According to an article in Freep, many GM and Chrysler LLC retirees are anxious about what would happen to their pensions if the automakers filing bankruptcy.

The article said:

As the specter of bankruptcy looms large over General Motors Corp. and Chrysler LLC, retirees from the two automakers, especially those younger than 65, fear the rules of their retirement might be abruptly changed, cutting their standard of living and security, after years of promises. More than 928,000 people are covered under GM and Chrysler pension plans.

“Most of us, obviously, worked for a number of years with the understanding that we would retire with a certain benefit level and had planned our lives around that,” said Karen DeOrnellas, a retired GM salaried worker who lives in Alma, Kan., and has joined a newly formed GM Retirees Association. “If that were to change, we would be significantly impacted and it would affect the quality of our lives for the rest of our lives.”

In laymen’s terms, if these automakers file bankruptcy, many retirees may face large reductions in monthly benefits which could have huge repercussions in their financial lives. Many retirees, especially those who retired before 65 years of age still have mortgages (many of them upside down) and huge credit card debts that are far from being paid off. Just as Karen said above, they planned their lives (understandably) around their pension benefits and are now facing huge changes if these automakers file bankruptcy. If the GM and Chrysler pension plans are taken over by the government during bankruptcy many of these retirees will experience payment reductions and could face foreclosure and possibly bankruptcy because they simple won’t have enough income.

What should they do?

These retirees must consider either paying off or discharging their debts in bankruptcy. If they are already in their 50’s or 60’s living on a fixed income, they may not have the time to repay their debts on an income that is suddenly reduced. Using Chapter 13 Bankruptcy these retirees can save their homes from bankruptcy and repay other debts if they have the income. Or they can discharge their debts in Chapter 7 Bankruptcy . Facing retirement with a compromised pension plan is scary enough; these retirees should not struggle with their debts alone. They should consider all of their options including bankruptcy.