A Ft. Lauderdale Bankruptcy Attorney Opines: Retirement & Filing Bankruptcy – Timed Correctly It Is A Valuable, Even Optimal, Retirement Planning Tool
Generally speaking, being able to finally retire for most of us equates to less income. For many retirees or retirees-to-be, a bankruptcy can be a valuable means to protect assets and bring relief from accumulated debt brought on by high credit card balances, medical bills, helping your children and the like. Too much debt is adverse to the retirement you envision. But within the parameters of the bankruptcy law, almost any kind of unsecured debt, meaning creditors who do not have collateral, like a car loans or a mortgage, is subject to being completely discharged, gone forever.
Who wouldn’t like to leave money, not debt, to their children?
The idea this Ft. Lauderdale Bankruptcy Attorney wishes to make here is that timing is very important. Let me explain. Simply put: The better you time a bankruptcy filing, the more money stays in your pocket.
I get that no one wants to file a bankruptcy. Certainly those of us of the generation now near retirement, myself included, are bothered by the stigma of the “B” word. But look at it rather as an economic determination, not a moral judgment. Sometimes in life you just have to do what your have to do.
My point on timing: Beware of the downside of waiting to file. By delaying and spending even some retirement assets on debt that would and can be discharged in bankruptcy, as in continuing to pay on credit card bills or medical debts and hoping for some magic wand, retirees risk a downward financial spiral from which they are much less likely to recover than younger people.
To be sure, I’m not speaking to people with a few thousand (less than $10,000) in debt, because that should be manageable. I’m talking to people who have say $20,000 or more or much more in debt who are just paying the minimums without a foreseeable way in the future to pay more and dig themselves out. When your total debt is overwhelming and your income is heading south, it is best to file right away.
Why? Because then you are rid of debt and you keep your assets to live on! Retirement income and savings in retirement plans (pension, IRA, etc.) are exempt in a bankruptcy, meaning you keep these assets despite filing bankruptcy. Same with a homestead up to $1.245 million. Social security income is exempt. So, if you wait to file and spend some of these monies in an attempt to hold off creditors, and then finally realize it’s a losing proposition and decide to file months or years later, in hindsight all that money, every dime, could have been in your pocket for your retirement needs. That money could have been a vacation, a new roof, a new car; anything is better than giving it to creditors who are charging high interest and maybe outrageous penalties and, I assure you, who will not be nice if something happens and you can no longer pay them.
You may consider a debt consolidation or debt settlement company, or try to negotiate with creditors yourself. But please read my blog on debt consolidation and settlement companies. Sorry, there just is no free lunch. Some of the saddest cases that I see are folks who try these companies or try themselves in good faith to make repayment, only to eventually realize they are still in significant debt, or lose employment, or anything that prevents them from continuing to pay. At that point the money they have paid is gone, but the debt remains. The daily stress continues and the big elephant is still in the room. When they finally realize a bankruptcy is the best, nay, the only option, they come to me and we proceed, usually to their sheer and unqualified relief to actually be debt free. Their sole regret is they didn’t file before frittering that good money away on an unsuccessful payback or settlement plan.
As a Ft. Lauderdale Bankruptcy Attorney I find that most times all assets owned by my clients are fully exempt in a bankruptcy and are retained by my clients. The only thing they lose are the debts. This where the advice of the bankruptcy attorney is crucial: in planning the case pre-filing, so that exemptions are optimized. And worse case, if there is a non-exempt asset, I can negotiate with the bankruptcy trustee to purchase the non-exempt portion of the item back by paying the trustee some money, so, for example, the client keeps their car. And best case, would it not preferable to pay a couple thousand dollars to a bankruptcy trustee and in exchange be rid of many, many thousands more dollars of crushing debt?
Bankruptcy is a way to hit the financial reset button. A way to maximise the amount of money and assets you will have for retirement. Why not look into it? I offer a free, confidential consultation by phone or office. Chapter 7 is a simple 4-month process that is absolutely worth the comparatively slight burden of doing it, for the peace of mind and more comfortable retirement it will bring.
(see the Q&A on my website for additional information & the satisfaction I get helping people have a life again).