Lynch Law Offices, P.C.
Call Us Now for a FREE Consultation:
800-491-7493
Offices in Four Convenient Locations

Is going through bankruptcy safe for retirees?

Baby boomers are entering their retirement years in ever-growing numbers. The Pew Research Center notes that the millennial generation, the group made up of 18 to 34 year olds, is now the largest demographic in the U.S. workforce. We suspect that a demographic breakdown of the population in Illinois would show the same thing.

At the same time, a report by a law professor in Michigan finds that the fastest growing demographic generation as far as filing for bankruptcy goes is the baby boom group. According to his findings, filers who were 65 or older accounted for just 2 percent of actions in 1997. In 2007, the rate had jumped to 7 percent. Many readers might wonder, then, if bankruptcy is a safe debt relief option for those in retirement. The answer is it depends on the circumstances.

Generally speaking, retirement funds are exempt from creditors under bankruptcy proceedings. This is certainly true for Social Security funds. It's also the case for most other forms of funds, such as 401(k)s and pensions.

However, Social Security funds could be vulnerable if they aren't in a separate account and if creditors aren't informed in writing about the fact. If income from pensions is significant, it might mean that a retired filer is limited to seeking protection under Chapter 13. However, this might be difficult to set up if cash flow is such that there is little disposable income to work with.

Individual Retirement Account funds of just over $1 million can be exempted under bankruptcy by federal law. State laws often coincide on this front, but they do vary so speaking with a local bankruptcy attorney is recommended.

Sometimes, home equity represents a retired bankruptcy filer's greatest asset. State laws differ on how much of that can be exempted so it's important to consult an attorney about details.

The prospect a retiree eventually having to move to an assisted living facility adds yet another wrinkle. Those homes accepting Medicaid can't discriminate, but a private home might insist on other family members co-signing a financial guarantee.

Medical bills in general can pose a challenge. They typically would be discharged as part of a Chapter 7 process as unsecured debt, but not under Chapter 13. If the debt has been secured by a previous judgment, a lien could remain.

You can see now why speaking to an attorney is crucial.

No Comments

Leave a comment
Comment Information

How Can we Help You? Contact An Attorney

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Four Convenient Office Locations To Serve You

Toll Free: 800-491-7493 Fax: 630-960-4755

Five Convenient Office Locations To Serve You

Lisle Office - DuPage County
1011 Warrenville Road
Suite 150
Lisle, IL 60532

Map & Directions

Lockport Office - Will County
900 South State Street
Second Floor, Suite A
Lockport, IL 60441

Map & Directions

Aurora Office - Kane County
1444 North Farnsworth
Suite 100
Aurora, IL 60505

Map & Directions

Palatine Office - Cook County
800 East Northwest Highway
Suite 700
Palatine, IL 60074

Map & Directions

Chicago Office - Cook County
1 S Dearborn
Suite 2100
Chicago, IL 60603

Map & Directions

Toll Free: 800-491-7493 Fax: 630-960-4755