Is bankruptcy the best option for soon-to-be retirees?
Let’s say you are a few years away from retiring, but you are deep in debt. You have a mortgage — and maybe a second mortgage — car loans, and other debts that you just can’t keep up with. What’s your best move?
How you approach debt when you’re about to retire depends on the unique aspects of your situation. One thing is for certain, no matter what your situation looks like: Do not withdraw funds from your retirement accounts to pay down your debts. Retirement accounts are protected in bankruptcy — if you choose that approach — so it is important to leave them alone. If you don’t, you risk incurring expensive fees.
If you are really deep in debt, bankruptcy may make sense for you. Although it may hurt your credit and may involve liquidating some assets, bankruptcy can offer a clean slate for those who are struggling with an immense amount of debt. Certain assets, however, are exempt from bankruptcy, and often include retirement accounts, your home and a car. Plus, as soon as you file for bankruptcy, creditors are required to stop contacting you.
Of course, bankruptcy is not the only type of debt relief. If your debt is not debilitating, it may be worth considering other options before bankruptcy.
Retirement is supposed to be a time to explore passions and move on from the daily grind. You have spent your life working, and you deserve some relaxation. With debt hanging over your head, however, it is hard to feel free. An attorney can help explain how bankruptcy could help your situation.
Source: U.S. News & World Report, “How to Confront Debt Before You Retire,” Daniel Solin, March 4, 2014