BK as a retirement strategy?

[dman]

Explain why you feel there is a difference between the 2 - as I can see none - as in the end, BK is still being looked at either way. Doesnt matter about being "informed / ducks in a row" as you're still looking into BK as a means "just in case.." - no different than planning a BK. Fraud is up to the Trustee to determine - not us.

Simple. A 60yr old person in the first scenario would say something like "I'm going to file for bankruptcy in five years so I can retire. I'm gonna get a head start and charge a lavish around the world cruise to this high-limit card." Someone in the second scenario would say "Gosh, I sure hope I never have to file for bankruptcy, but I'm glad I read up on how it works. I've made a few lifestyle changes that will ensure I'll be able to support myself throughout my retirement, even if something major comes along and tries to knock me down."

[ttg1]

Dman. I think you missed Pandora's point. The question is not whether you think you have committed fraud the question is whether the legal system thinks you have committed fraud. This is a confusion that I see all the time. Legally, a person has committed fraud only after a judge says they have committed fraud and not before. Up into that point in time everyone is just expressing their opinion. Indeed, even the judge is just expressing an opinion (hence, their ruling are called "opinions") but they have the power to make their opinion legally decisive.

I can't remember who said it but some judge said to a young lawyer, "This is not a court of justice young man, it's a court of law." I suspect the tale is probably archetypal.

[IamOld]

I think guys we need to have a quantum shift/leap/whatever analogy you want to use in how the economy is ordered...

[JackBondLove]

With individuals, there seems to be some moral hazard but large companies often seem to plan well in advance. Maybe they just have assets protected to begin with in case such a situation arises. Of course, businesses are always aware of gains and losses whereas individuals often assume they'll always have an income and pay their bills.

Businesses always try to put themselves into the position of "heads I win, tails you lose." They put together a business plan and sell it to banks and bondholders, along with a small equity position. If the business venture succeeds, the banks and bondholders get paid off, and the equity investors reap the rewards. If the business venture fails, everyone loses (but the original equity investors only lose their small investment.)

[dman]

Dman. I think you missed Pandora's point. The question is not whether you think you have committed fraud the question is whether the legal system thinks you have committed fraud. This is a confusion that I see all the time. Legally, a person has committed fraud only after a judge says they have committed fraud and not before. Up into that point in time everyone is just expressing their opinion. Indeed, even the judge is just expressing an opinion (hence, their ruling are called "opinions") but they have the power to make their opinion legally decisive.

I can't remember who said it but some judge said to a young lawyer, "This is not a court of justice young man, it's a court of law." I suspect the tale is probably archetypal.

Maybe I partially missed the point, but I'm pretty sure I got the gist of it.

If you set out to defraud your creditors, your bk filing is gonna stink, and the trustee is going to take a closer look. Sure, they get to decide what's fraud and what isn't...but if you happen to be currently living in a state with generous exemptions, and have a lot of exempt assets (house, retirement accounts, etc.) and all of a sudden you were diagnosed with cancer, had a mountain of medical bills, and lost your job...I doubt the trustee will think you planned it all.

[magua2]

That case I was mentioning earlier, the debtors did not have any significant "happening" in their life that caused them to file bankruptcy, other than retirement was around the corner and they would be much better off without all of their debt. The judge used that in his totality of the circumstances evaluation and denied their discharge.

[inyou]

i dont think filing BK would be an efficient retirement strategy. You should also look at the disastrous effects to your family and loved ones. i agree with dman, you should try other sensible strategies rather than filing BK

[btbeme]

i dont think filing BK would be an efficient retirement strategy. You should also look at the disastrous effects to your family and loved ones. i agree with dman, you should try other sensible strategies rather than filing BK

What disastrous effects are you referring to? We don't have generational debts in this country. Nor do we have debtor's prisons or Sharia Law.

Try this scenario... Dad has $53,000 in credit card debts and a house worth $125k with a $150k mortgage. Dad dies while working the door at WalMart, because he cannot pay the minimum payments, buy food, and pay the mortgage and medical with his Social Security check alone. Dad's retirement savings are also gone, because he used them to help his grandkids attend college and had to pay his wife's medical bills when she became ill. Dad leaves his estate to Bob, his only son, in his will. Bob now has to do a full accounting of the estate, because the mortgage company and the credit card companies will send a lawsuit for the balances to the bereaved as an addendum to their condolence note. Whatever Dad owned will have to be sold to satisfy as much debt as possible. Bob can't be sued, but Dad's estate can be sued for pretty much every nickel it is worth.

Alternate scenario - let's say Dad realizes that there is too much month left at the end of the Social Security check, so he takes the job at Walmart. His wife is ill and the bills are piling up. Credit cards paid for the car repairs, the medications, and the gas and insurance. Dad's retirement savings are being drawn down rapidly to pay medical bills. Bob sits down with Dad and convinces him to stop paying the bills, stop draining retirement, gather up all that is owed, and file Ch 7. Since Dad didn't fly around the world and rack up debt - the credit bills and medical bills are proof of that - Dad's Ch 7 discharge flies through. Dad now has enough to pay the mortgage (after negotiating a modification) and eat. He has just enough retirement savings left to buy a nice bottle of Scotch and a box of cigars every month and he enjoys his time at WalMart because it keeps him in the green.

If a retiree can file BK and shed debts rather than spend their retirement savings to pay credit card interest, isn't that the opposite of a disaster? Rather than rely on the goodwill of your children and grandchildren for a roof over your head and food to eat, isn't it preferable to keep 401k and IRA and Social Security funds available for basic necessities? Or is that money better spent paying off credit card debts and ten year old medical bills?

Certainly BK isn't a retirement strategy (fraud is fraud, at any age, and I would never suggest such), but my opinion is that the elder generations ought to look at it as a possibility should the shoe fit. Far too many of them live in working poverty simply because they dismiss BK out of hand.