There are two things of which we can be certain: we are all going to grow older and, no matter how much money you have in the bank, you could always use some more. When you combine those two facts, it could be a recipe for disaster.
Consider this: Pensions are decreasing. Tax rates are rising. Income goes down. Health care costs go up. If you are a senior citizen, you have to rely on social security and what you have in the bank. (Unless, of course, you have wealthy, generous children or want to continue to work until you can’t do it anymore.)
So, when the ratio of debt to income/savings gets so off-balance that a senior citizen considers filing for bankruptcy, there are both considerable benefits and certain concerns to consider.
Medical Debt: For most senior citizens, medical bills weigh heavily on the debt sheet. In fact, out-of-control medical debt is the leading cause of bankruptcy filings – no matter what your age. Medical debt is generally easy to discharge during bankruptcy. So, for seniors, this is great news.
Home Equity: You’ve scrimped and you’ve saved and you have a home that where you’ve raised your family. So many memories. Now, in your senior years, you likely have a decent amount of equity built up. In fact, you may even have been thinking that you will live off that equity in your retirement. Unfortunately, these plans can vanish during bankruptcy. If you file for Chapter 7, you may have your home equity tapped to pay your creditors.
Retirement Accounts: Lucky for seniors, these funds are usually exempt in bankruptcy. You may have plenty of money saved, but federal bankruptcy law prevents various retirement accounts 401 (k), 403(b), profit-sharing accounts, etc., from being liquidated during bankruptcy proceedings. Funds must be considered “legitimate” according to the laws.
One other point of note that should be of interest to senior citizens: To qualify for Chapter 7 bankruptcy, a person must take a “means test” to determine if their monthly income doesn’t exceed certain guidelines set forth by federal bankruptcy laws. If your income is too high, Chapter 7 may not be an option. The good news for seniors: social security benefits are not included in this means test.
Bankruptcy laws are complicated – no matter what your age or your financial situation.
Speak to an experienced and knowledgeable bankruptcy lawyer who will explain the laws as they apply to you and protect your rights.
Joel R. Spivack Esq. has been guiding people in South Jersey through the bankruptcy process for over 30 years. Put his experience and skills to work for you. Contact him today for a free consultation.