Should I Declare Bankruptcy after Retirement

You’ve planned and budgeted for your retirement and now you seem to still be falling behind in payments. Perhaps you’ve lowered your standard of living because of unforeseen medical expenses. Maybe you’re spending more on expenses like co-payments for prescription medications than you originally planned for. It’s possible that your pension has diminished from when you originally retired. One thing is for sure: retirement is meant to be a relaxing and stress-free time to enjoy your well-earned dotage and shouldn’t be spent worrying if you’re going to have to decide between medication and food for the month.

Chapter 7 and Chapter 13 bankruptcy have been increasing with seniors at what some feel is an alarming rate. In fact, bankruptcy among Americans 65 years and older has tripled over the past 27 years, according to a recent study performed by the Consumer Bankruptcy Project.

Social Security in Bankruptcy

Good news for those individuals who are retired and drawing social security: you are not required to include these benefits in your means test. This alone can help you qualify for a Chapter 7 bankruptcy. You must, however, include social security benefits on your “Schedule I: Your Income”. Even though this form of income must be listed in bankruptcy, federal law prevents social security benefits from becoming the property of your bankruptcy estate, meaning that the funds will be safe during the bankruptcy process.

Pension Plans in Bankruptcy

If you have funds in a tax-exempt retirement fund such as a pension or retirement fund qualified under ERISA or the US Tax Code, they too, will not become property in your bankruptcy estate. Some other types of pension may only be partially exempt during the bankruptcy process, and some still may not be exempt at all. Discuss what type of pension plan you own with your bankruptcy attorney in Sacramento California who will be able to tell you if you are protected in bankruptcy or not.

Bankruptcy and Your Home

As a retiree, you are more likely to own your home outright or have significant equity in it, and thus, are naturally concerned about keeping your property in bankruptcy. If you do own a home, protecting it from bankruptcy is possible using homestead exemptions. How much equity in your home you can protect using homestead exemptions depends on which state you file bankruptcy in and which set of exemptions you decide with your bankruptcy attorney to use. In California, if you are 65 or older you can protect $175,000 in home equity using the California bankruptcy exemption system.

Retirees and Bankruptcy

When deciding between Chapter 7 and Chapter 13 bankruptcy it’s important to consider what you earn through the funding of your retirement, how much equity you have in your home, and what your monthly expenses are. It’s a strong likelihood that you’ll be able to keep all your property and retirement income with Chapter 13 bankruptcy. Additionally, Chapter 13 can help you get back on budget while still allowing for daily living necessity and modest creature comforts such as vacation and leisure.

Seniors are the quickest growing segment of bankruptcy filers, but unforeseen circumstances shouldn’t spoil your American dream. If you’re suffering from a decline in retirement income, bankruptcy may be able to help you regain your financial footing and enjoy your retirement years worry-free. Contact a California Bankruptcy Attorney today to discuss your financial situation and discover your bankruptcy and other debt relief options.