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Bankruptcy after retirement can be complicated

If you're retired and thinking about filing for bankruptcy, you should know that it can get fairly complicated. You need to know what property is exempt, what types of bankruptcy you can use, what the long-term impact will be and much more.

First, many retirement funds and pension plans are exempt, so you don't have to worry about losing them if you file for bankruptcy. Similarly, your Social Security payments cannot be garnished.

One problem, though, is that a large pension plan can put you in limbo between Chapter 7 and Chapter 13. The pension may pay out enough that you're not eligible to liquidate your debt with Chapter 7. You have to use Chapter 13, which just creates a repayment plan. However, the pension may not give you enough to make those payments and still keep up with all of your expenses.

Another potential issue is that while Social Security payments can't be garnished, bank accounts can be. If Social Security funds are just deposited in the account, it can be tricky to figure out what cash can be collected, and some experts say that people should have one bank account only for Social Security payments.

For seniors, financial decisions are especially important because many live on a fixed income. There is no way to increase monthly earnings. Every decision has to be thought out carefully to ensure that it's the right one and that there aren't any unforeseen complications. If you're thinking about filing and you've already retired, make sure you take the time to go over all of the details and file in a way that protects your financial future.

Source: Bankrate, "Are retirement funds protected?," accessed Jan. 27, 2017

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