Bankruptcy gives you relief from overwhelming debt. It can benefit individuals or businesses facing financial difficulties that make it challenging to pay their debts. However, there are guidelines to follow when filing for bankruptcy and information to remember to make an informed decision. Senior citizens are some of the people who can benefit from filing for bankruptcy.
Although you can enjoy advantages over other debtors as a senior citizen, you should carefully consider other debt management strategies before settling on bankruptcy. Discuss some issues that could affect you and your rights when filing for bankruptcy. You can do this with a skilled bankruptcy attorney.
Bankruptcy for Senior Citizens
Bankruptcy is one way to manage debt in California. It has significant advantages, including wiping out some of your debt and maximizing your income to make monthly payments to your non-dischargeable debt. It also allows you to start life afresh after years of dealing with overwhelming debt. Although bankruptcy can benefit all adults, senior citizens are generally skeptical. Some feel it is unnecessary, while others think it is not a good idea. However, if you are drowning in debt, bankruptcy could be the best way to get out of that situation before losing everything.
Having overwhelming debts as a senior citizen can be one of the most depressing things in life. After years of working and living a good life, the last thing that is usually on your mind is to stress over debt and financial difficulties in retirement. However, if you are in debt, you can file for bankruptcy to obtain relief from debt and start life on a clean financial slate. If you have tried other debt management solutions without success, this could be worth your while. However, consider the benefits and disadvantages carefully and weigh all your options before deciding.
Bankruptcy seems far-fetched for a senior citizen, especially if you believe you have nothing for your creditors. When you look around and all you see are essential house items needed to maintain a home, you could reconsider or not even think about filing for bankruptcy. However, you must think about the stress of dealing with your creditors, the endless calls and harassment by collection agents, and the nagging thoughts of what you can do to pay your debt. Having nothing valuable to pay your debt can make you judgment-proof, which makes bankruptcy unnecessary. But it could be a good idea if you must endure collection efforts by your creditors.
Additionally, it can be a bad idea if you have more assets than you can protect with bankruptcy. Once you file for bankruptcy, you will likely lose most of your valuable assets to repay your debt. If you choose Chapter 7 bankruptcy, your bankruptcy trustee will liquidate your unprotected assets to repay your debt. In Chapter 13, you will need a high repayment plan to pay your non-dischargeable debt. A skilled attorney will consider all your options to advise you on the right one to manage your overwhelming debt. If the benefits of filing for bankruptcy as a senior citizen outweigh the disadvantages, you should start the process immediately.
Factors to Consider When Filing for Bankruptcy as a Senior Citizen
Filing for bankruptcy is not an easy decision for individuals and businesses. It has profound disadvantages, including a significant impact on your credit score. However, it becomes inevitable when the benefits are greater and you have tried other debt management solutions with minimal success. When it comes to senior citizens, a lot is at stake, including the possibility of losing valuable assets that mean a lot to you. A skilled bankruptcy attorney can help you consider your options and other critical issues for effective decision-making. Here are some of the problems you should consider with their help before taking action:
If You Have Dischargeable Debt
Dischargeable debt is the kind of debt that is forgivable in bankruptcy. You can forgo paying that debt once your bankruptcy petition is accepted in court. It also means you will have less debt to worry about once bankruptcy takes effect and the bankruptcy trustee starts using your assets to pay your creditors. Consider this debt and the secured debt that will remain to make an effective decision.
In Chapter 7 bankruptcy, you can discharge debts like credit card debt, medical bills, payday loans, utility and cell phone bills, past due rent, auto loan balances, and, to some extent, mortgages. Once the court receives your bankruptcy petition, the judge can order that the contract between you and the creditor (only for dischargeable debt) be discharged. Without this contract, you are not obligated to pay the debt, and the creditor cannot take any collection action against you.
Typically, discharge orders are received about four months after presenting your bankruptcy petition to the court. Consequently, your credit report will show that your debt is discharged in bankruptcy. Since this report remains in your record for ten years, it can affect your credit score.
If You Want to Catch Up With Your Car or Home Payments
You should also consider exactly what you want to do with your current debt and how bankruptcy will help you achieve it. For example, if you have car or home payment arrears, it is critical to consider the possibility of losing everything or saving your assets by catching up with the payments. Your bankruptcy attorney will advise you on the right bankruptcy to file for your needs.
If you want to catch up with your auto or home loans, filing for Chapter 13 bankruptcy can be a good idea. This bankruptcy allows you to plan your finances to pay your debt in three to five years. This will save your home or car, some of your most valuable assets, as a senior citizen.
However, you must be eligible for Chapter 13 bankruptcy to enjoy this benefit. You need a regular income to pay your debt in three to five years. You must also create a priority list of your debt, which your bankruptcy trustee will consider when making payments. If you have enough disposable income to pay creditors, you can catch up with most of your payments, including home and car loans.
If You Can Exempt Some Property from Bankruptcy
Filing for bankruptcy comes with a likelihood of losing some of your assets to your creditors. This is one of the reasons why most people, especially senior citizens, take a very long time to consider the idea of bankruptcy. However, there is also the likelihood of saving some of your property, especially the essential assets you need in your life, like a vehicle, home, and home essentials. It is important to consider which assets are exempt from bankruptcy and if you can save more to make an informed decision.
A skilled attorney will help you understand some of the assets you can keep when you file for bankruptcy. Even though your debt is overwhelming, a bankruptcy court cannot strip you of all that belongs to you to pay your creditors. Remember that the goal of filing for bankruptcy is to start life afresh. Thus, you will need some essential items to live and work. For example, you can keep your home, vehicle, and the tools you need for work. You can also keep your home essentials, like appliances.
If Filing for Bankruptcy is Worth Your While
Debt management is critical if you have overwhelming debt and can pay most of it. It does not make sense if you do not have the finances or assets to pay your creditors. Before filing for bankruptcy, you must consider whether it is worth your while. If you owe so much, you will still have much to pay even after discharging some of your debt. Your attorney will review your debt, income, and assets to advise whether filing for bankruptcy is good.
If you are judgment-proof and do not have enough to pay your creditors, you should reconsider your decision. Bankruptcy is worth your while if you can pay most or all of your debt after discharging part of it.
The Best Bankruptcy for Your Financial Situation
Filing for bankruptcy requires choosing a bankruptcy chapter that suits your financial situation. If you choose Chapter 7 bankruptcy, your income must be low enough to pass the means test. If you choose Chapter 13 bankruptcy, you must be financially able to make monthly payments towards your debt. You must carefully decide to make your life easier as a senior citizen. The help of a competent bankruptcy attorney will go a long way in ensuring that your best interests are considered throughout the process.
Critical Issues When Filing for Bankruptcy as a Senior Citizen
Filing for bankruptcy is not easy for everyone, especially senior citizens. When seeking a solution to your overwhelming debt, a mistake can result in regrettable mistakes. You should walk the journey with a competent bankruptcy attorney to understand what is at stake, your best options, and the right approach to protect your interests. Here are some of the critical issues you should discuss with your attorney as you consider filing for bankruptcy:
You Can Discharge Some of Your Debt
Remember that some debts are dischargeable when you file for bankruptcy. This applies to all applicants regardless of age. Typically, you can discharge most of your unsecured debt, including credit card balances and medical debt. If you file for Chapter 7 bankruptcy, you should be able to wipe out any dischargeable debt in just a few months. This will relieve you, leaving you with less debt to worry about.
However, your dischargeable debt is not a cause for worry if you are judgment-free. If you do not have any assets or income to pay off your debt, filing for bankruptcy will not make any significant difference in your finances. An experienced bankruptcy attorney will consider your exact financial situation to advise whether to go for bankruptcy or leave the matter as it is.
It Can Be Challenging to Protect Your Home Equity
Your home equity is the portion of your home’s value you own. It is calculated as the difference between your outstanding mortgage balance and home value. Your stake in your home increases as you pay your mortgage or your home value increases. If you bought your home years ago and have been paying your mortgage before experiencing financial difficulties, your home equity could be significant.
When you file for bankruptcy, a homestead exemption can protect a part of your home equity. Whether or not you can protect your home equity largely depends on the type of bankruptcy you choose. For example, if you file for Chapter 7 bankruptcy, you could lose part of your equity to creditors. Your bankruptcy trustee will use your nonexempt assets, including unprotected home equity, in your plan to pay your creditors. You should discuss your concerns with your bankruptcy attorney to determine your best options.
You Could Lose Your Retirement Benefits
Remember that bankruptcy helps you manage your debt to start life on a clean slate. Your bankruptcy trustee’s primary focus will be paying creditors from your income and assets to free you of overwhelming debt. Thus, you should carefully consider if you have some income you need to protect from bankruptcy, including your retirement benefits.
Remember that as a senior citizen, you need your retirement benefits to live comfortably for the rest of your life. Fortunately, federal bankruptcy law exempts all tax-exempt retirement benefits from bankruptcy. This includes 401(k), 403(b), profit sharing, IRA, and Roth IRA benefits. These will not be affected when you file for bankruptcy. However, you want to know your specific retirement benefits before starting the bankruptcy process.
Generally, retirement benefits in your retirement accounts are exempt from bankruptcy. However, those paid to you as income are not. If you receive a monthly income from your retirement account or pension, your bankruptcy trustee will consider it as income that should be included in your debt repayment plan.
You Could Lose Your Social Security Benefits
Like retirement benefits, your Social Security benefits are largely exempt from bankruptcy. You can protect them only if you leave them in a different account. Once you deposit them in your regular account or mix them with your other income, your bankruptcy trustee will factor them in when paying your creditors.
Additionally, your social security benefits are not considered part of your income when taking a means test for Chapter 7 bankruptcy. A means test determines whether you have sufficient disposable income to pay some or all of your debt.
However, you must disclose these benefits when developing a bankruptcy budget. Your bankruptcy trustee can still use them to pay your creditors if they determine you have more monthly disposable income for your necessities. Remember that the bankruptcy trustee aims to pay off your debt to give you a fresh start. If you can afford to pay more debt from your social security benefits, you cannot protect them.
Exempt Benefits Are Not Safe Once Withdrawn
If you want to file for bankruptcy and keep most or all of your benefits, you should consider it carefully before making the final decision. Remember that you need all your benefits to live comfortably for the rest of your life. Losing some or most of your benefits could leave you with little financial support when you cannot earn a living.
Typically, your benefits are exempt from bankruptcy as long as they remain in separate accounts. If you have retirement benefits, a pension, and social security benefits, you should be able to keep them after bankruptcy as long as they remain in their respective accounts. Once you withdraw the funds, your bankruptcy trustee can include them in your debt repayment plan. Bankruptcy will treat any withdrawal from your retirement accounts as income you should include in the bankruptcy budget.
If you want to enjoy the benefits of bankruptcy without losing your benefits, you must keep the protected money in a different account for later use. Keep your Social Security benefits separate from your retirement benefits and pension. Once the bankruptcy period is over, you can comfortably withdraw without the risk of losing the benefits.
Find an Experienced Bankruptcy Attorney Near Me
So much is at stake when filing for bankruptcy as a senior citizen in San Diego. In addition to considering your eligibility for bankruptcy, you should consider all critical issues that could worsen your financial situation after bankruptcy. Working closely with a skilled bankruptcy attorney is advisable to avoid making mistakes that could result in losing your benefits and pension.
At San Diego Bankruptcy Attorney, we know how difficult it is to file for bankruptcy, especially as a senior citizen. Although you can benefit from the process like everyone else, you should carefully consider your options for a more favorable outcome. We can help you review your financial situation to discuss your options. We can also answer your questions and concerns to help you make an informed decision. Call us at 619-488-6168 to learn more about your situation and our services.
