3 Things Seniors Should Know About Bankruptcy
Bankruptcy may not seem like an appealing topic at any age. But if you're a senior dealing with debt overload, it may be a better choice than you think. Many seniors are living on fixed incomes and are simply unable to keep up with large loads of debt, and there are some reasons why filing for bankruptcy as a senior may be a more beneficial choice than it was in your younger years. Take a look at a few things that you need to know about filing for bankruptcy as a senior.
You May Be Able to Keep Your Home
Losing a home during your golden years can be an even bigger loss than it would be at a younger age because seniors tend to have more equity in their homes. However, you may be able to save your home even if you file a Chapter 7 bankruptcy. Federal law and most state laws allow a homestead exemption that allows you to hold onto your property.
Laws vary from state to state, but the chances are good that you'll be able to exempt enough home equity to stay in your home. In some states, the amount of the exemption is higher for seniors. For example, California allows a $175,000 homestead exemption for seniors over 65 (or 55 if they make $15,000 a year or less) as well as for disabled homeowners.
Medical Bankruptcy is Requires Planning
Medical debt is one of the most common kinds of debt that seniors have to deal with. A serious medical event can put you deep in debt in a very short amount of time. Fortunately, medical debt is also typically easy to discharge in a Chapter 7 bankruptcy. Filing for bankruptcy can free you of that debt in a very short amount of time.
However, you should do some planning before filing for bankruptcy due to medical costs. Once you file, the only debts covered by the bankruptcy are the ones you had at the time that you filed. If you accrue more medical debt after the filing, you'll owe that, and you won't be able to file again for several years. You can't predict the future, but if you know that you'll have more expensive medical bills coming soon, you should probably consider delaying the filing until after you've completed your treatment.
You Can Benefit From Retirement Account Protections
You spent a lot of time-saving for retirement, and the last thing you want is to see those funds get eaten up by bankruptcy. What many seniors don't realize is that retirement accounts are protected in bankruptcies.
If you have a 401(k) or 403(b), a defined-benefit or money purchase plan, or a profit-sharing plan, you'll find that those accounts are entirely exempt. Meanwhile, IRAs are protected up to more than a million dollars. The exact amount is adjusted for inflation every three years. You won't have to fear losing your retirement nest egg by filing for bankruptcy.
Bankruptcy may be the key to getting out from under your debt so that you can enjoy your retirement. The best way to find out if bankruptcy is the right choice for you is to consult a bankruptcy attorney in your area. Companies like Dunbar & Dunbar can help.