Will Bankruptcy Keep Me from Retiring?

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Will Bankruptcy Keep Me from Retiring?

Most Americans worry about retirement. We’re all well aware Social Security is unlikely to cover our costs of living.
 
But it’s harder than ever to put aside money to save for retirement, too. So it makes sense to consider what happens to your retirement assets during a bankruptcy.
 

Social Security

If you’re not receiving Social Security benefits yet then you don’t even have to worry about it. The amount you’ve paid into Social Security over the years doesn’t factor into the bankrupcy process at all.
 
If you are drawing Social Security it serves as your income. The amount you’re drawing could inform whether it’s smarter for you to file Chapter 7 or Chapter 13. Or whether you should file for bankruptcy at all, as you could be “judgement proof,” devoid of any assets creditors might seize.
 
It’s a good concern to discuss during your free consultation.
 

Retirement Plans

We wince every time we hear a client tell us they cleaned out their retirement accounts to pay old debts. That’s what creditors want you to do, but it’s a bad move.
 
Most retirement plans are exempt if you haven’t used them to retire yet. Fully exempt, which means the amount of money in them doesn’t even matter. The exceptions are Roth and traditional IRAs, which are exempt up to $1,245,475.
 
This is true whether you file a Chapter 13 bankruptcy or a Chapter 7.
 
Trying to pay debts with retirement throws good money after bad and doesn’t help you.
 

Life Insurance Policies

How a life insurance policy takes effect depends on the policy type. It also depends on whether you’re getting any money from the policy.
 
For example, a term life insurance policy doesn’t produce any money until you die, so it’s little more than a monthly bill to be recorded on certain bankruptcy schedules.
 
A whole life insurance policy does have cash value. Often, we can keep it out of creditor hands through the correct use of federal and state bankruptcy exemptions.
 
If you receive life insurance money within 180 days of filing for bankruptcy it can become part of the bankruptcy estate. Timing is as important to bankruptcy cases as knowledge of the law. As Philadelphia bankruptcy attorneys it’s our job to make sure you’re filing the right bankruptcy type at the right time.
 

Disclosure is the Key

The only real way to jeapordize your retirement during a bankruptcy is to try to hide the funds. It’s important for you to tell us about all your retirement assets so we can protect them properly.
 
Failing to mention them is a bad move, as they can be left out of vital paperwork. This opens you up to accusations that you’re trying to hide assets, which can lead to a charge of bankruptcy fraud. At best, it could mean your case gets dismissed, which keeps you from getting the fresh start you’re trying to achieve.
 
 
If you do everything right, bankruptcy could open a path towards retirement by reducing your monthly obligations. This means you stand a chance of being able to live on those funds when the time comes.

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