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Bankruptcy during retirement?

Financial crisis can strike at anytime. Whether you are young in your prime earning years, or if you are looking at retirement, unexpected problems, like a divorce, injuries, medical conditions and job loss can intervene to sidetrack your plans. Sometimes, it is a temporary setback, like with a job loss, where you are lucky and quickly find a new job at the same pay.

But other times, there is no quick recovery. Maybe it is a divorce, leaving you struggling with less income and more expense than you expected. Or a sudden illness or decline in your health, leaving your income substantially lower and with significant medical expenses and no insurance.

Those who are retired might seem like unlikely candidates for a bankruptcy, but even those who are retired are not insulated from financial woes. Many individuals rely on 401k and other market-based investments for much of their retirement income and the volatile markets of the last decade have proved to be disastrous for many unlucky investors.

The phenomena of "gray divorce" has become more prevalent, and a divorce could upset your carefully designed retirement plans. And some parents may have signed on school loans for their children and may suddenly find themselves on the end of collection calls for a debt they never planned to pay.

Bankruptcy, at the end of the day, is a financial decision, and it needs to viewed as such. It can provide options, such as a Chapter 13, which can be used to eliminate financial burdens like second mortgages, medical expenses and credit card debt.

And because retirees may have a reduced need for new credit and some income, such as Social Security, may be protected in a bankruptcy from creditors, filing a bankruptcy even after retirement may make financial sense.

Source:, "Why Some Retired People Might Consider Filing for Bankruptcy," Juliette Fairley, June 6, 2015

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