Elderly and Bankruptcy FAQ: What Will Happen to My Benefits and Pensions?

Many older Americans in Oak Park and throughout the country are filing for personal bankruptcy. Indeed, as we have discussed previously, numerous seniors continue to file for bankruptcy due to medical debt. While consumers of all ages may have concerns about what will happen to retirement accounts, pensions, and certain benefits upon filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, this question is often of utmost importance for consumers who are already in retirement. Generally speaking, Illinois’s bankruptcy exemptions allow debtors to keep most pensions and benefits.
In Illinois, debtors who file for bankruptcy are required to use Illinois exemptions (as opposed to having the option of choosing the federal exemptions). At the same time, certain exemptions for retirement accounts require a closer look at the U.S. Bankruptcy Code. We will provide you with some detailed information aimed at seniors who are thinking about filing for bankruptcy in Illinois.
Seniors Who Receive Social Security and Veterans Benefits
If you are thinking about filing for bankruptcy and are concerned about your Social Security benefits or your Veteran’s benefits, you should know that these benefits are exempt. Specifically, under 735 ILCS 5/12-1001(g), the debtor retains the right to receive Social Security benefits and a Veteran’s benefit.
This is extremely important for older adults as most do indeed receive Social Security benefits. According to a fact sheet from the Social Security Administration (SSA), a snapshot in June 2017 showed that 42 million retired workers were receiving benefits totaling about $57 billion. The average monthly benefit for retirees is $1,369. How many seniors receive Social Security benefits? The SSA reports that approximately 90% of Americans aged 65 and older currently receive Social Security benefits, and those benefits represent around 33% of all income for people in that age group. For more than 40% of the elderly, Social Security benefits account for at least 90% of their income.
What about benefits for elderly veterans? According to the U.S. Department of Veterans Affairs, there are more than 12 million veterans aged 65 and older in the country, and they receive a variety of benefits, such as a monthly pension through “Aid and Attendance” or “Housebound,” and medical benefits through the Geriatrics Program. Seniors in Chicagoland can file for bankruptcy without having to worrying about these benefits being subject to the bankruptcy process.
Retirement Accounts and Pensions
Certain Illinois pensions are also exempt under Chapter 40 of the Illinois Statutes. When it comes to retirement accounts, the U.S. Bankruptcy Code clarifies that tax exempt retirement accounts such as 401(k) accounts and defined benefit plans are exempt. How about traditional IRAs and Roth IRAs? These accounts, too, are exempt, but only up to a certain amount. Generally speaking, the exemption cap is set at over $1,000,000 per person, so seniors who are struggling to pay monthly bills due to medical debt are less likely to be affected by the cap set on traditional IRAs and Roth IRAs. A bankruptcy attorney can tell you more.
Contact an Oak Park Bankruptcy Lawyer
If you have questions about filing for bankruptcy, you should speak with an Oak Park bankruptcy attorney today. Contact the Emerson Law Firm to discuss your situation.
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