Bankruptcy and Retirement in Arizona
There’s a concerning trend taking place in society today – individuals who are retirement age or are about to be retirement age are seeking an Arizona bankruptcy attorney. It leaves analysts wondering if America is in a retirement crisis and what should be done about the situation.
Filing for bankruptcy generally means a period of several years of healing your finances. And during this healing phase, you need to ensure you don’t make changes to your income because you’ve agreed to pay debtors certain amounts to have other debts discharged once your repayment period ends.
For adults ages 65 and older who file bankruptcy, it might mean that you can’t retire until age 70. And even those who make it to the other side of a bankruptcy situation after having the debts discharged, might not have the savings necessary to supplement Social Security income to make retirement a reality.
While the statistics are difficult to read, bankruptcy can still be a good idea for those who are retirement age and can be the only way to preserve your hopes of retiring. Let’s analyze why that might be the case.
Filing for bankruptcy in Arizona when retirement age
If you’ve done a good job putting away retirement savings and are not yet eligible to begin receiving disbursements for those savings, you might want to consider a bankruptcy filing now to make your retirement savings work better for you.
Once you reach retirement age, you’re more than likely going to be forced to take disbursements from your retirement savings. When you start living on those payments, you might find it harder to pay your debts as retirement income is generally lower than salaried income.
Filing for bankruptcy before you approach retirement age can mean that you have a more relaxed and comfortable retirement. Your circumstances dictate whether or not bankruptcy makes sense for you as you age.
The longer you wait to file for bankruptcy, the longer it can take for you to be able to retire. If you’re married, you’ll also want to factor in your spouse’s retirement age and available funds.
Click here to read an article about how bankruptcy can affect your retirement proceeds.
Rising health care costs and elderly bankruptcy
According to analysts, the rising cost of health care for the elderly is one of the primary reasons they must file for bankruptcy. Medical bills can weigh down seniors to the point where they can’t make their regular bill payments.
Bills related to medical care are an eligible form of debt that an Arizona bankruptcy filing can discharge. Chapter 7 bankruptcy can make those medical bills go away within only a couple of months, but it does mean surrendering the majority of the money in your bank accounts and most of your assets.
Social Security benefits and tax-exempt retirement accounts
If you’re already drawing Social Security benefits, those benefits are exempt from a bankruptcy filing. However, once you place those funds into your general bank account, they are no longer exempt from your bankruptcy filing. Individuals considering bankruptcy should place Social Security benefits in a separate account to protect them.
Federal bankruptcy law protects your retirement savings accounts from being considered as part of a bankruptcy filing. IRAs and Roth IRAs are protected only up to a certain amount, but 401(k)s and 403(b)s, as well as profit-sharing accounts, are exempt from your bankruptcy filing.
You should be aware that money that you withdraw from your retirement account is considered part of your assets and income. Once you start taking disbursements from your accounts, it is considered income like anything else.
If you’re approaching retirement age or have attained retirement age and are wondering if an Arizona bankruptcy filing makes sense for you, contact us.