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Ask Terry L. Your Own Question
Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2900
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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I have about $100K in consumer debt. I am retiring at the

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I have about $100K in consumer debt. I am retiring at the end of this year after which my income will consist of a state employee pension, a federal pension, a small private pension, plus my social security benefits, all of which amount to about $7-8K per month. My only other asset of any substance is about $85K in a federal tax deferred savings plan. I would like to discharge the $100K in consumer debt in Chapter 7, but am precluded from doing so before retirement because my salary is too high. If I stop paying the consumer debt after I retire, can my creditors come after any of my retirement income, social security benefits, or tax-deferred savings? If he retirment payments are made by direct deposit to my checking account, how do I stop creditors from levying on the checking account? Is it possible to discharge the debt in Chapter 7 following retirment despite my level of retirment benefits?

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

It will probably be unlikely that you qualify for chapter 7

Terry L. :

You'll be making about $96k post retirement, per year.

Terry L. :

In order to file chapter 7, you must 1) pass the means test calculation.

Terry L. :

2) your monthly income must be equal to or less than your monthly necessities.

Terry L. :

3) you can only exempt certain assets with your available exemptions. any amounts greater than your exemptions are subject to liquidation.

Terry L. :

You hit it on the nose, that deposits are subject to levy if the creditors obtain a judgment against you.

Terry L. :

What is the 'federal tax deferred savings plan? "

Terry L. :

If you don't qualify for the chapter 7, you can look at chapter 13, to repay debt to protect your assets, based on your disposable monthly income.

Terry L. :

You can pay anywhere from 10% to 100% based on the chapter 13 means test calculation

Terry L. :

You'd be best off talking with a local bankruptcy attorney to review these issues, and help set you up on the best plan of attack based on the facts of your case.

Terry L. :

What questions do you have?

Customer:

The fedeeral tax deferred savings plan is called TSP or Thrift Savings Plan, it's akin to a 401K plan for federal employees.

Terry L. :

Ok, thanks

Terry L. :

That should be exempt while the funds are in that account, once they hit your checking, they are fair game

Customer:

I guess my big question is if all my income is retirment income, how can my creditors come after that income? I thought all retirment income was exempt.

Terry L. :

it is, while it is in the retirement account

Terry L. :

once it hits your bank, it can be used to satisfy a garnishment unless the court orders otherwise.

Customer:

What if I have the money deposited to an off-shore account? Can the creditors levy on those accounts as well?

Terry L. :

it depends on how crafty and smart the creditors attorneys are.

Terry L. :

This is all irrelevant though with a bankruptcy.

Customer:

Well, here's the likely scenario: my wife and I may decide to relocate to New Zealand where she is a citizen. If I have my social security and other retirment benefits direct deposited to a bank in New Zealnd, is it likely my creditors will go to that exopese to levy in NZ? About three of the accounts are in the $20K rangge, the rest are less.

Terry L. :

if you move, it's unlikely your creditors would pursue you there. Any of the bank accounts you have here, though, could be frozen if they do sue.

Customer:

I'm okay with bank accounts being frozen (since I plan to leave nothing in them). I assume they cannot freeze the retirment accounts?

Terry L. :

correct

Customer:

Okay, Terry, sounds like I need to consult a bankruptcy attorney before doing any of this. Your answers were very helpful. Thanks.

Terry L. :

It would be the smart thing to do, just to protect all of your bases.

Terry L. :

Let me know if you have any other bankruptcy questions.

Terry L. :

thanks

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