Senior Citizens and Bankruptcy

Published on October 8, 2012 by Jeffrey Judge

It is not unusual in today’s climate to see people in their 70s and older in desperate financial straits.  

Most of us assume that between Social Security, pensions, Medicare, and other benefits seniors are living better than most.   Although that image of the financially secure retiree may still hold true for some, times have changed for many seniors.   The decline of pensions, increased medical expenses, predatory lending, and support for struggling adult children have left too many seniors with mounting debts and dwindling resources.   Many seniors are forced to use credit cards to pay for prescriptions, medical co-pays, and other necessary items.   For seniors unable to make more than minimum payments, these small debts accumulate rapidly.

Will I qualify?

Seniors have specific concerns about bankruptcy.  Because they are on fixed incomes, many seniors worry that they will not qualify under Chapter 7 and will be forced into a payment plan under Chapter 13. (Although some seniors will benefit from a Chapter 13 payment plan, for the majority the complete discharge of all or most debt offered by Chapter 7 is the only viable option.)  Fortunately, federal law makes special provisions for seniors.   For example, although Social Security counts as current income in a bankruptcy, it does not count as income for the purposes of the Chapter 7 means test.   For seniors who also have pensions or other income, this provision makes it easier to qualify under Chapter 7.

What do I have to lose?

Seniors are often concerned that they will lose everything, even their retirement plans, if they file for bankruptcy.  In fact, in the vast majority of cases, senior filers keep all of their personal property, including vehicles, bank accounts, etc.   Often they are able to retain their homes as well.   Moreover, qualified retirement plans (pensions, 401ks, IRAs, etc.) are exempt assets in bankruptcy, meaning that creditors cannot get to the principal.   (There are a few exceptions that most seniors would never encounter.) In addition, money from Social Security in a senior’s bank account is typically exempt not only in bankruptcy, but also from collection by creditors in general.

How can I get help?

If you are a senior in serious financial distress, please know that there is a solution to every financial problem.   A free confidential consultation with a bankruptcy attorney can help you sort out your options.  There is no need to suffer in silence.

Judge Law Firm offers Chapter 7 estate planning for seniors and new retirees to help plan for their old age. Call us today for more information 520-745-1500

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