Bankruptcy for Seniors: An Option to Consider

Harry and Sophie retired about ten years ago. They live in a small house in Shrewsbury with no mortgage and had primarily been living off of their Social Security, retirement accounts, and their personal savings. In the past few years they have all but exhausted their savings due to unexpected medical costs. They have been living off of their credit cards. Just one of Harry’s prescriptions alone is more than $120/month. Their rising debt has topped $230,000. They can barely pay the minimum on their credit cards and have been considering tapping into their retirement funds to try to pay off some of their debt. Their children try to help but Harry does not want to let them know just how bad it is. This is not how they pictured their golden years…

This scenario is all too familiar with many seniors; and we could be seeing a lot more like this with the aging baby boomer population. But struggling with their debt is not the only solution for Harry and Sophie. They do not need to feel stress or shame over their situation.

Sophie and Harry could consider Bankruptcy. They won’t have to drain their retirement accounts or sell their home to do so. In Massachusetts, people can file homestead protection, which protects the equity in their homes from most creditors. Additionally, during a bankruptcy Social Security and retirement accounts are exempt from creditors (up to about $1.1 million). Instead of worrying about their crushing debt and struggling to get by, Harry and Sophie can discharge the $230,000 in debt. As an added bonus the full value of their home can be passed to their children when they die. If they choose not to file, the $230,000 debt, and anything that it had accumulated, can be collected from the value of their home, depleting their children’s inheritance.

Bankruptcy is not appropriate for everyone. It is very important that any elders facing a crushing debt situation get appropriate legal counseling. By sitting with a qualified Elder Law Attorney they can consider their options such as budgeting, reverse mortgages, governmental assistance programs including Veteran’s Administration benefits and disability, bankruptcy, etc. If bankruptcy is appropriate for your situation, Vickstrom Law would be happy to refer you to an excellent bankruptcy lawyer.

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