Is Bankruptcy An Option for Arizona Senior Citizens in Debt?

Senior CitizensAside from death and taxes, there are two other things which are definite in life: we are all going to grow older and money is almost always never enough, no matter how much you have saved in the bank. When you combine those two facts, it could be a recipe for disaster. You are forced to think about other important things: dwindling pensions, increasing tax rates, dwindling income, increasing medical expenses.  As a senior citizen, you may find yourself dependent on social security and your bank accounts. Unless, you have rich, generous children or you are driven to work until your last breath. Otherwise, you may see yourself considering bankruptcy. You may look at bankruptcy as a viable solution to debt problems although it may not actually be necessary.  Let us look at some points to consider:

Chapter 7 Bankruptcy or Chapter 13 Bankruptcy Explained

Bankruptcy is almost always the go-to option of most people in financial distress who are either working or have a significant amount of property. Otherwise, for retirees,  bankruptcy might not be necessary.

Chapter 7 bankruptcy.

Chapter 7 bankruptcy is more of liquidation and allows the debtor to clean out debts and get a completely fresh start. A West Virginia bankruptcy court appoints a trustee who collects all of a debtor’s non-exempt property and sells them to pay back the creditors  A debtor is allowed to keep what is known as exempt property. Exempt property often includes most retirement accounts, Social Security payments, and a certain amount of home equity. Chapter 7 bankruptcy is suitable for low-income debtors with little or no assets with which to pay off their debts. However, the majority of Chapter 7 filers can keep (exempt) everything they own.

Chapter 13 bankruptcy.

Chapter 13 bankruptcy is called “reorganization” because it allows Chapter 13 filers to pay off all or part of their debts in a span of three to five years. Your Chapter 13 bankruptcy attorney will help you draft a proposed payment plan, which must be approved by the bankruptcy court before your petition can proceed further. The purpose of the reorganization plan is to show how you will fully pay all priority claims, such as child support, unpaid wages, and taxes, within three to five years. Unsecured debts like credit card debts and medical bills may be partially paid over time. Chapter 13 bankruptcy works for individuals who make too much money to qualify for Chapter 7 bankruptcy, or for those who would stand to lose property that they’d prefer to keep.

Is Bankruptcy Helpful to Me?

Bankruptcy is helpful in a number of ways, depending on your financial situation. Bankruptcy wipes out unpaid bills thereby protecting your assets. It helps deal with other issues that should be considered by senior citizens such as:

  • Wage Garnishment.

If you are like a lot of other senior citizens who are still working past their retirement age, filing bankruptcy can put a stop to wage garnishment. When you miss out on paying your bills, your creditors begin collection activities to make you settle your dues. Wage garnishment is one way for them to do so because it allows your employer to take funds out of your paycheck. Bankruptcy can help by wiping out debt before the creditor gets the wage garnishment,  and puts a stop to wage garnishment if it has already started. This is because when you file bankruptcy, the bankruptcy court will order an “automatic stay” which stops all collection activities against you. As such,  your money or property remains intact unless your creditors are otherwise, permitted by the court to seize them.

  • Equity in Your House or Car

Senior citizens, more often than not have built up equity for their homes after years of paying off the mortgage.   The same goes for a car that has been cleared of a loan, it could have valuable equity, as well. On the other hand,  if you’re facing repossession of your car or foreclosure of your house, a Chapter 7 bankruptcy can temporarily stop the process and allow you to keep a portion of your equity, depending on your state exemption laws. You need to consider this carefully because, even if Chapter 7 may help protect some equity, if you are behind on your payments or you have more equity than you can keep—and you want to keep the property—Chapter 7 bankruptcy might not be the best option for you. You risk losing your property altogether. You may have a better chance of keeping your property and catching up on payments if you go for Chapter 13 bankruptcy.  However, as previously discussed, this option is for those who are still has a source of income.

  • Other Assets

Contrary to popular belief, or rather, myth, you do not lose everything but the clothes on your back when you declare bankruptcy. You will still be able to keep basic essentials that will help you work and live such as personal items like clothes and your wedding rings, household appliances and furniture, tools that help you in your source of income, and your retirement accounts.

  • Judgment-Proof

If you are already retired and have no significant property, bankruptcy may no longer be necessary. If you have no considerable assets such as valuable property or money in the bank, you are already considered judgment proof.  This means, your collectors can no longer collect anything from your no matter how much they pester you.

If you’re a senior citizen considering to file bankruptcy, consult a bankruptcy attorney as your first step. There are special considerations involved in an elderly person filing for bankruptcy. Being guided by an experienced Arizona bankruptcy lawyer is important so as not to miss out the best option to take. Call Phoenix Fresh Start Bankruptcy to speak to a bankruptcy attorney. In your golden years, it is never too late to have a fresh start.