Filing Bankruptcy Over 50: What You Need to Know

Later-in-life bankruptcy filings were once unheard of. Today, they’re far more common than many people realize. Issues like medical bills, job loss, divorce, caring for aging parents, and/or inadequate retirement savings cause significant financial problems for many people over 50. To many, bankruptcy feels like a major setback. However, it also offers a structured and legal path toward a fresh financial start. Understanding how bankruptcy affects older adults, and what options exist,  helps you make informed decisions.

A Chicago bankruptcy lawyer understands the unique financial, emotional, and other needs that “gray bankruptcy” filers deal with. So, an attorney thoroughly reviews a case and lays out all possible legal options. Then, a Chicago bankruptcy lawyer sets gray bankruptcy filers on the road to a fresh start. No one wants financial issues looming over their heads later in life. Bankruptcy is the best way, and frequently the only way, to address such issues.

Relief Available

Chapter 7 bankruptcy eliminates many unsecured debts, such as credit card and medical debt. In many cases, the Chapter 7 process only lasts a few months. For these reasons, it is often the best option for people over 50 who have limited income and few non-exempt assets, such as a vacation house.

Chapter 13 bankruptcy, on the other hand, sets up a repayment plan over several years. The protected repayment plan is often ideal for individuals who have steady income and want to keep a home that is behind on payments, but it requires long-term budgeting that may be challenging for those nearing retirement.

Some hidden loopholes provide additional relief. The redemption option is a good example. If Tony is upside-down on his car note, he can redeem the vehicle for its current fair market value.

Retirement Accounts

Bankruptcy protects tax-advantaged retirement accounts such as 401(k)s, IRAs, and pension plans from creditors. Cash in a savings account is a tempting target for many creditors. Only bankruptcy effectively shields these accounts from such adverse action.

The effect of bankruptcy is proactive as well. Many people liquidate all or part of their retirement savings to pay bills. Bankruptcy preserves protected assets and avoids unnecessary tax liabilities.

Similarly, in many cases, Social Security income is protected from creditors and cannot be seized to repay dischargeable debts. This protection makes bankruptcy a very practical tool for seniors overwhelmed by credit cards, medical bills, or personal loans. However, if Social Security funds are mixed with other income in a bank account, careful record-keeping is essential to retain this protection. Most Chicago bankruptcy lawyers advise most people over 50 to keep Social Security and other government benefit funds in a separate account.

Bankruptcy and Credit

In many cases, this issue is the elephant in the room. Many people over 50 have worked a lifetime to build a good credit rating. They understandably don’t want to wreck it as they near the finish line.

Bankruptcy remains on a credit report for several years, usually between seven and ten. However, many older filers find that their credit actually begins to improve within a year or two. Eliminating debt lowers credit utilization and removes delinquent accounts. Bankruptcy also relieves financial stress and creates healthier financial habits moving forward. These things improve credit scores as well.

Count on a Thorough Cook County Lawyer

No matter what kind of financial problem you are having, there’s a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Source:

debt.org/bankruptcy/statistics/