Nearing Retirement & Worried About Too Much Debt? Here's What You Need To Know
Doesn't it seem that you work hard and put in a lot of hours to be able to afford to live? The American dream of owning a home is usually only achieved by going into debt. In your younger years, you may have planned on having your home paid off going into your retirement years, but that doesn't always happen. In fact, according to statistics from data collected from December of 2016, 73% of consumers had an average of $61,554 in debt when they passed away, and most of it was mortgage debt. Additionally, about 68% had credit card debt.
Here's what you need to know if you are nearing your retirement years and are facing the seemingly impossible task of continuing to pay a mortgage payment and credit card bills on a limited income.
Retirement Accounts
Your retirement accounts will be your financial lifeline during your retirement years. Do not stop paying into the retirement accounts and do not liquidate them to pay off any debt. The reason for this is because, should you file bankruptcy or have a lawsuit filed against you for non-payment, creditors cannot garnish any monies from retirement accounts. If you liquidate the accounts, the monies are no longer protected from garnishment.
Also, there are tax ramifications for liquidating retirement accounts. If you were to liquidate your accounts, you would likely pay hefty taxes in the next tax season. Speak with a debt relief lawyer before you make any decisions regarding the use of your retirement accounts to pay off debt before you retire.
Bankruptcy
If you are already swimming underwater with too much debt or know you will be once you retire, it may be a good idea to file for bankruptcy. Bankruptcy affords you the ability to legally resolve debt while continuing to contribute to the retirement accounts you have. In a bankruptcy, you may have to liquidate vehicle to pay off credit card debt and other debt, but your retirement accounts will not be touched.
If you've owned your home for a long time and equity in it, your home may be over the exemption limit for Chapter 7 bankruptcy, which means it could be sold in a bankruptcy to pay your debt. However, in most states, homesteads are exempt from Chapter 13 bankruptcies, so be sure to discuss these details with your debt relief lawyer like Clinger Richard S if you would like to remain in your home.