Bankruptcy Rates On the Rise Among Seniors
According to a recent report from the Institute for Financial Literacy, bankruptcy filings are on the rise among older Americans. Historically, most retirees who file bankruptcy have been driven by unmanageable medical bills. These days, however, the culprit is more likely to be credit card debt. Credit card interest and fees can easily spin out of control, especially for elderly people on fixed incomes who may turn to credit cards in order to make ends meet when basic necessities like medical care and food become too expensive.
Some retirees who are struggling with debt may not realize that some or all of their income is already be protected from creditors’ claims by a federal law that prohibits Social Security benefits from being garnished except to pay for child support, alimony or debts owed to the federal government such as delinquent taxes.
However, even seniors whose only income is Social Security may still be vulnerable to creditors if they own other assets such as a home, cars, or family heirlooms, which creditors may seize to pay off debts.
Bankruptcy Can Help Protect Assets
Many seniors with relatively few assets are able to emerge from bankruptcy without losing any of their property. This is because certain assets, known as “exempt property,” are excluded from the bankruptcy liquidation process, which normally requires assets to be sold in order to pay off debts. A debtor’s home and other property may also receive temporary protection through an “automatic stay,” which is an order from a bankruptcy judge that prevents creditors from taking collection action for a set period of time.
In addition to protecting their assets and finances, many people who file bankruptcy are motivated by a desire to “start fresh” with peace of mind and a clean financial slate. Senior citizens who are struggling with overwhelming debts or experiencing harassment from creditors should speak with an experienced bankruptcy lawyer to learn more about their rights and legal options.