A recent New York Times article, Bankruptcy Can Help Seniors Protect Assets, NY Times, June 30, 2015, makes a point that I have been making for years. Those in or near retirement need to be concerned about preserving their ability to support themselves as they age, and that means protecting the assets that make self-support possible.
Instead, I have seen too many people deplete IRA’s or retirement accounts to pay creditors. These accounts are protected from creditors and in bankruptcy (special rules protect all IRA’s in New Jersey. In other states the protection is there but more limited). Social Security income is also protected. Using up retirement funds means there will be less income or resources to meet our personal or health needs as we age.
While paying debts is laudable, it is a fools errand if the result is to make one destitute, or to leave debts for our estate to clean up after we die. A concern over one’s credit score should be less of a concern: with a fixed income, seniors should not be borrowing money that may not be paid back.
The starting point, as always, is a clear headed look at the available income and necessary living expenses. If one can afford to pay the debts one has while having a reasonable cushion for the inevitable unexpected expenses, a debt management plan may be best.
Even here, be leery of firms that promise to settle all your debts for a fee. Non profit organizations should be preferred.
Whatever the situation, a careful review with a qualified bankruptcy attorney is always in order. Knowing the options available is a wise first move. Whether or not bankruptcy makes sense for you, knowing what is available provides a good baseline to evaluate other options, and the relative short-term and long term costs they involve.