Bankruptcy: Is It Right for Senior Citizens?

As people live longer, the need for financial stability gets extended further and further. Health care and housing costs are only rising higher, and it's no secret that many seniors are struggling to make ends meet. Many people might be surprised at the thought of those in their 60s, 70s, and beyond declaring bankruptcy, but it happens all the time. The way bankruptcy affects older people makes for some unique considerations. If you are a senior citizen and are thinking that a bankruptcy filing would provide you with some financial relief, read on to learn more about a few important areas of consideration.

Property Losses

Many seniors are homeowners with a large amount of equity in their homes. While this situation is positive, it can make bankruptcy a risky move. A chapter 7 bankruptcy could put your home at risk, and most older people are naturally averse to finding a new place to live. Each state offers filers an opportunity to use homestead exemptions when they file for bankruptcy. The exemption provides some protection for homes and other pieces of property. If your home's value (its equity) exceeds your exemption, you might be putting your home at risk of seizure by the bankruptcy trustee.

Medical Bills and Credit Card Debt

These two forms of debt are labeled "unsecured" for bankruptcy purposes. That means that they can be wiped out with a chapter 7 bankruptcy filing. If you have no risk of losing your home and a lot of credit card and medical debt, bankruptcy might be the ideal way to open up more spending money for your monthly budget.

Retirement Accounts

Your Social Security benefits are protected against any negative effects of bankruptcy. However, there is one important issue you must know about. If you receive benefits and are considering a filing, make sure that you keep the funds in their own, separate account. That reduces the risk of commingling funds from other accounts that may not be protected from bankruptcy. Since filers now must pass the means test, your Social Security benefits are not counted in the calculation to determine your income level for filing. You must still disclose the earnings when filling out the budget portion of the bankruptcy paperwork, however.

If you have other types of retirement investment accounts, you can exempt all funds in your tax-exempt accounts. For Roth IRAs, which are not tax-exempt, you are only protected up to a certain amount. The funds are not protected once they are withdrawn, regardless of the account type. Discuss this and other issues with your attorney so that you will know what to expect before you file.

Call a chapter 7 bankruptcy attorney service for more information.


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