Struggling To Keep The Bills Paid In Your Golden Years? Bankruptcy May Go Easy On You
Posted on: 12 March 2015
Bankruptcy is often portrayed as a terrible thing to be avoided at all costs. However, for elderly people facing debt, bankruptcy's negatives may not be so serious, and its ability to get rid of certain types of debt may be even more important. If you're getting older and worrying about your debts, maybe it's time to consider chapter 7 bankruptcy.
Elderly People Have More Untouchable Money
When you file for chapter 7 bankruptcy, you must first pass a means test before you can proceed. Typically, this test is simple: do you make less than the median income for your state? If so, you can file for bankruptcy.
Elderly people who receive social security benefits may have an easier time passing this test, since these benefits are not counted in tallying up your income. That means if you live on benefits alone, your income is effectively zero dollars for the purpose of the means test. If you receive benefits but also have a job, only the income for your job will need to be counted. Benefits from social security will also not be taken at any point in the bankruptcy process.
Another factor that helps elderly people keep money throughout bankruptcy is the protected status of retirement funds. If you have a valid retirement account and you use the money from it to live, you won't have to worry about losing that source of income. Retirement accounts are exempt from consideration when the bankruptcy trustee is liquidating your assets. However, be warned, this only applies to retirement accounts specifically. Any money you have in a regular bank account may be up for liquidation.
Credit Score Becomes Less Important As You Age
Chapter 7 bankruptcy, like all forms of bankruptcy, is damaging to one's credit. In fact, the black mark of a bankruptcy will stay on your credit history for years after the process is complete and your creditors are all repaid. However, this may not be an inconvenience for everyone who files for bankruptcy.
While a credit score is important for younger people who will be opening their first lines of credit and requesting new ones, elderly people are likely to already have several lines of credit open to them. Whether from credit cards or banks, these lines of credit mean that older people won't have to qualify to borrow money that they need on short notice. Keeping up with several lines of credit also means that elderly people will see their credit score rise more quickly after it gets dinged.
As a result, the effect of bankruptcy's black mark is weakened when it comes to elderly people. It will of course still harm your credit score, but if you don't need to have good credit to get a windfall when you need it, why worry?
Bankruptcy Can Discharge Medical Bills
As you age, your health may begin to deteriorate. Seniors often face new, age-related medical conditions as they get older. In some cases, pre-existing conditions can also be worsened by the effects of age. Any one of these problems might result in significant medicals bills when you go to your doctor for treatment.
Unfortunately, medical bills can soar quickly into the hundreds of thousands, overwhelming whatever income or savings an elderly person might have. What's worse, if a senior tries to ignore the debt he or she can't pay, it may end up being sold to a collection company. The last thing any elderly person needs is to be hounded with letters and phone calls demanding money.
Fortunately, chapter 7 bankruptcy can help with medical bills. If you qualify, you can have all of your non-exempt debts discharged, including medical bills. This means filing for chapter 7 when faced with enormous medical debt may help you protect your quality of life.
Bankruptcy isn't an easy choice to make for anyone, but it is a little bit easier when you have less to lose. If you're facing bills for medical care or for anything else, and you get the majority of your income from social security benefits and a retirement account, then maybe chapter 7 bankruptcy is just what you need. For more information, talk to an experienced bankruptcy attorney from a firm like Wiesner & Frackowiak, LC.
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