Being in debt for senior citizens is a more severe problem than being in debt as young adults. Whether preparing for retirement or trying to make ends meet on a fixed income, it is true. You may need expert assistance deciding on your optimal debt-reduction approach.
Filing for bankruptcy might be the easiest way to get out of debt. This article will look at declaring bankruptcy and solutions for older individuals with lingering debt issues. If you have a few months before retirement, consider scheduling a free appointment with a bankruptcy attorney.
Debt Relief for Seniors Citizens
For many, debt can be one of those things that accumulate over a lifetime without much second thought. Cleaning up debt for a deceased loved one can be a heavy administration process. It usually involves having an estate executed, going to a probate court, and a lot of time spent tracking down and clearing old debts. Senior citizens often consider ways to alleviate their obligation to ensure not to leave a bomb of hassle behind for their loved ones to clean up.
For this reason, many senior citizens are interested in the various ways to reduce or eliminate debt. So, what are the different debt relief options for senior citizens?
Budgeting
While this may not be what people want to hear, budgeting is the most apparent option for clearing your debt. Adhering to a budget doesn’t have to be punishing. It can be beneficial for tracking your expenses. You’d be surprised how much you can save by making a few changes daily.
Downsizing
Whether it’s your home, car, or holiday home, downsizing to something a little cheaper can be a great way to pay off debt. If you’re still living in the four-bedroom house where you brought up your children who no longer live there, opting for something smaller might be an idea. Living in a house with empty rooms could indicate that downsizing is a good option to reduce your debt. When implemented alongside an effective budgeting plan, you’ll be able to make a significant dent in your debt payments.
Selling Assets
Selling your house could be a viable option for paying off debt. Senior citizens’ average social security checks are enough to cover rent and living costs. So, if you’re living in an owned property but have the option to rent instead, selling it to pay off your old debt might be worth considering.
Facing the brute reality of these debt relief options can be difficult for most people. Many ponder if downsizing, strict budgeting, and selling their beloved homes are the only way to settle their debts. These days, more and more senior citizens are declaring bankruptcy as their debt relief option of choice. What exactly is declaring bankruptcy? How does it work? Are there any downsides? Let’s take a deeper look into the answers to these vital questions.
Declaring Bankruptcy for Senior Citizens
As inflation and healthcare costs grow, it’s not unusual for senior Americans to file for bankruptcy. While senior citizens can often benefit from other creditors, bankruptcy is not the best option for individuals who stand to lose a lot of property. Continue reading to learn about other typical difficulties facing older persons in bankruptcy.
What Exactly Is Declaring Bankruptcy?
Bankruptcy is a legal process that relieves individuals and businesses who cannot repay their debts. There are two main types of bankruptcy: liquidation and reorganization. In liquidation, the debtor’s assets are sold, and the proceeds are used to pay off creditors. When someone files for bankruptcy, an automatic stay goes into effect, preventing creditors from taking further action against the debtor.
In the reorganization process, the debtor’s assets are not sold, but the debtor is required to develop a repayment plan to repay creditors over time. Bankruptcy can be difficult and stressful, but it can provide much-needed relief for those struggling with debt.
Is Declaring Bankruptcy Necessary?
Filing for bankruptcy is a simple strategy to eliminate debt and increase the money available to pay monthly payments. However, many seniors hesitate to declare bankruptcy, which isn’t always required or even a brilliant idea.
Here are two scenarios in which filing for bankruptcy is a dubious option for seniors:
- You have nothing that a creditor may seize. Creditors cannot take anything necessary for home maintenance, such as domestic furnishings, a small automobile, Social Security earnings, and many retirement accounts. Since these items constitute the majority of what many seniors own, many are “judgment proof,” so filing for bankruptcy is unnecessary. Nonetheless, some judgment-proof people will file for bankruptcy anyway to halt creditor calls and reduce the fear of losing money from a bank account.
- Filing for bankruptcy may not be wise if you hold property and income that is not shielded from creditors. You have too many assets to gain from declaring bankruptcy. You’d most likely lose the property or have to set up a high-rate repayment plan.
When Should You Consider Filing for Bankruptcy?
While filing for bankruptcy may not always be the most suitable option, there are many cases in which it can be beneficial for seniors seeking debt relief. If one or more of the following cases apply to you, it might be worth considering bankruptcy:
- You have the sort of debt that can be discharged under Chapter 7
- You want to use a Chapter 13 repayment plan to catch up on your payments
- It’s possible to exempt all or most of your property
- You’re able to discharge enough debt if you have to give up property
- Your income is low enough to pass the Chapter 7 means test
What Are the Consequences of Filing for Bankruptcy?
The most well-known repercussion of bankruptcy is losing property. A default can result in the loss of real estate, automobiles, jewels, antique furniture, and other goods under certain circumstances. As previously stated, both forms of bankruptcy proceedings may compel you to sell assets to repay creditors.
Others may suffer financial consequences as a result of your bankruptcy. If your parents co-sign a vehicle loan for you, they might be liable for at least some of the debt if you file for bankruptcy.
The Fundamentals of Declaring Bankruptcy
At this point, you might be asking yourself: What are chapters 7 and 13 all about? These are two routes of declaring bankruptcy; each has requirements, criteria, and distinct characteristics.
What Is Chapter 7 Bankruptcy?
When most individuals consider bankruptcy, they often think about Chapter 7, sometimes known as “straight bankruptcy.” You must enable a federal court trustee to supervise the sale of non-exempt assets. Proceeds will be used to pay off creditors. After the bankruptcy, the remaining debt is dismissed. Certain debts cannot be discharged.
A Chapter 7 bankruptcy will probably result in property loss, and the lousy bankruptcy record will remain on your credit report for ten years from the filing date. If you get into further debt, you won’t be allowed to petition for bankruptcy under this chapter for another eight years.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy works significantly differently, enabling you to keep your property in return for repaying your debt in part or whole. A three- to five-year repayment plan will be negotiated by the bankruptcy court and your attorney. You may agree to return all or amount of your debt within that time period, depending on what is discussed. When you finish the agreed-upon repayment schedule, your debt is dismissed, even if you only paid a portion of what you owed.
While any sort of bankruptcy can harm your credit score, Chapter 13 may be a better alternative. You may be allowed to keep some assets if you repay part (or all) of your debt. Furthermore, a Chapter 13 bankruptcy will be removed from your credit report after seven years, and you can file under this chapter again in as short as two years.
Considering Filing for Bankruptcy? Call us at 215-545-0008
Many senior citizens are considering bankruptcy as a debt relief option. Depending on your situation, declaring bankruptcy as a senior citizen may not be suitable for you. Consider hiring a bankruptcy attorney to find the best solution for you.