Showing posts with label Declaring Bankruptcy. Show all posts
Showing posts with label Declaring Bankruptcy. Show all posts

Saturday, June 5, 2021

4 Things Seniors Should Know About Declaring Bankruptcy After You Retire

You are sure of certain things in your working life: growing older and accumulating all your savings in the bank. Many seniors desire to reach their retirement age with enough savings in their accounts to sustain a comfortable life. 

However, that is not the case for those who retire with debts. Faced with increased healthcare costs, decreasing pensions, low income, and high tax rates, seniors have to rely on what they have in the bank and social security. 

When there is an imbalance in their savings and debts, they opt to file for bankruptcy. While the procedure helps relieve them of some cash straps, there are other concerns to consider.

Chapter


There are two key consumer bankruptcy protection types: Chapter 7 and Chapter 13. When you file bankruptcy with Chapter 7, you don’t have to deal with a debt repayment plan

Instead, all of your assets are liquidated and used to pay off as much of your debt as possible. If the value of your assets doesn’t cover the entirety of your debt, the remainder is dismissed. 

When you file bankruptcy with Chapter 13, you retain all your assets but commit yourself to repay your creditors a certain amount of money in a period of three to five years. The courts will decide on a payment plan for you.




When you file, you get to choose which type of bankruptcy to choose. However, there are some limitations to this. There is a means test to decide if you qualify for Chapter 7 bankruptcy. If your income is too great, you will be required to file for Chapter 13 instead.

Assets and Exemptions


Seniors should weigh the effect of declaring bankruptcy on their assets. All states have particular laws governing what is exempted during a bankruptcy case. 

Depending on where you reside, you can substitute federal exemption guidelines. Some of the assets that would likely be exempted in your case include a vehicle, home equity, clothing, and work-related equipment. 

Each exemption is associated with a certain amount of dollars. Homeowner retirees should pay attention to their state rules on homestead exemptions. Several states allow you to exempt a certain amount of money for your home value, while other states let you exempt any amount.

Retirement Income


As mentioned earlier, if you don’t qualify for Chapter 7 bankruptcy, you will have to file for Chapter 13 bankruptcy instead. However, one thing to keep in mind when doing the means test is that your social security compensation is not considered income, which can make it easier for seniors to qualify for Chapter 7. 



Additionally, pensions, 401k plans, annuities, and a certain part of a traditional or Roth IRA plan will all be exempted.

If you’re not sure whether bankruptcy is right for you or which type of bankruptcy you should file for, talk to a bankruptcy attorney. They can give you advice about what would best fit your specific situation. They can also help you in filing and working with the courts.

Filing for bankruptcy in your retirement is beneficial if you have substantial debt and do not have enough income to cover it. Contact a bankruptcy attorney for more information. The attorney will explain the legal process of filing for retirement bankruptcy and how to avoid penalties.




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