Seniors are facing several financial issues as they near retirement age — they are living longer and they are entering retirement with more debt. The financial crisis left many people struggling with debt. For those close to retirement, that debt may still be lingering. To make matters worse, seniors are entering retirement owing student debt and many owe substantial mortgage payments. For many seniors, the financial obligations result in working well beyond retirement age. For others, the debt is too overwhelming to handle on their own. They need a way to protect retirement funds while getting rid of the debt.
Using Retirement Funds to Pay Debts
A dangerous trend is seniors using their retirement funds to pay their debts. Even for those who are 10 or 15 years away from retirement, using retirement funds to pay down debt or pay off debt, especially unsecured debt, may not be the best solution to their financial problems. You need to protect retirement funds to ensure you have sufficient funds to support yourself during your retirement years.
For example, you are 55 years old with several thousand dollars in student loan and credit card debt. You use retirement funds to pay off these debts assuming you will have time to replace the retirement funds well before retirement. An unexpected life event such as unemployment or a medical emergency derails your plans. You now have more debt with less (or no) retirement funds. Is there a better way to protect retirement funds and eliminate debt you cannot pay? Before you dip into your retirement funds, you should consult a bankruptcy attorney and an estate planning attorney.
Filing Bankruptcy to Protect Retirement Funds
Almost all retirement funds are protected when you file a bankruptcy case. In other words, when you file a bankruptcy case, the trustee nor your creditors can use your retirement funds to settle your debts. Provided your retirement funds remain in a protected account (i.e. 401k account, most pensions, Individual Retirement Accounts, etc.), you may be able to eliminate your unsecured debts while you protect retirement funds for your future.
In order to determine if you are eligible to file bankruptcy to protect retirement funds, you must consult with an experienced bankruptcy attorney. It is unwise to rely on information provided online, by friends or family, or by an attorney who does not specialize in bankruptcy law. Only after reviewing your financial situation can a bankruptcy attorney advise you if your retirement funds will remain exempt from the court and your creditors if you file a bankruptcy case.
If you need a referral to a bankruptcy attorney, we will be happy to provide you with some attorneys in your area who practice bankruptcy. We also encourage you to schedule an appointment with our office to discuss your estate plan to ensure that you have everything in place that you need to protect your assets and your family during your retirement and after you have passed.
Experienced Madison Estate Planning Law Firm
The attorneys of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters pertaining to these areas of law. We personalize our services to meet the needs of each client and our attorneys make house calls for our clients if they are unable to come to our office. Contact our office by calling (608) 268-5751 to schedule a consultation or use our online contact form.
Image Credit: Helen Penjam