Choosing To Change Your Finances

When Retirement and Bankruptcy Collide

by Luis Hawkins

Rising medical care costs impact everyone but especially people on a fixed income, like senior citizens. As you age, medical care can become more expensive and you may find yourself having to use more of it than you did in your younger days. Some retired seniors find themselves unable to pay their bills. For whatever reason, some older adults may be facing bankruptcy. To learn more about the unique challenges this type of action could create, read on.

Medical, Personal, and Credit Card Debt

The above three types of debt are not only common among seniors but they are also all known as unsecured debts. Unsecured debts are not based on collateral so they carry special status when it comes to Chapter 7 bankruptcy. Your home or vehicle, if you owe money on them, are secured debts and are attached to the home or the vehicle. You can lose your home or vehicle if you don't make the payments and there is not a lot that filing bankruptcy can do for you in that case. Unsecured debt, however, has a different process. First, an automatic stay is granted, which means all of your bills will freeze while you and the court determine the next steps. A bankruptcy lawyer can help you understand how to file and what the next steps will be.

Losing Property

You worked hard to pay for the things you have but there is a chance you could lose some of those things when you file for Chapter 7 bankruptcy. Secured debts like your home and car represent assets and you may be allowed to keep a certain dollar amount of assets. Each state has exemptions and they vary greatly. Before you make the filing decision, talk to your bankruptcy lawyer about your property and find out if it can be protected with exemptions. In addition, stay up-to-date on loan payments for any property you want to keep.

Income Issues

Each state has a median income and the amount applying to your state matters with bankruptcy. Your income has to fall below the median for you to file Chapter 7. No such income limits exist with Chapter 13, however. When it comes to what types of income you must include, your Social Security income is not counted. However, most investment account income is counted. If you need to file Chapter 7 and your income is over the median, you might still be able to use certain deductions to come in under the limit. Ask a bankruptcy lawyer for more information about these deductions. 

The above issues affecting retirement age individuals are just a sampling. To learn more about what bankruptcy could mean to your situation, speak to a bankruptcy lawyer and find out more.