Bankruptcy in Retirement

Older, bald, white man rubbing his temples as he calculates his finances at a desk.

Aging, Debt, and Emotional Stress

Everyone wants to retire with enough income to cover their living expenses. And for some people, it’s not too hard to put away 5%, 20%, or even 45% of their paychecks each month. But for a much larger number of Americans, saving enough for their golden years is a daunting task; and in some cases, it’s out of the question. Combined with the normal hardships of old age, financial debt can create profound emotional stress for low and moderate-income seniors.

Benefits of Bankruptcy for Older Adults

Many older adults feel a sense of obligation concerning their finances. Laudable as it is, paying off enormous debts on a fixed income is not always realistic. Bankruptcy, on the other hand, can be a lifesaver for good people who have fallen on hard times. There is nothing to be ashamed of, and older adults are the least likely group to be impacted by the temporary effect bankruptcy has on credit ratings. And the benefits are enormous. A successful bankruptcy can free you from:

  • Existing medical bills
  • Credit card debt
  • Personal loans
  • Utility bills
  • Certain court judgments
  • Attorney fees

Retirement Accounts

Another important benefit for seniors is the unique way retirement funds are treated in bankruptcy cases. Among other savings-incentives enacted by Congress, assets stored in most types of retirement accounts are, by law, shielded from creditors.

While the payments you receive from these types of accounts are considered regular income, the accounts themselves cannot be drained and turned over to creditors, as non-retirement assets can. Protected retirement assets include those from:

  • 401(k), 403(b), and other employer defined-benefit plans
  • Pensions that qualify for the Employment Retirement Income Security Act (ERISA)
  • Annuities that are set up to begin payments at age 65
  • IRA funds under a limit determined by the current cost of living—(set at $1,362,800 until April 1, 2022)

As a general rule, if you’re filing for bankruptcy in retirement, a portion of your income to cover your basic living expenses will be protected from creditors.

Do You Need to File for Bankruptcy?

Some seniors don’t need to claim Bankruptcy because they are what is known as “judgment proof.” These include individuals who have no assets—neither liquid (cash), nor fixed (real estate), and are not working or are working for very low wages. That said, if you are sued by a creditor, and you believe you are “judgment proof,” you should still respond to the lawsuit. An attorney can help you determine the best course of action.

Reach out and Get Help

If you’re facing retirement and also dealing with overwhelming debt, the first thing you need to do is talk to an attorney. Whether you are in trouble because your income was too low to save enough money, or because you had too many medical bills, or any other reason, a legal professional will help you understand your options and allow you to stay focused on rebuilding your future. With over 25 years of legal experience, I have the skill and knowledge to help you find the best solution to your financial problems in retirement. Call or email today for a free consultation.

Resources for Seniors

Maryland offers a wealth of resources for seniors. This statewide list of Area Agencies on Aging can connect you with local support systems that can help alleviate the emotional and physical stresses you may be facing: Area Agency on Aging. Don’t suffer needlessly—get the help you need today!

Call Today for a New Start

If you're ready to take back control of your finances, call 301-589-4597 or email me at to discuss your options. I offer free consultations to those enduring severe financial strain in Maryland and Washington D.C., including areas around Baltimore, Bethesda, Silver Spring, Gaithersburg, Rockville, Wheaton, Upper Marlboro, Bowie, College Park, Laurel, Frederick, Hagerstown, Hyattsville, Salisbury, Towson and Glen Burnie. Let me help you make a new start today.