Help for a Friend who is Desperate

[molly]

I have a friend who is thinking about filing chapter 13. However, this friend has worked for the government for 30 years and can retire. My friend wants to continue working for the next five years due to age. This friend is afraid to file because she works for the department of agriculture and thinks she might get fired. If you work for the government can you file chapter 13, continue working and not get fired? Can someone respond asap? Thanks.

[SinkingFast]

Government jobs are a bit of odd ducks when it comes to BK.

If your friend has a position with some sort of Security Clearance, he/she may be transferred to a job in a different Department. Something where Security Clearance is not required. Supposedly, people with financial issues are a potential Security hazard/threat to National Security.

If your friend does not work with sensitive materials, chances are the BK won't be a problem.

[leftyf]

I was just watching Jurassic Park and the fat guy who played Newman on "Seinfeld" took down the park trying to solve his financial problems....so I guess I could see how this might be a threat. Of course, if you've filed already, I doubt you would steal from your employer to pay debts.

[lrprn]

It's against the law to be fired solely because you filed bankrutpcy. As SF already said, if your friend isn't working in a job that requires security clearance or the direct handling of money, she shouldn't have a problem filing Ch 13. She's not wiping out her debt, she's just reorganizing it and she'll pay at least some of debt back as well.

[treehugger1]

I'll throw a twist in here. If the party is close to retiring it might be in their best interest to avoid filing as long as possible. If the retirement "income" will be below the means test for BK 13, then the party might be able to file a chapter 7 after retiring. This is hard to know for certain and one would want to work through some calculations and "what if's." I've heard of more than one person "planning" to remain solvent as long as possible. Upon retirement one can draw their pension and will often come in below the means test. However, if there is urgency in filing (save a house, etc) then little is gained by not filing now.

I now have an interesting question. 401's, 403's, 457's, pensions, etc are protected in bankruptcy, If one retires and then declares bankruptcy, are these still protected?

As a side note, there are many folks filing BK 13 who are in their early to mid-50's. I would be one of those folks. I suspect we will all see this increase. One reason is baby-boomers with high unsecured debt. Another reason will be that it is nice to go into retirement and have no unsecured debt.

[$$only4ever]

Good Observation Treehugger. It appears that many of us who are in their 50's have filed Bankruptcy. For us it was either file or never retire.

[treehugger1]

I'm chuckling to myself. I'm more than likely going through a process that all the 50+ folks already went through. I'm early 50's and I keep thinking maybe I can pull this off. If things still look bleak at 55-56, I'll pull the plug and file. I certainly don't want to find myself in a situation where i have reasonable retirement funds/pension, and still trying to pay off huge amounts of unsecured. I should be learning from all of you, but banging my head against the wall doe not hurt enough at this time.

Still, does anyone have any thoughts on whether or not retirement assets (pensions, TDI, etc) are safe AFTER one retires? I would assume that whatever pension one has plus whatever they are drawing on 403, 401, 457, etc is your "new" income. If I were to retire on my pension and not touch my tax-deferred investments, I would qualify for a BK 7 hand's down. Unles, the 403, 457, etc count against me.

[lrprn]

Still, does anyone have any thoughts on whether or not retirement assets (pensions, TDI, etc) are safe AFTER one retires?

As long as the retirement funds are ERISA-qualified and you don't have over a million dollars in your retirement accounts, they can't be touched in bankruptcy before or after you retire.