Bankruptcy Can Help Senior Citizens Protect Assets

7001705A recent New York Times Article (in a special section on retirement) proclaimed this in its headline.  (the full article can be read here).  The main idea of the article is bankruptcy can provide needed debt relief to seniors and also protect their assets.

The biggest obstacle seems to be the stigma some seniors feel at the prospect of filing for bankruptcy.  Because of his purported shame, many seniors will put off filing for bankruptcy until it may be too late.

However, bankruptcy can bring much needed relief to seniors in financial distress.  Most importantly, bankruptcy can help seniors with excessive debt and also protect their retirement accounts. Without going into too much detail, qualified retirement accounts are generally exempt in bankruptcy – meaning those assets are protected from any bankruptcy trustee.  Simply put, you can basically keep all of your retirement money (with some little applied qualifications) and take care of your debt.

I understand  many seniors will try and move heaven and earth to pay off their debt.  I understand trying to do the right thing and pay off your creditors, but at some point you have to look out for your interest and the interests of your family.  If you go to the extent of trying to pay off creditors with funds from your retirement accounts, you may suffer even more.  In my opinion, if a bankruptcy is justified, please save your (exempt) retirement accounts and file the bankruptcy.  A little pre-bankruptcy planning can go a long way in saving your financial life.

I met with a senior couple who easily qualified for a chapter 7 bankruptcy.  They had tried to pay off heir debts by taking out money from their retirement accounts.  However, these efforts were not enough, and the couple had to file bankruptcy even after exhausting their retirement monies.  This definitely was a worst case scenario: not only did the couple have to file bankruptcy, but they exhausted their nonexempt money anyways.  They could have filed for bankruptcy and kept the money in their retirement accounts.

The lesson is to seek out the expertise of a debt relief professional, such as a consumer bankruptcy attorney.  Many such attorneys offer free consultations and you can get some good planning advice before making a huge mistake.

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