Approximately 14 percent of all households in America, or about 17 million, owe more than they own. But less than 1 percent of U.S. households ever file for bankruptcy. For many, this is an opportunity to wipe out debt that they can never repay.
Bankruptcy is a federal procedure that helps individuals free themselves from past debts and repay their creditors. The process usually takes between three and six months to complete.
If you are a senior citizen struggling with debt, bankruptcy may be a solution for you. Finding the right bankruptcy attorney in Bloomington, MN is the best thing you can do to tackle your financial hardships head-on. There are many benefits of bankruptcy, but whether it is right for you depends on your unique circumstances.
The information below provides some basic information on bankruptcy options for seniors. It also contains some advice on finding the best bankruptcy attorney to handle your case.
Why Bankruptcy Has Increased for Seniors
From 1991 to 2016, the rate of bankruptcy filings for seniors more than doubled. There are many reasons for this. The biggest one is debt related to medical issues.
While Medicare provides basic healthcare for seniors, it often does not cover things like hearing aids, dental care, or eye exams. Long-term care is a significant expense that Medicare often does not cover.
To get many of these benefits, you need supplemental insurance. Also, basic Medicare requires copays and other out-of-pocket expenses.
A study by the Kaiser Family Foundation showed that, among all Medicare beneficiaries, on average 41 percent of their Social Security income went to out-of-pocket healthcare expenses. The study also predicted this amount to increase to 50 percent by the year 2030.
Medical expenses are not the only culprit. Health conditions can cause seniors to lose employment. This can exacerbate existing difficulties with paying bills and debts. Abrupt or otherwise unforeseen non-medical circumstances and expenses are another reason seniors file for bankruptcy.
Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 bankruptcy entail different rules and outcomes. It is important to understand these distinctions since they are informed by your personal circumstances.
Most people file Chapter 7 bankruptcy since it wipes out most debts, including credit cards and medical debt. However, with Chapter 7 bankruptcy, you can lose some of your property if you own enough. You are allowed to exempt and keep a certain amount of property from creditors. You will turn over nonexempt assets to a bankruptcy trustee who is then tasked with selling your property and using the proceeds to pay a dividend to your creditors.
With Chapter 13 bankruptcy, you keep your assets. This is one of the main reasons people choose this route. However, the Court would not want you to continue to make payments on a luxury item a the expense of your other creditors. An example might be a boat or motorcycle loan A monthly debt consolidation and partial repayment plan is implemented and generally lasts for three to five years.
Chapter 7 bankruptcy involves a “means test.” If your income is above a certain threshold, you cannot qualify for this type of bankruptcy. The idea is that you do not have enough disposable income for a Chapter 13 repayment plan.
If you do not qualify for Chapter 7, or if you wish to keep more of your assets than Chapter 7 allows, Chapter 13 bankruptcy may be the best option for you.
Property, including homeownership, is a major factor in choosing Chapter 7 bankruptcy. Many seniors have paid off their homes. You can keep your home if it is exempt. You can exempt up to $450,000.00 of equity in a home in Minnesota.
With Chapter 13 bankruptcy, you can keep your house. The process even affords different avenues for continuing to pay your mortgage, if you still have one.
As noted, most retirement benefits are protected from bankruptcy. There is an exception in Chapter 7, which caps the exempt amount of Roth IRAs. Few people will exceed these limits. With Chapter 13 bankruptcy, you retain all retirement accounts regardless of their balances.
Social Security and Social Security Disability benefits also are protected, even in Chapter 7 bankruptcy. Also, this income is not counted towards the means test calculations. This is important to remember, especially if most of your income is from Social Security.
With Chapter 13 bankruptcy, Social Security income is included when calculating the amount of your monthly repayment schedule. Hiring a prominent Bloomington bankruptcy attorney is a good way to understand what this amount might be at the outset.
Find a Bankruptcy Attorney in Bloomington, Minnesota
Now that you have an idea of whether filing bankruptcy can be a beneficial move for you or an elderly loved one, you can contact a bankruptcy attorney in Bloomington to help you with the proceedings. You need a reputable lawyer who can guide you through the processes and achieve the most desirable outcome possible.
Gregory Wald has more than 30 years of experience as a bankruptcy attorney. He can assist you in determining the best course of action given your particular circumstances. Reach out to us today to see if we can help you get out of debt and get on with your life.