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Bankruptcy for Seniors? No kidding. It happens.
Debt levels have risen at a faster rate for older Americans than for the overall population.
In households led by people 65 and older, the mean debt load rose to nearly $82,000 in 2011 from about $29,000 in 2000, Census Bureau data show.
I’ve been a Los Angeles Bankruptcy Attorney for 36 years. At my law firm we’ve seen a steady increase of seniors filing bankruptcy. More seniors file bankruptcy than ever before. The oldest bankruptcy client I’ve represented was 98 years old. He was slightly deaf. But otherwise spry. Sharp as a tack. And still played golf, (nine holes). Naturally, he didn’t want to consider bankruptcy. His credit card debts had piled up. He was sent in by his daughter. She’s an attorney and told him to get his butt in to see me. Living solely on Social Security and no real assets made him an ideal bankruptcy candidate. The case went fine. Last I heard he was still on the golf course once a week.
America’s population is aging rapidly. That means more seniors who struggle financially. Our perception is that age brings wisdom. That may be. But a fixed income leaves many seniors over reliant on credit cards and debt traps to meet basic living expenses. Bankruptcy for seniors who need it is good medicine. Is there any sense spending the last years of life in a self imposed debtor’s prison? Many of the the senior clients I have represented faced crippling financial pressure caring for abandoned grand children.
There are special considerations involving bankruptcy for seniors. Bankruptcy lawyers, senior clients, and the families of seniors should know a few key points.
Bankruptcy for Seniors Means Credit Card Debts are No Longer a Death Sentence.
It will take 32 years to pay off a credit card when all you pay are the minimum monthly payments. At that rate, most seniors will not live long enough to pay off their debts. They are doomed to die in debt.
Most clients who file bankruptcy are anxious to rebuild their credit. They look forward to having a fresh start. Most seniors will not have a post bankruptcy financial recovery. For many, there is no time left to rebuild. Those on fixed incomes will not be candidates for new credit. However, the need for a credit card can be easily overcome. A bank debit card will do anything that a credit card would have done.
Many seniors, like my 98 year old client, live on a small fixed income. They have no valuable assets. Folks who have limited income and no assets are often what we lawyers call, “judgment proof.” That means that a debt collector who sues will go away empty handed. Being judgment proof does not stop debt collectors from making your life a living hell. Bankruptcy for seniors who are otherwise judgment proof is simply good medicine. Bankruptcy stops bill collector harrasment. Judgment proof seniors will benefit from a bankruptcy case by receiving peace of mind.
Life is Good. Live it Up.
Poverty is not a requirement for bankruptcy. Seniors who have some assets and property often enjoy special bankruptcy exemptions to protect their property. Seniors age 65 and older are given special bankruptcy benefits in some states. Here’s a prime example. Seniors who are eligible to use the California state exemptions are allowed to protect $175,000 of equity in their home. Social security benefits are exempt in all states. Most kinds of pensions are fully protected. Money in an IRA account will be protected up to $1,245,475 per person. With minor exceptions, most retirement plans have exemption amounts that are unlimited if the plan is an ERISA-qualified pension plan, such as public employee retirement plans, 401(k)s and 403(b) plans.
