There comes a time in everyone’s life where you cannot work anymore, even if you still have bills to pay. Whether it’s credit card debt, medical bills, or otherwise, debt collectors will continue calling and sending letters even after you’ve long retired.
Eventually, seniors drowning in debt are left with one of two major choices: rejoin the workforce or file for bankruptcy.
Before making any kind of decision, you should reach out to bankruptcy attorney services to figure out what your options are. How can it help you with debt, and what are some misconceptions?
Here’s everything you need to know about filing for bankruptcy as a senior citizen.
Benefits of Bankruptcy
Contrary to popular belief, only 5% of bankruptcy cases are related to reckless spending. Roughly a fifth of all cases are actually filed by well-educated people, and most are due to medical expenses.
The reason people file for bankruptcy is that they’re unable to pay their outstanding debts. All of your assets are measured and evaluated, and you can use those assets to repay part of your debt.
One of the benefits of filing for bankruptcy is protection from creditors seeking that debt. Elderly debt collection laws protect you from collectors, so you don’t have to worry about them throughout the process. It could also save you from eviction.
You don’t necessarily lose all of your things when you file, either. Law protects certain pieces of property, such as your social security check and other items.
The same goes for your vehicle. If you’re okay with continuing to pay it off, it’s off the table. Otherwise, you can give it up and your car loan.
Arguably one of the most important benefits is protecting your credit score from further damage. After you file, missed monthly payments and other debts won’t affect your credit score. In fact, you may see it increase in the following year.
Drawbacks of Bankruptcy
Although bankruptcy is an option for dealing with a large amount of debt, it does have some drawbacks that you should consider.
For starters, your credit will take a temporary hit. You can be in debt and have a higher credit score if you maintain your monthly payments, but situations like hospitalization or sudden unemployment can get in the way.
When that happens, a small hit now to your credit score is better than watching it dwindle away over the next few months or years. Once your bankruptcy discharge is granted, you can always work on raising it back up again.
Not all debts are erased by filing for bankruptcy. Student loans and tax debts are hard to eliminate, and child support isn’t touched at all.
You also have to be prepared to lose your belongings. That includes certain expensive items. Speak to a bankruptcy lawyer to prevent this from happening to your more precious personal belongings.
Types of Bankruptcy
Now that you know the pros and cons of filing for bankruptcy, you should be aware that there are two major types individuals should consider: Chapter 7 and Chapter 13. There are also other types, such as Chapter 11 bankruptcy, but that’s reserved for businesses or corporations.
Chapter 7 bankruptcy, otherwise known as liquidation, is the most common type for individuals. Most senior citizen credit card debt relief will be accomplished through this form of bankruptcy, as will other accrued debt.
It will typically discharge and settle all of your debts outside of taxes, student loans, and domestic obligations. In order to qualify, you must prove that your income is lower than the state medium. If not, you need to pass a means test to measure whether you have enough disposable income for your debts.
Some of the properties exempt from liquidation include your home, your car, clothing, and job-related equipment.
While Chapter 7 liquidates your assets and subsequently erases your debt, Chapter 13 bankruptcy reorganizes it. It’s a good option for people who have a steady income but can’t handle their monthly bills.
Chapter 13 allows you to repay your debt over three to five years with better rates and a lower principal.
Proper filing of a petition can be complicated, so you should seek out bankruptcy attorney services for help navigating it all.
When to Seek Bankruptcy Attorney Services
Although bankruptcy serves a purpose as debt relief for seniors, it’s not the best option for everyone. Any professional you speak with should advise you based on your own specific needs. In some cases, you may simply need to have someone analyze your spending habits.
One reason you may seek senior bankruptcy services is if you want to make sure your debt isn’t passed onto your heirs. You may also utilize it to help you get through financial difficulties, such as paying off hospital bills after an extended stay.
The Filing Process
Before you begin filing, you should determine what type of bankruptcy to file for. It’s often limited by your income and the amount of debt you have.
Collect all of your relevant documents. These include your most recent credit report, tax returns, pay stubs, bank statements, and anything related to your assets.
Filling out the bankruptcy forms can take a while, and you also have to pay a filing fee of $338 for Chapter 7 bankruptcy. You do have the option to pay it in installments for up to four months, however.
If you’re not too sure about filing for bankruptcy on your own, reach out to an expert for some guidance.
Debt Forgiveness for Seniors
Rising debt isn’t something you should avoid dealing with. Not only can it impact your life with creditors hounding you for repayment, but it can affect your credit score and even get passed on to your heirs.
Depending on your circumstances, you’ll likely end up filing for either Chapter 7 or Chapter 13 bankruptcy. There’s also the chance you can manage your debt with proper budgeting strategies.
If you or someone you know needs bankruptcy attorney services in the North Charleston area, give us a call.