Peter R. Scribner, Esq. ATTORNEY AT LAW
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Bankruptcy and retirement: You may want to consider it

Bankruptcy can be seen as something negative. And while the decision to file should not be taken lightly, it can have benefits.

One that may be crucial is that either a Chapter 7 or Chapter 13 can put a stop to relentless creditor harassment. It can also provide a path to help you get back on track financially and again able to meet a age goal for retirement.

Why should you consider choosing bankruptcy near or during retirement?

When you're close to retirement, you may find that your debts far outweigh what you can bring in while you're on Social Security. You may not have the cash flow in retirement to cover monthly expenses.

Struggling with debt can be very hard as you age, so it's important to wipe it out. Some good reasons to eliminate your debts before retirement include:

  • Being able to reduce the risk of foreclosure
  • Lowering monthly debts to avoid missed payments

If you go through bankruptcy before retirement, you should know that certain retirement accounts are protected. Your Keogh, profit-sharing, defined benefit plan, 403 (b), 457(b) and 401(k) should be protected against creditors if you file for bankruptcy prior to retirement.

If you wait until you are retired to file for bankruptcy, the funds you have could be more accessible to your creditors. The main thing to worry about is how much income you are bringing in. Anything more than what you need to meet your living expenses could be open to creditors, which could affect the comfort of your retirement.

Social Security benefits cannot be touched by creditors through garnishment, in most cases. The government will, however, allow money to be taken out of the Social Security check before you receive it if you owe federal taxes, court-ordered restitution, child support, alimony, student loans or other federal debts. Keep in mind that the moment your money hits your bank account, it's fair game to creditors. There are some additional protections in place, but the reality is that any money in your bank account could be open to creditors and taken from you if you owe debts.

Learn the positives and negatives of filing for bankruptcy, so that you can make an informed decision that is the most beneficial in your circumstances.

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Peter R. Scribner, Esq.
1110 Park Avenue
Rochester, New York 14610

Phone: 585-800-9616
Fax: 585-256-6462
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