Summary: Don’t worry if you’re older and need to file bankruptcy. If you need to file bankruptcy, start by talking to a bankruptcy attorney. Social security benefits have a special protection if you have your funds saved in a separate account.
Most people want to pay their debt. Sometimes, it is simply not possible. Debt gets out of control for many reasons. Circumstances beyond your control can contribute. Bad choices may be made (especially looking back and knowing what you know now, right?) Usually, it is a combination of all. Figuring out what the mistakes are is important. Learn from them. Please do your best not to repeat them. But then stop punishing yourself and move on. Most people filing bankruptcy are older.
More People Over 50 Are Filing Bankruptcy
Studies are now showing that most individuals filing bankruptcies are over 50 years old. With people working up to age 70 and beyond now, over 50 is really not a “senior.” But once you hit the 50’s, you will be dealing with some of the same issues as a senior.
Get Help Early
Get good counsel early. If bankruptcy is inevitable, don’t waste your money or the last of your working years trying to do the impossible. Paying off debt in a realistic time frame is important. Being able to stop working if you need to for health reasons is also important. If your debt load will take longer than 1 to 2 years to pay off, get professional advice. Don’t struggle silently for years trying to pay debt.
Area Agency on Aging offers various resources if you are over 60, including counseling on benefits that may be available to help.
Elder Law Overview – handbook published by Houston Bar Association covers various topics of interest to seniors.
If you are on social security and struggling with debt, you need to know that social security benefits are protected in and out of bankruptcy. Many folks on social security own their home or at least have a lot of equity. Planning is necessary to help you protect both your home and your money. Get help early to get the best results. This protection is not automatic. For steps, you should take read more here.
Want to learn more about bankruptcy and strategies to overcome debt?
Chapter 7 Bankruptcy – Best if wiping out credit card or signature loans will help. Cheapest, fastest bankruptcy, but can’t help you catch up on past due mortgage or vehicle loans.
Chapter 13 Debt Reorganization – Best if need to catch up on long-term debt, such as mortgage or vehicle.
Will I lose property if I file bankruptcy?
Bankruptcy law favors seniors. Social security benefits are not counted in the means test. In addition, most retirement plans, including 401k’s are exempt, meaning you do not lose these benefits in bankruptcy. Texas also has generous exemptions. Most people are able to keep all of their property.
Should I borrow money against my home to pay off credit card, medical or signature loans?
The biggest mistake I see is people who borrow against the equity in their home. This may be through a reverse mortgage or home equity loan. Seldom does borrowing fix a debt problem. Experts agree that you should never borrow against your home to pay off credit cards, signature loans, and other unsecured debt. You are creating a secured debt that bankruptcy won’t forgive. Whether you can afford it or not, you’ll have to pay a home mortgage or face losing your home.
Can my social security funds be garnished or seized by a creditor?
Social security benefits have special protection. You must keep your benefits separated from other funds. The best way to do this is through a Direct Express Card. Funds held on a Direct Express Card cannot be garnished.
Another option is keeping your social security payments in a separate bank account. If you have multiple income sources, such as pension or wages, deposit that income into a checking account. Have your social security go into a savings account. As needed transfer funds from your social security savings into checking to pay bills, etc. But don’t transfer from your checking into savings. If you are able to save money, it should be in the social security savings account. Seizure of funds held separately in a bank account are more limited. Your bank is required to let you use 2 months of your benefits. But then you’ll have to go to Court to claim the rest as exempt. That is why the Direct Express card is a better option if you are being sued or have judgments against you. For more detailed information on how this works, check out this article.
Certain creditors can garnish your social security, but very few.
Can I help my parent or spouse file bankruptcy when they are unable to file themself?
If you have a loved one, such as a parent or spouse, who is ill and carrying a heavy debt load, bankruptcy may be filed using a statutory durable power of attorney. The Judge will have to enter an Order Authorizing the use of the power of attorney. There are specific criteria that have to be met. For assistance with a power of attorney, Texas Law Help provides a detailed power of attorney fact sheet.
If your relative is physically or mentally unable to attend the hearing, the bankruptcy judge has the authority to excuse him. Someone with knowledge of the financial affairs of the debtor will have to attend to answer any questions the trustee may have about the paperwork. Using a durable power of attorney and getting an order excusing attendance at the required hearing is not routine though. Medical proof, such as a physician’s statement is usually necessary.
What if I can’t pay the property taxes on my home? Will I lose it?
Property tax relief for disabled and elderly. Be sure you are getting all the tax benefits you are entitled to under Texas Law.
Blog posts on the topic of bankruptcy for seniors.
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