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Protecting your retirement funds with bankruptcy

Retirement might conjure images of time spent traveling, freedom from work obligations and few worries. For a growing number of retired individuals in Washington, however, this may simply not be true. Unplanned expenses and medical bills can eat away at retirement accounts and leave retirees without the necessary funds to provide for themselves. Instead of fruitlessly emptying a retirement account for a bill that will likely never be fully paid off, some experts advise that filing for bankruptcy could be a far more productive course of action to take.

Requiring extra health care in the years following retirement is not uncommon, and even with insurance, medical bills can easily grow to an overwhelming size. Even if an individual took all precautions when preparing for his or retirement, a single medical emergency can eviscerate funds that were carefully saved to last the remainder of his or her years. In many instances, a monthly amount that a hospital or bill collector demands can be far greater than the limited or fixed income on which most retirees survive.

Filing for bankruptcy so late in life might seem counterintuitive to some people. After all, if they made it to retirement with a good credit score and little debt, why not try and pay off the bill little by little? While this line of thought might make sense on the surface, it fails to address the realities of paying back a serious medical bill with retirement funds and assets that are meant to buy groceries and pay the light bill. Once those funds are gone, most seniors have nothing else. 

For most people, going back to work was not in the plan for retirement, and for many more, it might even be physically impossible. Bankruptcy is such an effective means of debt relief for retirees because their retirement assets are off the table. Many Washington seniors can even keep their home by filing an exemption for their principal residence.

Source:, "Bankruptcy can help seniors protect assets", Constance Gustke, June 1, 2015

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