Can a Retiree File for Bankruptcy?

Yes, a retiree can file for bankruptcy, but these cases involve some special issues, which we examine below. As late as the 1990s, “gray” bankruptcies were almost unheard of. These filings have increased almost 70 percent since then, even though overall bankruptcy filings have dropped by almost as much. A combination of a longer lifespan, rising medical treatment costs, a shrinking social net, and a bumpy economy have fueled this increase.

Because of the special issues in these bankruptcies, only a Chicago bankruptcy lawyer with a specific set of skills should handle them. A lawyer must be able to identify these issues and proactively act to resolve them. In other words, a lawyer shouldn’t try to clean up a mess. Instead, a lawyer should prevent the spill from happening in the first place.

Medical Bills

High medical bills are the leading cause of consumer bankruptcy filings in the United States. Since the end of the Great Recession in 2010, medical bill inflation has consistently outpaced overall inflation.

Medical bills are generally dischargeable in bankruptcy. In addition to discharge, bankruptcy gives a Chicago bankruptcy lawyer leverage to renegotiate payment terms in these bills.

Discharge is usually optional in bankruptcy. If they so choose, debtors can reaffirm certain accounts, such as medical bill accounts. Secured debt reaffirmation is a little more common. Most people want to keep their houses and cars. To do so, they must keep making payments, whether the debt is discharged or not.

Some people choose to reaffirm medical debts, for similar reasons. Doctors usually cut off patients with unpaid bills, whether they filed bankruptcy or not. A reaffirmation agreement is more than a statement of intent to keep making payments. A reaffirmation agreement replaces the original contract. Therefore, an attorney can renegotiate items like interest rate and even UPB (unpaid principal balance) amounts.

Social Security Benefits

Many retirees depend on Social Security benefits to make ends meet. These benefits are exempt assets in bankruptcy. Most other government benefits, like VA disability and workers’ compensation benefits, are also exempt assets.

Furthermore, in Illinois, these exemptions aren’t value-based. These government benefits are 100 percent exempt, regardless of their value. Noncash benefits, such as medical care at a VA hospital, are normally exempt as well, regardless of the value of those medical treatment services.

We usually recommend that people keep exempt assets, like Social Security benefits, separate from nonexempt income, like wage income. Always consult a Chicago bankruptcy lawyer before moving money into a new account. This action could be interpreted as evidence of bankruptcy fraud.

Retirement Account

The same 100 percent exemption applies to 401(k)s, IRAs, pension accounts, and other retirement nest egg accounts. This exemption is significant. Frequently, a retirement account is a retiree’s largest financial asset. These assets have an emotional value as well. They represent a reward for a lifetime of savings as well as security for the future.

This exemption applies to earned retirement accounts. The Supreme Court has ruled it doesn’t apply to inherited accounts. Unearned accounts (e.g. Mary got half her husband’s IRA in a divorce) are in uncertain territory.

Connect With a Tough-Minded Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Source:

forbes.com/sites/nextavenue/2019/10/29/why-so-many-55-people-are-going-bankrupt-and-how-to-bounce-back/