Bankruptcy In Retirement — Some Pros And Cons
Are you a senior who struggles with debt? If so, you may wonder if bankruptcy protection is the right choice or not. How can you decide? Here are a few pros and cons for older debtors considering bankruptcy.
Pros of Late-Life Bankruptcy
Certainly, one of the biggest reasons to declare bankruptcy as a senior is to reduce your expenses and make retirement funds last longer. Going through your retirement funds too quickly or outspending pensions and Social Security checks is stressful and financially devastating. However, if you can reduce your monthly expenses by getting rid of some or all of your debt, it stretches things as far as possible.
Seniors face a particular problem that may necessitate bankruptcy: higher medical and dental expenses. You need medical care more now than ever and you must be able to get the help you need without having to worry that it will cost you everything. Fortunately, medical bills are some of the easiest to discharge in bankruptcy, allowing you to move on with your health.
Don't overlook the emotional relief that comes from getting rid of past debt. As you begin a new chapter in your life, discarding the mistakes and baggage of the past can give you a fresh start. It can make retirement a time of greater joy and stress relief.
Cons of Late-Life Bankruptcy
The cons of bankruptcy during retirement include the fact that you may have high assets and a lot of equity in your home. Assets like bank accounts and home equity can only be protected from seizure to pay debts if they fall under thresholds set by bankruptcy laws. A senior who has been in their home for decades may have far too much equity to exempt it — meaning they may not be able to keep that home during liquidation.
Owners of high assets may have to use Chapter 13, or repayment, bankruptcy. If so, your retirement income will be used to calculate how much you must repay — making your retirement accounts and Social Security checks subject to this type of bankruptcy where they were previously exempt. This may limit how beneficial bankruptcy is due to higher repayment plan requirements.
Where to Learn More
Want to know more about late-life bankruptcy before or during retirement? Start by meeting with a bankruptcy law attorney in your state today. Together, you can examine the pros and cons to come up with the right solution for your situation.