Should seniors file for bankruptcy?
Maybe. It all depends on their specific financial circumstances.
Bankruptcy can be a great solution for older people dealing with debt, but it’s not right for everyone. Working with a bankruptcy attorney helps you make informed decisions about your situation.
What are three things seniors should understand before filing for bankruptcy?
1. Bankruptcy is Best for People Who Have Dischargeable Debts
People with financial concerns related to non-dischargeable debts are unlikely to get much out of bankruptcy. For example, if you’re behind on child support payments, bankruptcy isn’t going to wipe out that debt.
However, filing for bankruptcy can help you with non-dischargeable debts when it frees up money to put toward those debts. If you’re drowning in credit card or mortgage debt and you cannot afford child support, discharging the credit card debt with bankruptcy could result in having more money to put toward child support.
2. Bankruptcy Might Not Help If Your Assets are “Judgement Proof”
Seniors considering bankruptcy should take a long look at how accessible their assets are to the court. Things like your primary home and vehicle, as well as Social Security income, can be protected from bankruptcy court. This means if a creditor files a lawsuit against you, the court will not grant a judgment in their favor unless the debt is directly related to the asset.
For example, if you fall behind on your mortgage, the mortgage lender can foreclose on your home. However, a debt collector after you for a credit card debt won’t be able to force you to sell your home to pay that debt.
What filing for bankruptcy can do when you have nothing a creditor can take is stop the harassment from creditors and bill collectors. You won’t need to worry about the debts anymore if they’re discharged. But this peace of mind doesn’t mean it’s always financially smart to file for bankruptcy.
3. Home Equity
Home equity is a significant concern for many seniors considering bankruptcy. Most seniors have more equity in their homes than younger people, primarily because they’ve had more time to make more mortgage payments.
If filing for bankruptcy puts your home at risk and you’ve paid your mortgage in full or are close to doing so, you might be better off taking another route.
Bankruptcy does offer protection for your home and the equity you have in it, but there are often limits protections. You need to be sure the protections available are enough to prevent you from losing your home.
Should seniors file bankruptcy? As an older person, should you consider bankruptcy if you’re facing financial woes?
Several factors affect whether or not bankruptcy is the right choice for you. The best thing you can do is schedule a consultation with an experienced bankruptcy attorney to discuss your assets, debts, and other issues that will be affected if you file.