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Can You File Bankruptcy if You Are Retired?

In recent years, older Americans have been turning to the bankruptcy court to help them address medical debts, credit card bills and mortgage debt, and help them enjoy retirement debt-free. In fact, recent data show that those aged 65 and older are among the fastest-growing groups of people filing for bankruptcy.

Here's a look at some of the rules that apply to retired people who seek bankruptcy protection.

How Do You File if You're Retired from Your Job?

The bankruptcy filing process is the same whether the filer is 18 or 81, and it officially starts when the filer submits a petition with the bankruptcy court. A brief overview of the bankruptcy process looks like this:

  • Complete a credit counseling briefing.
  • Decide which type of bankruptcy to file, Chapter Seven or Thirteen.
  • Fill out necessary paperwork and submit it to the court.
  • Attend the Meeting of Creditors.
  • Begin making monthly payments (in Chapter 13 only).
  • Complete the financial management course.
  • Get a discharge from the court.

Of course, many of those steps are fairly complicated. Choosing which type of bankruptcy to file, for example, may be difficult for someone who is not familiar with bankruptcy laws and requirements. That's why the U.S. Courts System recommends working with a lawyer throughout the process, regardless of a filer's age.

Are there Special Bankruptcy Rules for Retirees?

While there are no bankruptcy laws that apply only to retired people, there are some retiree-specific situations that might affect a bankruptcy case. For example:

  • Protected income. Benefits received from the government (including Social Security payments, veterans' benefits, disability checks and others) are generally exempt from garnishment. This means that retirees living primarily on Social Security should not have to worry about their income being garnished by creditors. Typically, these income sources aren't included in the means test calculations, making Chapter 7 more likely available for retirees.
  • Repayment plans. Because many retired people live on reduced or fixed incomes, they may not be able to afford a chapter thirteen repayment plan. In this circumstance, a retired person may benefit from Chapter seven.
  • Exempt property. On the other hand, a retiree with little income but significant valuable property (such as heirlooms or antiques) may find that those possessions are subject to a liquidation sale in Chapter 7 bankruptcy if they fall outside of the bankruptcy exemptions in their state. This may make Chapter 13 a better alternative.

Learn More about Bankruptcy in Retirement from a Bankruptcy Lawyer

It's perfectly legal, and in many cases beneficial, to file bankruptcy while you are retired, but it can be a complex process and should not be undertaken lightly. To speak with a lawyer about how bankruptcy is likely to affect your financial situation, please fill out this form and arrange a no-obligation consultation today.

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