This headline doesn’t make sense, does it? When most people think of bankruptcy, they think of “throwing in the towel” and losing everything. In many cases, it is just the opposite! Lately, I’ve met more and more senior citizens who run into financial troubles. It could be because their pension was cut or eliminated, or because they weren’t able to save enough for retirement, and social security just doesn’t provide enough each month.
Whatever the reason for the financial troubles, bankruptcy can be a real help for senior citizens. Here is the big reason that bankruptcy can protect assets, especially for seniors: Retirement assets are protected. The money has to be in the right kind of account, though. Retirement assets have to be in certain kinds of accounts, set up correctly, such as IRAs, Roth IRAs, 401 (k) plans, and other retirement accounts.
Another reason is that bankruptcy protects other assets too, such as a certain amount of equity in your home (in Illinois it is $15,000.00 per person), and $4000.00 worth of your other things, and other assets, such as workers compensation and monthly retirement benefits.
So, don’t panic and cash your retirement accounts to pay for certain debts. Be proactive, and attack your problem. But, before you take any actions, talk to a bankruptcy lawyer for advice. If you cash any retirement funds, you’ll be responsible for taxes and penalties, if you cash it too soon. This can apply to everyone too!
Here is an article, Bankruptcy Can Help Seniors Protect Assets, from the New York Times that makes exactly this point. Bankruptcy is a serious option to consider. There are other options, such as debt settlement, which may be reviewed also. But, most importantly, see an experienced bankruptcy attorney to find out all of your options before deciding what to do.
Daniel J. Winter
Offices in Chicago, Oak Lawn, Skokie, and Gurnee.