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Should you file bankruptcy before retirement?

On Behalf of | Jun 15, 2022 | Uncategorized |

As you approach retirement, you may find that you have debts that you will not be able to pay after leaving work. You will be on a limited income, and you may not see a way to handle those debts prior to reaching your retirement.

Now may be a good time to consider bankruptcy, especially if you are concerned about your debts leading to issues paying for your home. In fact, one helpful aspect of going into bankruptcy is that you may be able to protect your home against foreclosure.

You cannot lose your retirement in bankruptcy

One thing that is great to know about going into bankruptcy prior to or during retirement is that you can’t lose your retirement income to the bankruptcy itself. For example, if you are going to start receiving retirement income this month and go into bankruptcy, any income that hasn’t been deposited won’t be at risk of being lost in your bankruptcy. Social Security payments are typically safe until they go into your bank account. To protect your Social Security, you may want to look into having it deposited into a different kind of account.

If you have a pension, you should know that any that qualify under the Employment Retirement Income Security Act of 1974 are also exempt from bankruptcy. Along with these, 401(k) accounts are exempted as well.

With your retirement protected, bankruptcy could be a good choice

Bankruptcy could be a good choice if you’re concerned about losing your home or assets because of lower wages or a lack of income. If you go through a bankruptcy before your retirement, you can go into bankruptcy with a clean financial slate, helping you have more income to spend in your golden years.

There are other exemptions that may also help you keep your assets and belongings, too, so you don’t ever have to start from scratch. It’s helpful to get to know more about the bankruptcy rules and exemptions, and then you can weigh your options when deciding if you should go into bankruptcy now or wait until retirement in the future.