Special Issues in an Over-55 Chapter 7 Bankruptcy

The overall consumer bankruptcy filing rate has declined significantly since 2005, when the law changed dramatically. But the over-55 bankruptcy filing rate has increased over 60 percent over roughly that same period. The combination of several recessions, or mini-recessions, a shrinking social safety net, and a few other factors have prompted many people in this age group, who should be in their peak earning period, to file bankruptcy.

These bankruptcies have some special issues, which we’ll discuss below. All Chapter 7s require special attention, and a Chicago bankruptcy lawyer pays special attention to these cases. This special attention starts with the unique emotional issues in these cases and continues until the judge closes the bankruptcy. When that happens, the judge also discharges most unsecured debts, such as credit cards and medical bills.

Emotional Issues

Most people over 55 grew up playing Monopoly. In this board game, when players declare bankruptcy, their tokens are removed from the playing board, all their property and other assets are liquidated, and they cannot get back in the game.

Many people believe that a real-life Chapter 7 has similar dynamics. To them, filing bankruptcy is admitting failure and the end of the line.

These things aren’t true. Most people, regardless of their age, file bankruptcy following a divorce, business downturn, or other event that’s at least mostly beyond their control and devastated their finances. These individuals aren’t failures in any sense of the word. Instead, in the words of the Supreme Court, they’re simply unfortunate.

Other over-55 distressed debtors fear the loss of control. They believe a judge or trustee (person who manages a bankruptcy for a judge) has near total control over the proceeding.

Once again, that’s not right either. In fact, the opposite is true. A Chicago bankruptcy lawyer helps these debtors decide which debts to reaffirm (keep paying) and which to let go.

For example, many people want to continue paying certain medical bills, so they remain in a doctor’s good graces. Attorneys often renegotiate repayment terms, and even repayment amounts, in these situations.

Financial Issues

People over 55 often have substantial assets, like home equity and a retirement nest egg, to protect. Bankruptcy protects these assets, at least in most cases. Furthermore, the Automatic Stay prohibits creditors from taking legal action against any assets, as long as the bankruptcy is pending.

Illinois has a very limited home equity exemption. However, some loopholes are available, such as a tenancy of the entirety. If Husband signs over his part of a home to Wife, Wife designates Husband as a tenant, and Husband files bankruptcy, the house is safe. Creditors cannot seize one person’s assets, which in this case would be the house, to pay another party’s debts, which in this case would be Husband’s unpaid obligations.

Always speak with an attorney before making any such moves. A misstep, even an unintentional one, could have drastic consequences.

Retirement accounts are a bit more straightforward. The Supreme Court recently reaffirmed that these accounts are 100 percent exempt in bankruptcy, regardless of their value.

 Reach Out to a Detail-Oriented 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:

forbes.com/sites/nextavenue/2019/10/29/why-so-many-55-people-are-going-bankrupt-and-how-to-bounce-back/