With the tax rates, pensions and income decreasing, and medical costs rising, it has become increasingly hard for senior citizens. Your income becomes off-balance compared to debt which is why filing for bankruptcy might seem like the next best step. With Chapter 7 and Chapter 13 bankruptcy, seniors get a way to deal with their debt trouble.
However, some options and factors need to be considered by retirees and seniors before they file for bankruptcy. Senior citizens must also understand what bankruptcy can do and what it cannot do. This way, they can understand whether it is the best option for them. Here, we will discuss types of bankruptcy as well as the options they offer senior citizens.
The Different Types of Bankruptcy
Here are two types of personal bankruptcy available for most senior:
Chapter 7 Bankruptcy
Under Chapter 7 bankruptcy, you must discharge almost all your debts as well as turn your assets to a trustee. Your trustee will then sell the properties and use the money to pay off your debts.
Chapter 13 Bankruptcy
Here, you will make use of a payment plan to pay off your debts without having to sell off your assets and property. This type of bankruptcy is usually available for those people who do not qualify for Chapter 7 bankruptcy.
What Happens When Seniors File for Bankruptcy?
Some Seniors Lose Ownership of their Homes
If these seniors have a large amount of home equity that is not bankruptcy protected, the trustee will have to sell off the home to pay off creditors in Chapter 7 bankruptcy. It has been proven that seniors are at a greater risk of losing homeownership because most of them have either paid off their mortgages or their home has a significant amount of equity.
Depending on the state where the senior is, the amount of equity on the home varies. On the other hand, chapter 13 bankruptcy will allow you to keep your home if you endeavor to make timely mortgage payments.
Retirement Accounts Help Seniors
Almost all retirement accounts are covered in bankruptcy, so seniors can rely on these accounts to fund their lifestyle. This means that as long as seniors have their retirement accounts to fall back on, they won’t always be left out to dry when they declare bankruptcy.
Social Security Income is protected in Bankruptcy
The income you get from social security is protected in Chapter 7 bankruptcy. Also, you can qualify for Chapter 7 bankruptcy if all or most of your income is from social security. On the other hand, income from social security is added when determining the amount you’ll pay monthly under Chapter 13 bankruptcy.
If you or a loved one are elderly and considering bankruptcy as a means to take financial control of your life, you need the assistance of a licensed, skilled bankruptcy attorney. Elias Dsouza of Dsouza Legal Group has been helping families navigate the complex topic of bankruptcy for well over a decade. Contact Elias today for a free consultation.