How to File for Bankruptcy After Taking an Early Retirement
If have taken an early retirement and are having trouble paying your bills, there may be help for you. Chapter 7 bankruptcy would be a good solution for a retiree who has no regular income, aside from retirement benefits, with which to pay his debts. Chapter 7 allows a debtor to liquidate some of his assets and recover with a discharge of debts at the end of the process.
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Instructions
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How to File for Bankruptcy After Taking an Early Retirement
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Wait. Before you attempt to file for bankruptcy, you should wait until your income is consistent. If you file for bankruptcy and are a recent retiree, your income for the past six months will very likely be higher than it is during your retirement. When deciding which chapter of bankruptcy you can file, you must use your income for the previous six months to calculate your future expected earnings. Your past earnings could land you in a Chapter 13 repayment plan for the next five years. Therefore, you should wait until you have been retired at least six months before filing for bankruptcy. (See Reference 1.)
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Go to credit counseling with a government-approved agency. At credit counseling, you will receive a certificate that you should present to the bankruptcy court. (See Reference 1.)
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Take the means test. Compare your family income to the median family income of a family of the same size in your state. The Census Bureau website provides state median incomes. If your family income is less than the state median, skip to Step Five. (See Reference 1.)
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Calculate monthly disposable income. Monthly income minus allowed monthly expenses equals monthly disposable income. If your monthly disposable income is less than $100, you can file for Chapter 7 bankruptcy. If your monthly disposable income is more than $100, and that amount would not pay at least 25 percent of your debts over the next 60 months, you can file for Chapter 7 bankruptcy. Otherwise, you may need to file for Chapter 13 or not file at all. (See Reference 1.)
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5
File your Chapter 7 petition and pay a $299 filing fee in the bankruptcy court serving your area of residence. You must also file schedules listing assets and liabilities, current income and expenses, executory contracts and unexpired leases and a statement of financial affairs. A bankruptcy trustee will administer your case. You must provide the trustee with a copy of your tax returns. (See Reference 2.)
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Claim exempt property. The trustee separates your exempt property from your non-exempt property. Non-exempt property ceases to be your property. It becomes the property the bankruptcy estate and will be sold to repay your debtors. Each state has a list of exempt property. Some states allow its residents to claim federal exemptions. Some federal exemptions that would benefit retirees include: homestead up to $20,200; retirement funds that are in a fund or exempt from taxation; IRAs and Roth IRAs up to $1,095,000; Social Security and disability payments; public assistance benefits and veterans' benefits; and unmatured life insurance policies. (See References 2 and 3.)
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Tips & Warnings
An experienced bankruptcy attorney can help you to choose the best course of action.
Mistakes could lead to having your case dismissed.
References
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