When planning for retirement, you may be focused on saving up the money you’ll need to live comfortably after you’ve left the workforce. And when planning your will and trust, the primary focus is probably making sure that your loved ones are well taken care of by passing down as much of your property possible. Surprisingly, bankruptcy can help you achieve both of these goals.
Your Retirement Assets Are Safe In Bankruptcy
When money is tight, many people tend to reduce or eliminate retirement contributions before making cuts to credit cards or other unsecured debt payments. This makes sense in the short term – your 401(k) or IRA isn’t going to start calling you as soon as the money stops coming in – but you’ll regret short-changing your retirement when the time comes that you need to rely on it. Additionally, paying down debt becomes much more difficult once you’ve retired, so wiping it out ahead of time will help you stretch those dollars you’ve already saved.
Federal and state laws strongly favor retirement funding over your creditors. First, your creditors are generally barred from taking money out or your retirement accounts like they can with a bank levy. Second, your qualified retirement accounts are safe in a chapter 7 bankruptcy, or chapter 13 bankruptcy (be sure to let your qualified bankruptcy attorney know about any financial accounts you have so that an assessment can be made as to the exemptions that apply). Third, you can and should keep making reasonable retirement contributions even while you’re in the middle of a chapter 7 or 13 bankruptcy. In a chapter 13, federal law even gives you a credit for doing so, reducing the amount of your chapter 13 plan payment, and your retirement contributions can help you qualify for a chapter 7 where you might not otherwise be eligible.
Death Doesn’t Mean The End Of Debt Collection
Your creditors can collect your debts after you’ve passed away. Your estate must settle your accounts before it can distribute assets to your loved ones, and the debt collectors will line up to get paid. This is true regardless of whether you have lots of assets and valuable property or just a few household goods. However, if you’ve filed bankruptcy and discharged your debts the creditors will be barred from collecting in the future, more of your assets will transfer to your friends and family members, and the personal representative of your estate (executor) will have a much easier time doing his or her job without having to fight with debt collectors. It’s too late to file bankruptcy after you’ve died, so this is a tool that you’ll want to take advantage of sooner rather than later.
To talk to an experienced bankruptcy and debt relief lawyer about how you can have a more enjoyable retirement and give more to your loved ones upon your death, call The Law Office of Clark Daniel Dray at (303) 900-8598.