The following is a guest post. Enjoy!ย
Retirement is supposed to be a time for reflection on your life, relaxation, and maybe even a chance to finally see your dreams become a reality. But for a startling number of retirees, retirement only brings financial problems, making seniors the fastest-growing segment of bankruptcy filers. This doesn’t mean seniors are financially irresponsible, though; quite the contrary. More than half (62%) of bankruptcy filings are the result of exorbitant medical bills.
If you’re facing the prospect of bankruptcy during your retirement, you may feel overwhelmed and frightened. Bankruptcy may help you, but knowing all of your options is key to getting out of financial trouble.
Keys to Avoiding Bankruptcy
Bankruptcy can happen to anyone, but if you’re in the early stages of financial trouble, you may still be able to avoid it. To stay out of bankruptcy:
- Avoid taking on debt that’s not absolutely necessary; no credit cards to pay for vacations or clothing!
- Maintain up-to-date health insurance so that you’re not saddled with medical debt, and be sure to sign up for Medicare.
- Don’t loan money to children or other loved ones if you can’t afford to lose the money.
- Don’t retire early if you don’t have enough saved up.
- Consider taking a part-time job in retirement.
Remember, seniors have options for protecting their financial health and assets that younger people don’t have. In addition to Medicare and Social Security, seniors can also tap into reverse mortgages. If you own your own home, a reverse mortgage can provide a steady stream of income, but you get to keep your home.
What Bankruptcy Offers
If you’re considering filing for bankruptcy, know that bankruptcy does not have to be the end of the financial road for you. Every bankruptcy is different, so you should talk to a lawyer before making any major decisions. Generally, though, bankruptcy will eliminate most of your debts, except for student loans, which can’t be discharged in bankruptcy. The downside is that your credit will be wiped clean, eliminating your ability to get a loan, credit card, or new home for a few years. In general, you can usually get a credit card about two years after bankruptcy. A Chapter 7 bankruptcy will fall off of your credit report in 10 years, while a Chapter 13 takes seven years.
When You’re In Over Your Head
If you’re considering filing for bankruptcy, slow down before making any decisions you can’t take back. Then take the following steps:
- Talk to a financial advisor or credit counselor to explore possible alternatives out of debt.
- If you have loved ones who may be able to help you, consider seeking help paying down your debt in return for something else. Perhaps, for example, your kids can pay off your credit cards in return for weekly baby-sitting for a year.
- Seek an experienced bankruptcy attorney who works with seniors. Steer clear of lawyers who run volume-based practices, since their job is little more than signing paperwork. It may cost a bit more to hire a lawyer who takes his or her time, but this strategy ensures your assets are protected.
Bankruptcy can be scary, but it doesn’t have to ruin your financial life for good. And when you’re in over your head, bankruptcy may even be the lifeline you need to regain control.
