Your golden years are meant to be the time when you sit back and relax. Yet, for millions of people across the country, growing older and entering retirement is cause for more financial stress, rather than less.

In fact, a 2018 report found that bankruptcy rates were significantly on the rise among older adults. According to reporting from the Chicago Tribune, the rate of bankruptcy among Americans ages 65 and older tripled between 1991 and 2018. Per the Tribune, bankruptcy rates were also up substantially among the pre-retirement set, those aged 55-65. And according to data from, 12.2% of all bankruptcies were filed by people 65 and older last year – compared to just 2.1% in 1991.

There are many different reasons for this increase in bankruptcy filings among the senior set. Medical costs continue to grow more expensive, pensions are growing less and less common, more seniors are dealing with mortgage and loan debt, cost of living expenses continue to increase, and many Americans have long been dramatically underestimating the amount they need to save for a comfortable retirement, according to reports from CNBC.

When taken together, all of these factors can make for a perfect storm of financial distress for seniors. Over time, it’s easy for debts to mount, and for concerns over your finances to begin impacting your health, your mental well-being, and your lifestyle.

For retirees, facing down debt brings up some common questions: Is bankruptcy a practical option for debt relief? And, if so, how do I file for bankruptcy? How will it impact my income, my savings, my home, and all the other important aspects of my life?

These are important questions to ask! Ultimately, it’s important to remember that everyone’s situation is going to be unique. In many cases, the best path to move forward is to get in touch with an experienced bankruptcy attorney in your area, who can get a handle on your distinct circumstances and help you understand all of the solutions available to you, including bankruptcy.

As you begin the process of taking stock of your personal circumstances and weighing whether bankruptcy may be a practical course of action for you, here are five key things for retirees to keep in mind about filing for bankruptcy:

Bankruptcy and Your Home

Many people fear that filing for bankruptcy will necessarily mean having to give up their homes. This can be particularly intimidating for seniors, who may have spent decades living in the same place, working to build equity in their property. It’s important to keep in mind that some types of bankruptcy may affect your assets, but there are protections in place that can help you to shield some property, including your home.

In Illinois, for example, the homestead exemption exists to help owners preserve equity in their residence and keep a roof overhead, even in the face of bankruptcy or severe indebtedness. With Chapter 13 bankruptcy, as well, filers can restructure their debts and pay them off over a series of years, without necessarily having to liquidate any property in the short-term.

In short? It’s important to remember that filing for bankruptcy does not necessarily mean having to give up the things that are most important to you.

Bankruptcy and Social Security

Under bankruptcy laws, there are some things that are considered “protected” – including income received from Social Security and/or Social Security Disability.

So, broadly speaking, creditors cannot garnish Social Security benefits. This source of income also does not typically get counted on the Chapter 7 bankruptcy means test, allowing for more flexibility and choice for seniors considering bankruptcy as an option for financial relief. Social Security payments can also be safeguarded even after they’re deposited in your accounts; as consumer information site The Balance notes:

“…under a rule established in 2011, banks must know whether federal benefits are included in an account before they allow money to be seized. If Social Security or similar government benefits are included in an account, the bank must protect two months’ worth of those benefits from creditors.”

Bankruptcy and Retirement Accounts

Similar to Social Security payments, many retirement accounts can typically be protected in Chapter 7 bankruptcy. As The Bankruptcy Site notes, this includes “almost all tax-exempt retirement accounts,” including “401(k)s, 403(b)s, profit-sharing and money purchase plans, IRAs, and defined-benefit plans.” Meanwhile, Chapter 13 bankruptcy often allows debtors to hold onto their personal assets (including retirement accounts), provided that they can keep up with a structured repayment plan worked out with their creditors.

At the same time, it’s important to consider whether bankruptcy is going to be necessary, given your level of income and the types of debt you owe. If you’re only drawing a limited income from retirement accounts and Social Security and are living with fewer assets in retirement, it may be worthwhile to pursue an alternative solution to bankruptcy, working with the counsel and guidance of an experienced bankruptcy attorney.

Bankruptcy and Medical Bills

One of the most important things to understand about bankruptcy is which of your debts it can help to discharge, and which it cannot.

Generally speaking, Chapter 7 bankruptcy can allow filers to discharge many of their unsecured debts – that is, debts that are based purely on one’s promise to pay them back, usually with interest. Broadly speaking, medical bills are often dischargeable in Chapter 7 bankruptcy, along with some other common types of debts facing seniors, like unsecured credit card debts, personal loans, and some utility bills. On the other hand, it’s important to remember that bankruptcy will not allow you to immediately discharge all of your debts, and you may still be liable for some common debts in bankruptcy, including taxes and child/family support obligations.

Bankruptcy and Your Retirement Goals

Many of us tend to think of debt as something that only impacts our lives financially. But in many cases, that’s simply not true. Debt can ultimately cause effects that go well beyond the pocketbook. Receiving calls or messages from creditors can impact your daily life. Worrying about debt constantly can negatively affect your mental and physical health. For seniors, paying down debts can mean having to make tough sacrifices, such as choosing between buying food or paying for prescription drugs.

In short? If struggles with debt are significantly affecting your ability to live a happy, healthy, and fulfilling life in retirement, then it may be a logical step to consult with an expert and take some steps to gain the relief you deserve – including looking into bankruptcy as a lasting solution for debt relief.

Keeping the Conversation Going

For retirees in Chicagoland and beyond, the best way to determine if you qualify for bankruptcy, and what strategies to pursue in bankruptcy, may be to consult with an experienced legal professional.

With a bankruptcy attorney on your side, there is no need to search for all the variables and hope you don’t miss any key detail, or waste your time seeking out costly and ineffective third party remedies. Instead, an attorney can help you pursue the right course of action for your unique financial situation. Legal professionals can also offer the force of law to protect you from creditors, all while being held to a higher standard by the state and ethics review boards.

If you’re looking to get a better understanding of bankruptcy, do not hesitate to get in touch with the Gunderson Law Firm.  We can get you actual, straightforward answers for your personal situation, and your first consultation with us costs you nothing.

At the Gunderson Law Firm, we strive to protect our clients’ assets to the full extent allowed by today’s laws throughout the complex bankruptcy process, helping them get the debt relief they not only need, but genuinely deserve. For retirees and seniors, we can address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again. Drop us a line if you’d like to keep the discussion going.