and 403(b) accounts, bankruptcy in retirement, chapter 13 bankruptcy, chapter 7 bankruptcy, IRAs less than $1.2M, social security and retirement | Leave a comment