Using Bankruptcy to Wipe the Slate Clean as a Senior Citizen

Many senior citizens live on a very fixed income, with money coming in from pensions or social security perhaps barely covering the bills. An unforeseen event, such as large medical bills (which seniors may also be prone to) or other costs can make a senior's life difficult very quickly. If you begin to build up debt that you really can't pay on your fixed income, then you may find yourself harassed by creditors and plagued by fear- that is no way to spend your golden years. Fortunately, the bankruptcy code provides protection for people, including senior citizens, with debts they cannot handle. So, you may wish to consider the option of using bankruptcy to start over once your debt becomes too much for you to take.

Understanding Bankruptcy

Bankruptcy was created by the US federal government so people would not be locked into a lifetime of debt. Under the bankruptcy code, there are several different types of bankruptcy including chapter 7, chapter 13, and chapter 11. For most personal bankruptcies, which is the type most senior citizens declare, there are really two primary options:

• Chapter 7 bankruptcy
• Chapter 13 bankruptcy

Chapter 13 bankruptcy is considered a "wage-earners" or "working mans" bankruptcy because under this type of bankruptcy, you do not just get to walk away from the bankruptcy with your debts forgiven. Instead, you have to set up a payment plan with the court, approved by your creditors, that restructures your debt and imposes a plan to pay at least some of it over a 3-5 year period. The good thing about Chapter 13 is that you get to keep your assets, so if you can afford the payments and have stuff you don't want to lose, Chapter 13 may be right for you.

Many seniors on a fixed income will declare Chapter 7 instead of Chapter 13. Chapter 7 is a total liquidation bankruptcy. This means all debts are forgiven (except those such as student loan debt and tax debt that are largely exempt from bankruptcy protection). While this sounds great, there are two catches to chapter 7:

• You have to qualify based on income. If you make more than the median income in your state, or if you can pay your debts and still have money left over to live on, you don't qualify
• You have to turn over most of your assets for sale (With the exception of some of your home equity, inexpensive cars and low-value personal items)

Getting Help

As a senior citizen, you have worked your whole life and should be enjoying your retirement- not dealing with creditors. If you find yourself unable to handle your debt, a phone call to a bankruptcy attorney is a great first step towards getting your life back. Your attorney can help you to understand your options and can help you to choose what is best for you and then make it a reality by negotiating with the courts on your behalf.