A person may experience significant financial challenges that prompt the consideration of filing for bankruptcy at any stage of life, including during or after retirement.
When looking to a bankruptcy plan for debt relief help after retirement, however, a consumer should understand how their income and retirement savings may play into their bankruptcy.
The Chapter 7 bankruptcy means test
Prior to being approved for a Chapter 7 bankruptcy, a consumer must pass the means test. MarketWatch explains that the means test evaluates a person’s income and how it aligns to the median income in the debtor’s state for a similar household. Regular household expenses are also included in the means test evaluation. If the debtor meets the criteria, they may file for a Chapter 7.
Social Security income and the means test
According to SmartAsset, money received from Social Security as regular post-retirement income does is not considered income in the eyes of the bankruptcy means test. This may help a retired person preserve some income and also qualify for the bankruptcy plan.
Retirement accounts and consumer bankruptcies
When it comes to retirement accounts and consumer bankruptcies, things may get a bit complicated. On one hand, the assets in some retirement accounts like 401Ks may be exempted from the bankruptcy process. On the other hand, any income that a person receives from a 401K or other exempt retirement accounts may be factored in as income during the means test process.