If you are approaching retirement and are considering bankruptcy protection, you may have questions such as “what happens to retirement funds in bankruptcy before you retire?” Or, if you have carried debt into retirement and are considering bankruptcy after the fact, you may wonder if your disbursements will be up for grabs or even your social security benefits. As with any bankruptcy, filed at any age, timing can be a factor. Sometimes it makes sense to file right away while other times it is beneficial to delay.
Let’s start with whether bankruptcy will affect your retirement funds prior to taking distributions. The answer is probably not. Funds in your 401(k), 403(b) and or other defined benefit plans are typically out of a creditor’s reach in a Chapter 7 and are not considered in a Chapter 13 repayment.
“What if I am already taking retirement distributions?” The situation changes if you are taking distributions from your retirement account because that money is accessible to creditors in a Chapter 7 liquidation and may also be considered as part of the repayment plan in a Chapter 13. It really boils down to how much you need to meet your living expenses – any excess income may be considered fair game by creditors.
“Is my social security at risk from creditors?” Although social security and disability are technically protected from garnishment by creditors, once it hits your bank account your protection is limited.
Of course as we age, we all have concerns regarding potential unexpected medical expenses and how to pay for them when prices are sky high. Many wonder, “Can I discharge medical debt in a bankruptcy?” The answer is yes. Whether you are retired or not, your medical bills are the type of debt that can be discharged or wiped out along with credit cards, personal loans, utility bills and some court judgments in a chapter 7.
Questions On Filing Bankruptcy Before or After Retirement?
Contact an Experienced Illinois Bankruptcy Attorney For Answers
If you are in a difficult financial situation and have questions regarding filing bankruptcy before or after retirement, contact the Peoria bankruptcy law offices of Charles E. Covey for assistance at 309-674-8125.