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When older adults call our office to discuss bankruptcy, we often want to know what’s causing theirfinancial distress. The reality is that there’s no age limit to filing for bankruptcy. Nonetheless, older Californians face different financial circumstances than younger debtors. For one thing, you have less time to get your finances in order before retirement. Indeed, you might even be retired when you call our office.
ContactResolve Law Firm to talk about your debts with an experienced Orange County bankruptcy lawyer. Our firm can discuss whether this is the right option for you or if you should try to address our debts using a different method.
Older Adults Could Lose More in Bankruptcy
The most popular bankruptcy is Chapter 7, which you can use to quickly eliminate certain debts. But as part of bankruptcy, the debtor must turn over non-exempt assets to the bankruptcy trustee, who can sell them. In exchange for getting certain debts eliminated, you could lose important pieces of property, such as your home.
This is a major concern for older debtors. You might have too much equity in a home or own other assets, so filing for Chapter 7 is not the sensible choice.
Older debtors have less time to re-establish themselves. A person in their 30s might not blink twice at discovering they will lose their home. They have another 30-40 years to get back on track before retiring.
But older debtors are naturally more hesitant. Consequently, you need to be more deliberate about whether to file for bankruptcy protection. You could have already reached the end of your working life, in which case any mistake could prove doubly costly.
You Might Be Ineligible for Chapter 13
This is the second most popular bankruptcy option. Debtors will not lose non-exempt property. However, they must make payment to creditors for 3-5 years and pay off an amount equal to their non-exempt property.
However, Chapter 13 requires a regular source of income. It is popularly called a “wage earner’s” bankruptcy. If you are retired or living off savings, then you might not even qualify for Chapter 13. That could dramatically reduce your options for tackling debt.
Call Resolve Law Firm. We can help you decide if either Chapter 7 or 13 is a realistic option for you. We can also discuss non-bankruptcy alternatives which could work better for your short- and medium-term goals.
Social Security Benefits Are Safe
In some situations, being retired could be the perfect time to file for bankruptcy. Generally, Social Security benefits are exempt from bankruptcy. Also, your retirement accounts are probably exempt—at least until you withdraw money from them.
Some seniors have nothing for a creditor to take. You could be living with an adult child or not have any equity in a home. For older Californians in this type of situation, a Chapter 7 bankruptcy could be the best option because you are not losing many assets.
Other Forms of Help Might Be Available
It’s good to figure out what is driving your financial difficulty. Some seniors are struggling with medical debt. It’s true you can quickly eliminate most medical debt with a Chapter 7 bankruptcy. But there could be other options to consider as a senior.
California consumers have certain protections when it comes to medical debt. For example, state law prohibits garnishing wages for a medical debt unless by court order. Furthermore, a debt collector or hospital cannot force a patient to sell their primary residence to free up funds to pay medical debt. This law also prohibits a forced sale during your spouse’s lifetime.
These laws might give you an upper hand when negotiating a settlement with the collection agency for less than the face value of the debt. They know they can’t get at your most important asset (your house), so they could be willing to accept less than what you owe.
Capacity is an Important Issue
A consideration for older Californians is mental capacity. As we age, many people will begin to lose the mental capacity to make financial decisions for themselves. Some adult children worry about their parents making rash financial choices which end up hurting them.
We work with clients of all ages. We can certainly discuss capacity with you if this is an issue that concerns you.
Primary Alternatives to Bankruptcy
Bankruptcy isn’t the ideal solution for every client. Sometimes, there could be better options for seniors, depending on their financial situation:
- Debt settlement. You might negotiate with a creditor to pay a fraction of the debt owed. The creditor writes off the remainder. Although this type of settlement will impact your credit, you can overcome the negative impact.
- Credit counseling. You could work with a credit counselor to look at your debts and see if you can adjust the terms. For example, you might only need a temporary grace period to ride out a rough patch. A credit counselor could also try to lower interest rates, which can make paying off the debt easier.
- Debt consolidation. You might consolidate high-interest debts using a low-interest loan. This way, you can dedicate each month to principal and pay off the loan faster.
Some seniors do nothing. In that case, you are likely to be sued by your creditor. And if you don’t defend the lawsuit, they can get a default judgment against you. You should at least discuss options with a lawyer.
Call an Orange County Bankruptcy Attorney for a One-on-One Consultation
Older Americans are struggling with trillions of dollars in debt. Some of them are still trying to pay off a mortgage, and an alarming number are covering student loan payments for children or even grandchildren. Now is the time to consider the best options for doing something about your debt. Contact Resolve Law Firm to speak with an experienced lawyer about your best options. If bankruptcy is the right choice, we can get your case filed and shepherd it through the system from initial filing to discharge.
