An increasing number of older adults of retirement age are heading towards bankruptcy and the only way out appears to be policy change.
Bankruptcy Instead of Retirement
More retirement age seniors are filing for bankruptcy, leaving many to question if America is facing a “retirement crisis.”
According to academic researchers affiliated with the Consumer Bankruptcy Project, “Older Americans are increasingly likely to file consumer bankruptcy and their representation among those in bankruptcy has never been higher.”
High health care costs and insufficient income stemming from a decreasing social safety net and changes in retirement plans are major factors that may be to blame.
When data from the 1991 Consumer Bankruptcy Project was compared to the new numbers, researchers found more than a two-fold increase in the rate at which Americans aged 65 or more years filed for bankruptcy and an almost five-fold increase in the percentage of older Americans in the U.S. bankruptcy system.
“The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect,” the researchers wrote.
According to the publishers of the paper, the trend will continue unless there are “significant policy changes that reassume the risks of aging and effectively [e]nsure the financial stability of older Americans.”
Are you Facing Bankruptcy?
Bankruptcy can be one of the scariest things you’ll go through – especially if you are jumping blindly into the process. We always suggest working with a bankruptcy attorney if you are even just considering it as a way of managing your debt. Because you’ll be working closely with your attorney, you’ll want to pick someone that is the best fit for you.
Questions to Ask Your Bankruptcy Attorney
Before making a decision on filing for bankruptcy you’ll want to work with an attorney. There are a number of questions you can ask your lawyer to ensure that he or she is the one to handle your case.
- Do I have any non-exempt assets? Each state in the nation has a list of assets that that specific state deems protected or “exempt” from creditor attachment or seizure. Your bankruptcy lawyer should be able to review your assets and determine which items are and are not exempt in your bankruptcy. Non-exempt assets can be seized and sold by a Chapter 7 trustee and can also drive the payment plan higher in a Chapter 13 bankruptcy. Your lawyer should also advise you on strategies for handling non-exempt assets. Such options include making an offer to the Chapter 7 trustee or liquidating the asset. Liquidation will need to be performed under legally permissible conditions prior to filing.
- Do I have any preferential payment issues? A preferential payment is a payment that is made to one creditor at the expense of or in absence of a payment or payments to other creditors.
- Do I pass the means test? In other words, do I qualify to file for Chapter 7?
Your attorney should review your income and review your circumstances to determine if you qualify for Chapter 7 bankruptcy.
- If Chapter 13 is recommended, what is the reason and what is the estimated monthly payment plan?
There are five typical reasons for filing a chapter 13:
- saving your home from foreclosure,
- saving your car from repossession,
- a prior Chapter 7 bankruptcy,
- failing to qualify for Chapter 7 due to high income, and
- non-exempt assets.
- If Chapter 13 is recommended, how many months will it last?
The length of a Chapter 13 bankruptcy is dependent upon passing the Means Test. You should not be locked into a 60-month plan if it is not deemed necessary.
Other Considerations When Choosing an Attorney
There are a number of other considerations to take into account when you are choosing an attorney to handle your bankruptcy.
- Are they professional?
- Are they passionate about what they do and about your case?
- Do they take the time to explain the process and answer all your questions?
- Do they hear your concerns?
- What is their fee?
You’ll want to make sure that you feel comfortable with your attorney and trust him or her to have your best interests in mind.
Forms of Bankruptcy to Consider
If you’re facing large amounts of debt, have ruled out a workout or are not eligible for a workout, you will want to consider bankruptcy. You’ll also want to have an understanding of the types of bankruptcy available to you.
What Type of Bankruptcy Should You File For?
Most people have heard of Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Since Chapter 11 bankruptcy is usually for businesses, we’ll focus on Chapter 7 and Chapter 13. Please do not hesitate to contact us though, if you are interested in learning more about Chapter 11 bankruptcy, which is also known as “reorganization bankruptcy.”
Chapter 7 is the most common form of bankruptcy and is commonly referred to as “straight bankruptcy.” Under Chapter 7, assets are sold off so that the proceeds can go to paying debt. All proceeds from the sales of those assets are handed over to a trustee, who then pays down any and all creditors. After all creditors have been paid off they are no longer able to collect funds directly from you and your debts are cancelled, meaning you are no longer responsible for them. Chapter 7 is a good option for people dealing with the following:
- You unable to repay your debts
- You have debts that do not have co-signers
- You are going to be sued by creditors
Chapter 13 reorganizes debt so that you are able to pay back debts over the next three to five years. This pay-back plan is called a debt repayment schedule. Based on your income, and how much you owe, you’ll repay 10-100% of the debt you owe. Chapter 13 is a good option for people dealing with the following:
- You have already filed Chapter 7 within the past six years
- You have debts that have c-osigners
- You are able to re-pay your debts within three to five years
- Your income has disqualified you from filing for Chapter 7
- You need relief from impending collection proceedings or you want to pay your creditors back but are currently unable to
Pros and Cons of Bankruptcy to Consider
Just as it’s important to ask a number of questions up front when you are choosing a bankruptcy lawyer, you’ll also want to determine the pros and cons of filing bankruptcy. Below we discuss the advantages and disadvantages of filing for bankruptcy. As always, it’s advised you work with a phoenix chapter 7 bankruptcy lawyer that can help advise you.
Pros of Filing Bankruptcy
One immediate advantage that helps debtors when they file for bankruptcy is the “automatic stay.” This motion alerts creditors that they must stop their efforts to collect money from debtors. This stay is what stops creditors from calling you! Under an automatic stay, creditors are not allowed to call, send collection letters, file lawsuits, garnish wages, or seize assets – except for in specific situations such as the collection of alimony and child support payments.
The biggest “pro” of filing bankruptcy is that a court discharges your debts. That means that certain debts will not need to be repaid. This, of course, is dependent on the form of bankruptcy you file: either chapter 7 or chapter 13.
Cons of Filing Bankruptcy
One “con” of bankruptcy is that while it will discharge most debt, it does not discharge certain debt, such as mortgages, student loans, taxes, alimony, or child support. While student loan debt has been forgiven in extreme cases, for the most part, it is never discharged in bankruptcy. Additionally, a debtor can lose certain nonexempt property in a bankruptcy filing because a court orders it to be sold.
Bankruptcy will also have an effect on your credit score. While your credit might already be low because of delinquent payments, once a bankruptcy is filed, it’s required by the national credit reporting agencies that it appears on your credit report. A chapter 7 bankruptcy will stay on your credit report for 10 years and a chapter 13 will stay for 7 years.
The impact on your credit can hurt your future ability to qualify for a future loan or credit card. It might also affect your ability to be hired or secure living arrangements. Some employers and future landlords evaluate a persons credit score to determine if they are good candidates.
Working with a Bankruptcy Attorney
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 7 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
668 N. 44th St., Ste 320, Phoenix, AZ 85008