Lancaster Bankruptcy & Retirement Lawyers
Although retirement is a dream for most workers, living on a fixed income creates challenges. Accordingly, our law firm receives many phone calls from those nearing retirement who have significant debt loads. One question they have is how filing for bankruptcy might affect their retirement. They want to get out from under debt, but they don’t want to take any action that might compromise their ability to enjoy their Golden Years.
The good news is that most retirement savings are exempt from creditors, so you can eliminate debts without losing your pension. Let our Lancaster bankruptcy & retirement lawyer review your financial situation and help you decide whether bankruptcy will help you achieve your goals. Contact us to schedule a consultation.
Is Chapter 7 Right for You?
Chapter 7 bankruptcy is the most popular consumer bankruptcy for those hoping to eliminate credit cards and personal loans, along with medical and other unsecured debts. Most of our clients complete it within 6 months, and then they are free of their most troublesome debts.
But there’s a catch with Chapter 7: the trustee can take certain assets that you own and distribute them to creditors. That means creditors are not left completely holding the bag—they get something.
As you approach retirement, you are probably concerned about supporting yourself when you are no longer working. Will you lose hard-earned assets such as retirement accounts? Or can you keep those?
The good news is that most retirement savings are exempt from the creditor’s reach in California:
- 401(k) and 403(b) plans
- Deferred compensation plans, like 457(b)
- Defined-benefit plans, such as pensions
- Most plans run by tax-exempt organizations or the government
You can also exempt some of the savings in an Individual Retirement Account, like a Roth IRA. Currently, the amount is $1,512,350, which is a lot. This number gets adjusted for inflation regularly. If you have multiple IRAs, then the number above is the total you can exempt.
Withdrawals are not exempt. For example, you could have taken $35,000 from an IRA and parked it in your savings account. That money would need a separate exemption, otherwise the trustee can take it if you file for Chapter 7 bankruptcy.
What about Social Security benefits? These are a crucial pillar of support for many retirees. The good news is that the trustee cannot take your Social Security benefits, but you should put them in a separate bank account. Don’t mix them with other savings or with money in your checking account. That type of commingling could result in you losing them.
Another bankruptcy option is Chapter 13, but you need a regular source of income to qualify. You should discuss it with a lawyer if you have not yet retired.
Contact Us to Speak with a Bankruptcy Attorney
Wadhwani & Shanfeld has worked with countless retirees to help them map out a way to reach financial freedom. Call us to find out whether you should file for bankruptcy by talking with one of our Lancaster bankruptcy and retirement lawyers.
