Bankruptcy is often a valuable tool for overcoming debts, but it’s not for everyone. The number of individuals filing for bankruptcy has decreased in the last 20 years, but the number of older individuals declaring bankruptcy has increased. One in seven people filing for bankruptcy is older than 65. Many people wonder if they’re too old to declare bankruptcy, but there are no age restrictions for declaring as long as you’re an adult.
In this blog, you’ll learn about some of the factors you should take into consideration before filing for bankruptcy. If you’re considering filing for bankruptcy, we encourage you to contact experienced bankruptcy lawyers today.
When considering bankruptcy, you need to evaluate factors relating to your debt and your retirement. If you suffer from overwhelming debt that’s negatively impacting your life, bankruptcy maybe your best option.
Seniors who file for bankruptcy are often able to discharge certain debts like medical bills and credit cards, both of which are incredibly common debts for senior citizens. Debts associated with the medical industry and credit card companies can be bought by aggressive debt collectors, which can affect your overall quality of life. Certain debts can be discharged entirely when filing Chapter 7 bankruptcy, but not everyone is eligible for Chapter 7 bankruptcy. Some people have too high of an income or have assets that require making monthly payments through filing Chapter 13 bankruptcy.
Filing for bankruptcy is a viable option when your debts affect your social security. For example, unpaid federal student debts can garnish your social security by 15%. Additional debts that can affect your social security include federal taxes, child support, alimony, victim restitution, and other federal debts.
Although bankruptcy is the best option for some when it comes to overcoming debt, it’s certainly not the best option for everyone. Many senior citizens fall under the category of “judgment proof,” meaning they don’t have enough assets that creditors can seize. Social Security benefits are protected from bankruptcy and creditors, so even if an elderly individual is in debt, they may not be at risk of losing much money or assets to creditors. Other assets that are protected when declaring bankruptcy include 401(k)s, 403(b)s, IRAs, and Roth IRAs.
Although Social Security is protected from creditors, there are certain factors you need to take into consideration when it comes to your debts. Your Social Security needs to be in a separate account. If it’s mixed in with your other funds, the money can be impacted by your declaration of bankruptcy. Additionally, retirement withdrawals are considered income, so your creditors can go after that money.
A reason that someone on social security may need to consider bankruptcy is to protect certain assets. If a creditor sues a person on social security that also owns real estate, those judgements will likely become judicial liens attached to their real estate. It is possible for a creditor to foreclose on that judicial lien and force a sale of the property to satisfy the debt. A Chapter 13 can protect the equity in a house. It is important to file a case prior to the creditor obtaining the judgement to avoid the judicial lien issue.
And finally, people with social security income may wish to file a bankruptcy to stop the onslaught of calls and letters that debt brings. Over the years we have helped many seniors who simply wanted the harassment to stop.
Bankruptcy is an incredibly complex area of the law, especially when you’re eligible for retirement. Filing Chapter 7 or Chapter 13 may be the best option for some seniors while negatively impacting others. For bankruptcy guidance you can trust, contact Sawin & Shea, LLC. With over 45 years of combined bankruptcy service experience, our experienced legal team has helped numerous individuals become debt-free. To learn your best financial option going forward, call Sawin & Shea, LLC at 317-759-1483 or schedule a free consultation by clicking here.