Bankruptcy for Retirees
Many retirees are facing credit challenges which seem daunting, maxed out credit cards, property tax debt, income tax debt and some are even facing foreclosure . Maybe the retiree experienced a medical expense which placed them in a financial bind and then they tried to fix it by mortgaging their house or maxing out their credit cards, or maybe they tried to help an adult son or daughter by co-signing a car loan or even a mortgage. Whatever the action was that placed the retiree in financial crisis, bankruptcy may be the fix they need.
Let’s take a look at a few scenarios where retired debtors may benefit from filing bankruptcy:
- If the retired debtor owns their home outright and has no mortgage; but is faced with large homeowner association fees and property taxes, they may benefit from bankruptcy under certain circumstances. If the debtor is unable to pay their housing related expenses because of other debt obligations such as credit card debt , bankruptcy could help them discharge some or all of their credit card debt freeing up their cash to pay expenses related to their housing. In Texas, the homestead exemption is generous so the debtor would not be forced to sell their property to pay off debts in bankruptcy.
- If the retired debtor is receiving income mostly from their regiment savings and/or social security; but are still faced with other unsecured debts such as a personal loan or medical expenses, bankruptcy could allow them to discharge those debts and improve their lifestyle. Because retirement accounts and social security payments are protected in bankruptcy, their creditors would not have access to the money to pay off debts.
- If the retired debtor has experienced a reduction in their retirement income because of losses on the stock market, filing bankruptcy may benefit them if they want to return to work at least part-time. By discharging unsecured debts in bankruptcy, the debtor will be able to use more of their money for savings and important expenses such as their housing and medical bills .