Even though the senior population in the U.S. is increasing, the number of older Americans being forced to file bankruptcy is even higher, according to statistics. Recent data shows that over 12% of bankruptcies being filed in the U.S. are households being headed by seniors. The culprit seems to be the cutbacks in these seniors’ social safety nets, such as more out-of-pocket healthcare costs and a decrease in government assistance. Experts only expect these numbers to increase as by 2050, one-quarter of the U.S. population will be older than age 65, compared to only 15% currently.
Would Bankruptcy Work for You?
Even though filing bankruptcy is not always a necessity, or beneficial, in some situations it can be the answer for seniors who are struggling financially. To determine if bankruptcy might be the answer for you, ask yourself these questions:
- Do you have debt that can be discharged (wiped out) in bankruptcy?
- Do you want to catch up on car or home past due payments through a repayment plan?
- Can you protect most or all of your property?
- If you give up some property, will your debt still be enough to make filing worthwhile?
- Is your income low enough to pass the means test for Chapter 7 bankruptcy?
Additional things to take into consideration include the following:
- Discharging credit card and medical debt – These two things are the easiest type to discharge in a bankruptcy.
- It can be difficult to protect home equity – Many seniors have significant home equity, and while the homestead exemption protects some equity, it will depend on the laws of your state. In a Chapter 7 bankruptcy, the trustee will likely take any nonexempt property, such as home equity, to pay your creditors.
- Retirement accounts – Most retirement accounts are exempt from bankruptcy, but you will want to double check with your bankruptcy attorney to be certain that your specific types of retirement accounts are protected.
- Social security benefits – Your creditors will not be allowed to take your social security benefits as long as the funds are in a separate account. If you commingle these funds with other funds, that protection is lost. Social security benefits also do not get counted as income when qualifying for the means test, but it must still be disclosed as part of your budget and may be used to disqualify you if your budget shows that you have a significant amount of disposable income every month.
- Retirement funds – If you are receiving money from a retirement fund, it can be tricky. When it comes to bankruptcy, retirement withdrawals are treated like income for qualification purposes. Once these funds are withdrawn, a creditor can use a bank levy to get them as they lose their protected status. If you commingle these funds with your social security funds, the social security funds will lose their protected status, as well.
Contact an Experienced Bankruptcy Attorney
Bankruptcy is not easy for anyone, but it can be exceptionally difficult for a senior citizen. If you are a senior facing financial struggles, you need to talk to an experienced attorney at Newland and Newland, LLP today. We will advise you if bankruptcy is an option for you and help you ensure that your funds are protected during the process. Contact us today to schedule a consultation. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Huy Phan)