Older Americans Can Turn to Bankruptcy to Protect Their Financial Lives

According to a recent study, elderly Americans are turning to bankruptcy courts at much higher rates than other adults. From 1991 to 2007, the Consumer Bankruptcy Project reports that the rate of personal bankruptcy filings by those 65 or older increased by 150 percent. Looking only at those ages 75 to 84, bankruptcy filings skyrocketed even higher — by some 433 percent. Yet, during the same period, the rate of bankruptcy filings across all age groups declined by 29 percent.

Why are older Americans seeking the protections of bankruptcy courts more than ever before? While the study did not delve into specific causes, many experts cite rising health care costs and the burden of medical debt as primary factors.

Whatever the source of their troubles, one thing is clear: older Americans overwhelmed by debt are increasingly taking advantage of the protections offered by bankruptcy. This trend is not entirely surprising, given that for seniors in particular, bankruptcy offers a number of unique benefits.

The Automatic Stay

Nobody wants to spend their golden years getting harassed by creditors. A benefit called the "automatic stay," which is built into the bankruptcy process, can help ensure that this does not happen to you.

As soon as you file for bankruptcy, the automatic stay takes effect. It prohibits creditors from calling or contacting you — any of your creditors who do contact you in violation of the automatic stay could be subject to stiff penalties.

Furthermore, an automatic stay halts other creditor actions against you, including foreclosure proceedings, repossession actions and creditor lawsuits. While the automatic stay is not permanent, it lasts throughout the bankruptcy process — and after the conclusion of your bankruptcy case and any corresponding debt discharges, your former creditors should no longer have a reason to contact you.

Exemptions

There are different kinds of bankruptcy; for consumers, Chapter 13 "reorganization" and Chapter 7 (referred to colloquially as "liquidation") are the two primary types. Chapter 13 involves the restructuring of debts so that those with a regular income can catch up on payments. Chapter 7, on the other hand, involves the repayment of a portion of debt with available assets and an almost immediate discharge of most or all remaining financial obligations.

However, even Chapter 7 is far less scary than it may sound to the untrained ear. "Liquidation" is more of an unfortunate misnomer than an apt description of the Chapter 7 process. Many property exemptions exist that can help anyone going through bankruptcy, and seniors in particular, may hold on to items and investments that are of value to them.

Exemptions vary by state, but no matter where you are, the most important one is usually the homestead exemption. This exemption protects residential property that you own and occupy. In Tennessee Bankruptcy Court , other examples of common exemptions include:

• Public benefits, such as Social Security payments

• Money on deposit with a bank, up to certain amounts

• Clothing, family heirlooms, wedding rings, family pictures and other personal effects

• Pensions and other types of retirement plans, including employee contributions to ERISA plans

• Tools of a trade or profession

You may also be able to claim other exemptions based on a variety of factors unique to your situation. Rest assured, thanks to the generous exemptions in Tennessee, a bankruptcy filing does not mean you will lose all your assets or that you will be left with nothing to pass on to your loved ones.

Bankruptcy Can Bring You Peace of Mind

Sometimes, the most appealing aspect of bankruptcy for seniors is the calming effect that comes with knowing that you will no longer have to juggle unmanageable debts, you can relax and enjoy your golden years free of financial worries. It may be intangible, but the benefits bankruptcy can have for your mental health should not be underestimated.

Get the Legal Help You Need

The bankruptcy process can be difficult to navigate; however, a qualified bankruptcy attorney can guide you through it with as little hassle as possible. Your attorney will be able to help you get the most out of bankruptcy, structuring your assets to take advantage of all available exemptions and relentlessly pursuing solutions against your creditors.

If you are a senior citizen struggling financially, there is hope. Contact an experienced bankruptcy lawyer today to learn how to escape from your unmanageable debt load.