The recession that gripped the country shortly after the Housing Crisis in 2007 was a double blow for many Americans, particularly senior citizens. Investment portfolios were ravaged, and that meant retirement plans had to be delayed for many. For other seniors, the situation was even more serious. Without much investment income or equity in their homes, these seniors were a medical calamity away from being unable to handle monthly bills. Many turned to bankruptcy lawyers for help.
More Seniors Turn to Bankruptcy
The tidal flow of bankruptcies began in 2008, topping 1.5 million personal bankruptcies by 2010. Seniors were one of the fastest growing segments of Americans turning to bankruptcy protection, statistics show. According to the American Association of Retired Persons, the number of bankruptcies by people 65 and older increased by 150 percent in the period between 1991 and 2007. The situation was particularly dire for older seniors. Statistics compiled for the AARP by the Consumer Bankruptcy Project showed that bankruptcy rates jumped by 433 percent for seniors between 75 and 84 years old. A study in 2010 by the University of Michigan Law School concluded that senior citizens make up the fastest-growing age group filing for bankruptcy.
Why Senior Citizens File for Bankruptcy
During tough financial times, seniors generally have fewer options than younger Americans. Working extra hours or finding a second job is not an option for many seniors, often because of health reasons. Many seniors are hesitant to burden their children, instead turning to credit cards for living expenses. The 2010 study by the University of Michigan Law School showed that seniors had an average of nearly $23,000 in credit card debt by the time they turned to bankruptcy. Any senior facing a financial crisis should visit an experienced bankruptcy lawyer immediately to determine if filing for bankruptcy is a viable option.
Seniors and Bankruptcy Myths
Senior Citizens May Lose Their Home After Filing Bankruptcy
For most senior citizens, bankruptcy can be a way to drastically improve a difficult financial picture. Some seniors are hesitant to even consider bankruptcy for fear they will lose their home and any remaining money. In many cases, this simply isn’t true, and most bankruptcy lawyers can explain what a senior should expect in his or her case. Many seniors derive the bulk of their income from Social Security and retirement income, and the bankruptcy court generally cannot touch any of that money. Federal exemptions protect 401K savings and other retirement plans from bankruptcy trustees, as well as Social Security.
They May Lose Their Car
There are other bankruptcy exemptions that generally protect a vehicle and household possessions. A home with equity could be seized by a trustee in a Chapter 7 bankruptcy to pay off creditors. However, a bankruptcy lawyer can assess that risk and determine if a Chapter 13 filing is a better plan for a senior. Under Chapter 13, debtors propose a repayment plan to creditors, including mortgage companies. The repayment plan, usually over five years, can even include missed mortgage payments and penalties.
Unsecured debt such as credit cards and medical bills can be discharged in a Chapter 7 bankruptcy, drastically changing the financial outlook for most seniors.
Their Credit Score Will Prevent Them From Making Purchases
It is true that a bankruptcy will significantly impact a debtor’s credit standing. However, high credit scores are most important for major purchases, such as cars and homes, and also play role in applying for new insurance policies. A senior who isn’t looking to borrow money in the short term shouldn’t be too concerned about the impact to his or her credit score by bankruptcy. Over time, credit scores will increase.
Important Disclaimer: The information discussed above and throughout this website should not be relied upon to make any decisions without first speaking to a bankruptcy attorney. There are many intricate rules of law governing bankruptcy with many exceptions to the general rules that could change the advice given by an attorney based on the differing facts in each person’s special set of circumstances. THEREFORE, it is important to discuss any information contained in this website with one of our attorneys before taking any action or refraining from taking any action.