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Bankruptcy in retirement: Protect your future

Retirement is not always the easy time of your life that people expect it to be. Costs are high, and if you don't have enough to make ends meet, you could end up facing bankruptcy during a relatively vulnerable time of your life. If you have to file for bankruptcy in retirement, there are some things that you should know.

To file for a Chapter 7 bankruptcy in retirement, you'll need to pass a means test. A means test shows if you have an ability to repay your debts based on the amount you currently owe. It takes into consideration your annual income and monthly expenses. The good thing about the means test is that your Social Security benefits won't be considered income for the purposes of the test, so you may qualify for bankruptcy even if you're getting a decent amount of money each month.

If you still have too much money to qualify for the Chapter 7 bankruptcy you wanted to have, then you will have the option of a Chapter 13 bankruptcy. Chapter 13 bankruptcies require you to pay back creditors over the course of three to five years, though you may not pay back all you owe.

What happens if you own your home?

If you are entering into bankruptcy and own your home, you'll need to pay close attention to the homested exemption. Residents of Virginia can generally choose if they'd like to take the federal exemption or state exemption. Statewide, the exemption for the homestead is $5,000 worth of real estate with another $500 per dependent. If you are over 65, you can take an exemption of up to $10,000.

If you have a lot of equity in your property or are not able to exempt as much as you'd like, you may need to sell your home before you can proceed with the bankruptcy. However, you can discuss the options with your attorney before you decide what to do and if bankruptcy is actually the right choice based on your financial situation.

Sometimes, choosing bankruptcy and using exemptions will be the best choice for your situation. As you continue to get older, you need to get your finances in order and as organized as possible. Taking care of debts and collections now by completing a bankruptcy may be the best way to do that, depending on your income and the assets in your possession.

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Bristle & Yi Law, PLLC
9200 Church Street
Suite 202
Manassas, VA 20110

Phone: 703-278-2027
Phone: 703-454-0701
Fax: 703-649-6368
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