Bankruptcy is an excellent means of getting a clean slate in terms of debt, but that does not mean it is right for everyone. If a debtor is nearing retirement, a time when income typically levels out, the decision to file bankruptcy is one which should be carefully considered.
Those considerations should of course include the positives to filing as well. For instance, bankruptcy lends itself to strengthening one’s financial future by allowing the filer to shift money which would have been used to pay off debt into retirement savings. With so many Americans taking on debt late in life, the likelihood that bankruptcy will need to be utilized in retirement has risen substantially. Therefore, filing a few years before retirement —when income is higher— has increasingly become a smart option for debtors.
When Bankruptcy is the Right Option
For those approaching retirement who are unsure whether bankruptcy is the best financial decision, the first thing that should be done is to weigh one’s debt versus what has been saved for retirement. If repayment is likely to leave him poorly prepared for his approaching retirement, bankruptcy should definitely be considered. Additionally, there are a couple other questions the debtor should ask.
- What is protected? It is important to ensure that retirement plans will be protected. While most are, a large pension or significant money in an IRA, might not be fully exempt. The debtor should confirm which assets will be afforded exemptions, and which will not. This will vary depending on the state and the debtor. For instance, Florida protects a home’s full equity under most circumstances, regardless of how much the equity is, whereas filers in other state may not fare as well.
- Is there joint debt? The presence of joint debt should not necessarily deter a debtor from filing bankruptcy, but it is important to be informed nonetheless. For married filers without joint debt, one spouse’s filing will not affect the other’s credit. However, if there are any debts which both spouses have formally agreed to be liable for, a bankruptcy could cause harm to both credit scores. In order to decrease the chances of this happening, a filer should ensure that any shared debts remain current. In the event that the creditor files a report to the contrary upon receiving notice of the other spouse’s bankruptcy, the debtor should formally dispute these claims to the three primary credit reporting agencies — Experian, TransUnion and Equifax.
If you are still unsure whether bankruptcy is your best option, it is in your best interest to consult a West Palm Beach bankruptcy attorney. The team at Kelley & Fulton can help you to determine your best course of action, so call today.