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Scura, Wigfield, Heyer, Stevens & Cammarota Blog

Filing Bankruptcy During Retirement in New Jersey

[fa icon="clock-o"] December 7, 2018 [fa icon="user"] Scura Law Firm [fa icon="folder-open'] Bankruptcy

Bankruptcy-During-RetirementMore retirees in New Jersey and throughout the United States are filing for bankruptcy relief as they struggle to pay basic living expenses. According to a study published by the Consumer Bankruptcy Project, the number of individuals age 65 years and older filing for bankruptcy relief increased by 204 percent between 1991 and 2016.

The researchers who conducted the study reviewed data from the Consumer Bankruptcy Project. The results of the study are startling. Unfortunately for many retirees in New Jersey, the results of the study mirror the stark reality they deal with each day.

Why Are More Seniors Filing for Bankruptcy Relief?

Instead of blaming seniors when they need to file for bankruptcy relief, maybe we need to consider factors that combine in a perfect storm that results in “financially broken retirees.” Problems with Medicare and retirement systems were cited as reasons for more retirees filing for bankruptcy relief. For many seniors, a reduction in income combined with high health care costs is often the reason for filing a bankruptcy case.

In addition to rising health care costs and limited income, many seniors are supporting family members. The number of grandparents raising their grandchildren has increased dramatically in the past few decades. Approximately 2.6 million grandparents are currently raising their grandchildren. Grandparents are raising almost two-thirds of the children living apart from their parents in the United States.

Seniors raising their grandchildren face additional expenses. Even for those who have robust retirement savings, the additional costs of raising their grandchildren can put a huge strain on their budget. For some seniors, they also have their adult children living with them, adding to the expenses for the household without contributing any money for bills.

Another factor in the rising number of retirees filing for bankruptcy relief is the amount of debt Americans owe when they retire. Many retirees have significant mortgage debt, credit card debts, and other debts when they retire. Other seniors are forced to live on credit cards to make ends meet. Many seniors owe thousands of dollars in debt. They may manage to make payments on these debts for a time, but increasing health care costs, living expenses, and other obligations make it impossible to continue paying debt payments.

Some Seniors Outlive Their Retirement Savings

Another issue facing some seniors is outliving their retirement savings. Retirees may begin their golden years with sufficient income and resources to enjoy retirement. However, as the years go by, they begin to see their retirement income dwindle. They may borrow money to make ends meet and to pay basic living expenses. Unfortunately, with limited income, many seniors are unable to repay debts.

Retirees in New Jersey File for Bankruptcy Relief Too Late

Many seniors file bankruptcy during retirement as a last resort after struggling to pay bills they cannot afford to pay. Unfortunately, by the time they decide to file bankruptcy, many retirees have liquidated assets and withdrawn retirement savings to pay debts. By the time they consult with a New Jersey bankruptcy attorney, they have exhausted their life savings.

Filing for bankruptcy relief gets rid of the debts they cannot pay. However, it cannot replace the assets and retirement funds they have expended as they struggled to pay bills and living expenses. There is a better way. Seniors who contact a New Jersey bankruptcy attorney to discuss debt relief options before they drain their retirement savings may be able to eliminate debts while protecting their retirement funds and other assets.

Filing Bankruptcy During Retirement to Protect Assets and Income

Eliminating debts that you cannot pay is only one goal of filing for bankruptcy during retirement. Another goal of filing bankruptcy during retirement is to protect your retirement savings and property. Bankruptcy exemptions allow you to protect certain property from the court and your creditors. Exempt property cannot be liquidated to pay unsecured creditors.

The good news is that federal bankruptcy exemptions protect pensions and ERISA qualified retirement accounts. Bankruptcy exemptions also protect Social Security benefits and income, public benefits, and some equity in your home, vehicle, and personal property.

In most Chapter 7 cases filed in New Jersey, debtors can eliminate most, if not all, unsecured debts while keeping all their property. Within approximately four months from the filing date, the debtor receives a bankruptcy discharge. Creditors cannot take any actions to collect a discharged debt.

Before Using Retirement Funds to Pay Debts, Call a New Jersey Bankruptcy Attorney

You might be able to get rid of debts you cannot pay while keeping your retirement funds intact by filing for bankruptcy relief. However, if you withdraw funds from a retirement account, the funds lose their protected status in a bankruptcy case.

Therefore, before you liquidate assets or use retirement funds that might be protected in a bankruptcy case, call a New Jersey bankruptcy attorney for a free consultation. You learn about your debt relief options during a no-cost, no-obligation consultation with an attorney.

There is hope. Bankruptcy offers a fresh start so that you can recover from a financial crisis to continue enjoying your retirement years.

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