Bankruptcy & Retirement
Planning for retirement seems like something we start working on from a relatively young age, but we never know what may come near the end. Unforeseen circumstances such as an illness or other debts can creep up on you, meaning you may not have enough to cover your debts and pass along money or property to loved ones. Our probate attorneys Milwaukee are well versed in end of life financial planning, maximizing your assets to be passed down. So how can filing bankruptcy help you make sure your family and friends are taken care of after your passing through proper estate planning?
Filing Before Retirement
If you have not retired, but you have retirement funds such as a 401(k), profit sharing, or other retirement plan, these funds cannot be accessed by debt collectors, no matter the amount of funds you have. Both Chapter 7 and Chapter 13 are not affected by the amount of savings you have in your retirement accounts, therefore if you’re facing debts that can be discharged, such as medical debt or credit card debt, filing for bankruptcy before your retirement can mean that you hold on to these accounts, instead of using them to pay down your debts or stop funding your retirement. In the long run, you’ll have more funds available to both live off of after retirement and have more assets to pass down. Be sure to let your estate planning attorney know of all accounts you have in order to assess what funds are accessible.
Filing After Retirement
While you can still file for bankruptcy after retirement, if you are drawing funds from your retirement accounts, these funds become more available for creditors to access. Anything that is deemed excess income, meaning anything that is above what is needed to meet your living expenses, becomes available to creditors during Chapter 7 bankruptcy. During Chapter 13, this income is included in the calculations of how much you can repay in your plan, meaning you could end up paying out more. Your estate planning attorneys Brookfield should know both federal and local laws, so be sure to contact them to talk about whether filing is the right decision for your estate planning.
Contributing to Retirement During Bankruptcy
Yes, you can continue to contribute to your retirement funds even if you file for bankruptcy. In fact, it’s encouraged. Instead of pulling money out of your retirement funds to cover debts, or reducing or stopping contributions in order to have more funds available, instead consider filing for bankruptcy and continuing contributing to your retirement funds. Federal law gives a credit for contributing during Chapter 13, reducing the amount of your repayment plan. During Chapter 7, increasing your contributions can help you qualify when you may not have been previously eligible.
Debt Collection After Death
Even death doesn’t stop debt collection. In order to maximize the assets being passed along, discharging your debt before death becomes crucial. After-all, you cannot file for bankruptcy after death. Your estate is required to settle all accounts before assets can be allocated to your loved ones. However, if you have filed for bankruptcy before death, creditors are barred from collecting in the future. Not only will this prevent your executor from being harassed by creditors upon your death, it will make their job of allocating your assets much easier.
There are many options to weight when considering using bankruptcy as an estate planning tool. Our estate planning attorneys can help walk you through, step-by-step, and help you make a sound decision in order to ensure your loved ones are taken care of after your death.
Divorce & Bankruptcy
Even the simplest of divorces can be complicated. However, if you add bankruptcy into the mix, it can become downright confusing, not to mention stressful. With thousands of bankruptcies filed in Milwaukee each year, there are bound to be times when both a bankruptcy and a divorce are imminent. Whether the bankruptcy is the reason for the divorce, or not, there are some important facts to know before you consider filing for both.
- Avoid filing for both divorce and bankruptcy at the same time
Both divorce and bankruptcy are legal matters, and overlapping them at the same time can cause some legal hold ups. A decision should be made on whether to file for bankruptcy or divorce first. One consideration is that when bankruptcy is filed for, your assets and property are frozen immediately in order for the courts to sort out what you have that can compensate for your debts. If you choose to file for divorce at the same time, the courts will not be able to split up the assets since they are put on hold. This can cause the divorce to get dragged on through the court system for a longer period of time.
- Your situation will determine which should be filed first
Although you shouldn’t file for both a bankruptcy and a divorce at the same time, it doesn’t mean you cannot figure out which one makes more sense for your situation. If you are your soon-to-be ex-spouse are on cordial terms, it may make more sense to file for bankruptcy first. By filing for bankruptcy before the divorce, you can share the cost of the bankruptcy attorney as well the filing fees. This may also be able to protect you both from having to pay joint debt, which can occur if you have property together. There may also be double exemptions in your area; by contacting your bankruptcy attorney you can learn more about this.
Depending on the type of bankruptcy you are going through, your joint income may put you over the threshold for filing. In those cases, it is best to proceed with the divorce first, then file for the bankruptcy, so long as the individual incomes then meet the threshold for the bankruptcy filing.
- Chapter 7 or Chapter 13
When considering going through a divorce and a bankruptcy, you’ll want to consider the different types of bankruptcy and their timelines. If you choose to file bankruptcy first, and would like a faster divorce, Chapter 7 may be beneficial. Chapter 7 eliminates all dischargeable debt typically in 3 to 6 months, meaning you can proceed with your divorce faster.
Chapter 13 bankruptcy sets up a 3- to 5-year payment plan, and this can cause your divorce to take longer. However, if you are in the repayment period of a Chapter 13 plan, and file for divorce, you can choose to cancel or restructure the payment plan. If you choose to restructure the plan, it will divide the plan into two separate cases, one for you and one for your spouse. This means that you can then separately handle the bankruptcy from your partner.
In either case, bankruptcies can become even more complicated if not handled properly, especially with divorce added into the equation, and therefore you should contact a bankruptcy attorney.
- Bankruptcy does not discharge all debt
If you are planning on going through Chapter 7 debt discharge, it is important to note that some debts are “nondischargeable”. These debts include:
- Child support
- Government fines
- Court fines/penalties
- Student loans
- Attorney fees for child custody or support cases
These are debts that you will still be required to pay back no matter the circumstances. There are also a variety of rules that you will have to follow in order to have your debts discharged, and failure to meet these rules can result in the court denying the request.
- If you file for bankruptcy during a divorce, you will likely need a new attorney
If you and your spouse hire a divorce attorney Milwaukee together to handle the divorce, then choose to proceed with a bankruptcy, the divorce attorney cannot represent you both. Conflict of interest prevents a lawyer from representing you both in the divorce and in the bankruptcy, and therefore one or both of you will be left looking for a new attorney. Hiring multiple attorneys will lead to more legal fees for the both of you, adding to your financial burden. It can also drag out both the divorce and the bankruptcy since the attorney(s) will need to be caught up on the case.
While both bankruptcy and divorce are stressful times for anyone, by making informed decisions, you can come out with a fresh start. Each situation is unique, and in order to make sure you understand the complexities of your divorce and bankruptcy, you should contact a reliable divorce attorney in Milwaukee to get started.
Recently we helped a couple who owned an Office Cleaning Milwaukee business but was going through a divorce. We were able to help them quickly and amicably sort out the process and finalize decisions on how to divide their commercial cleaning and janitorial business with the least amount of headache. We can help do the same for you.