Has the pandemic piled so much debt on you that you're wondering whether you ought to file for bankruptcy? If so, that's not surprising. In the wake of coronavirus-related business shutdowns and job losses, personal bankruptcy filings spiked this year, with nearly 80,000 Americans hoping to erase some or all of their debts.
That leap could portend an ongoing wave of filings, including among people over 65 — who, in the years leading up to the pandemic, had been the fastest-growing age group of bankruptcy filers. The combination of high medical bills, limited retirement income and the lack of guaranteed pensions makes that trend likely to continue, says Robert Lawless, a law professor at the University of Illinois. “The COVID epidemic hasn't made that any better,” he says.
It can salvage your retirement. Filing can wipe out credit card balances, medical bills and other debts, giving you more of a chance to save for retirement and more protection for what you've saved already. While pensions, 401(k)s and recent Social Security benefits are shielded from creditors even if you don't file, bankruptcy adds protection for up to $1.36 million in IRAs, which are not always off-limits to creditors in all states.
A bankruptcy filing is often the first step to an improved credit score.
