One of the top reasons that anyone in the United States will file for bankruptcy is for medical debt. This is also true for elderly Americans. As prices rise for medical care, pensions are dropping. This can lead to dire straits financially, a serious problem that bankruptcy just might be able to solve. It is not for everyone, however, especially for any seniors who have nonexempt property. As each situation is unique, it could be imperative to speak with a bankruptcy lawyer so that you can understand whether or not bankruptcy is right for you. In the meantime, here is a brief overview of the drawbacks and benefits of bankruptcy for seniors.
As mentioned, medical bills can lead to bankruptcy, and this process can discharge most if not all your medical debt. Under Chapter 7 bankruptcy protection, it could take only 3 to 5 months to free of these outstanding payments. While bankruptcy might fix this issue, it is a fix you might want to wait for. Bankruptcy can only discharge preexisting debt, that is, debt that you have up until the day you file for bankruptcy. If you are in the midst of expensive medical treatment, you would only accrue further debt after you file.
If this debt is substantial, you will still not be able to turn right around and file for bankruptcy again either, not until enough time has passed. With Chapter 7 bankruptcy, you could be required to wait eight years before you can file for bankruptcy again. You would not have to wait to get Chapter 13, but if you refile too soon, you will not have any debts discharged. It would take 4 years before you get any debts discharged under Chapter 13 again.
Another thing to consider in bankruptcy is your home. You will need to find out if bankruptcy will affect your equity, especially if your retirement is wrapped up in it. If you should file for Chapter 7 bankruptcy, this means that trustees can sell certain property to satisfy your creditors. If your house is nonexempt, it might be liquidated to pay off your debts. The good news is that there are likely many ways for your home to be exempt, shielded from bankruptcy. There are also states where seniors are can more easily qualify for a homestead exemption. Any exemption laws will depend entirely on where you live, so a local bankruptcy attorney could help you understand what laws apply to your situation.
If you are concerned about your retirement accounts, many of these will be exempt from bankruptcy as well. There may be numerical limits on how much is protected, but for the most part, Chapter 7 bankruptcy cannot touch your 401(k)s, 403(b)s, IRAs, Roth IRAs, and most other tax exempt accounts.
Another difficulty that people can face in Chapter 7 bankruptcy is passing the means test. This matches up your income with the average income of citizens in your state. If you make too much money, then you might not be eligible for this protection. Fortunately, if you are collecting benefits from Social Security, these will not count as your income for the purposes of the means test. You must still report what you receive in Social Security, and this might still factor into your eligibility, but only in certain circumstances. Note that if you have income outside of Social Security, this will not automatically disqualify you either.
If you have any further questions, do not hesitate to contact an excellent bankruptcy attorney. The sooner you get answers, the sooner you may be able to free yourself from debt. Call today!