Los Angeles Bankruptcy & Retirement Lawyer
After decades of hard work, you deserve a relaxing retirement. Unfortunately, heavy debt loads can make retirement a distant dream for many. Debts are much harder to service when you are on a fixed income, and our law firm receives many calls from seniors hoping to eliminate debts before they jump into retirement. At Wadhwani & Shanfeld, we can advise anyone looking to eliminate debt for their golden years. We can help you choose which bankruptcy option is right for you and then handle your case from start to finish. Call us to speak with a Los Angeles bankruptcy & retirement lawyer.
Are Your Retirement Savings Protected?
Chapter 7 is the shorter of the two main consumer bankruptcies and is a popular choice with those hoping to retire. The Chapter 7 process takes 3-4 months to complete, and you can eliminate certain qualifying debts, such as credit cards, personal loans, payday loans, and medical debt.
When you file for bankruptcy, the trustee puts all your assets into a “bankruptcy estate” and can sell certain assets to pay your creditors unless the assets are exempt. The good news is that many retirement accounts are either fully or partially exempt:
- 401(k) plans: fully exempt
- 403 profit-sharing plans: fully exempt
- Deferred compensation plans, like 457(b): fully exempt
- SEP and SIMPLE IRAs: fully exempt
- Individual IRA: exempt up to $1.5 million
- Roth IRA: exempt up to $1.5 million
The good news continues. The government can’t take your unpaid Social Security benefits. So you should continue to get that monthly check even if you filed for bankruptcy.
What happens if you have started receiving distributions from your retirement accounts? In that case, the funds are no longer exempt. They are treated like cash in a general checking or savings account. As part of your bankruptcy estate, the trustee could use this money to pay your creditors back.
As you can imagine, timing your bankruptcy is critical. Ideally, you should file for bankruptcy right before you retire and delay withdrawals from your IRA or 401(k). That strategy will maximize the money you have for retirement. If you withdraw $50,000 from a 401(k) and put it in a bank account, the trustee can use that money.
The law is different with Social Security benefits already paid to you. You might be able to exempt them if you keep them in a separate account and don’t “commingle” them with other cash.
Many seniors are also concerned about their homes. California has a fairly generous homestead exemption, which can help you stay in your home even if you file for Chapter 7.
Are You Considering Bankruptcy? Contact Us
Wadhwani & Shanfeld has decades of experience working with all sorts of clients. We have helped many people approaching retirement file for bankruptcy and finally get out from onerous debts. And if you are already retired, we can help you with the bankruptcy process as well. Please don’t hesitate to reach out to our Los Angeles bankruptcy and retirement attorney today for a consultation.
