Filing for bankruptcy is seen by many as something that people do when they are unable to stay in control of their bills, but it's not always that simple. The reasons for filing for bankruptcy can be influenced by a person's age. A younger person's filing often comes as a result of running up too much credit card debt during a time when they did not fully understand credit. A middle age person might file after experiencing unexpected expenses, such as medical bills or home repairs, or after a period of unemployment. Seniors too find themselves considering bankruptcy, and it can be a hard step for many to take. However, it may be the right step, depending on what they have at stake. Here is some information seniors may want to take into account if considering bankruptcy as a debt relief option.
For seniors that live in their own home, protecting equity may be a concern. States have individually set exemptions that allow them to keep some property after they have filed for bankruptcy, such as personal items, a decent car and a place to live. The federal government also designates certain amounts for exemptions. In many cases, filers can choose between filing under their state's system or the federal system. New Jersey is one state that does not have a homestead exemption, so in order to get protection, the federal exemption must be used, which is approximately $23,000. Homeowners will want to talk to their attorneys about whether or not filing will put their home at risk.
Retirement savings and Social Security benefits
In most cases, legitimate retirement accounts, such as 401Ks and IRAs up to approximately $1.2 million are protected during bankruptcy, and Social Security income does not count towards the "means test," which determines whether or not an individual qualifies for Chapter 7 debt forgiveness. If your retirement savings are held in other types of accounts, such as regular savings or investment accounts, they could be counted toward determining your assets.
One of the biggest reasons why many seniors consider bankruptcy is because of their medical debt. In many cases, this debt disappears or nearly disappears, freeing people from a big source of stress in their lives.
Filing for bankruptcy is something that needs to be considered carefully regardless of a person's age. Working with an attorney to help determine your financial standing can help you determine whether the benefits of filing bankruptcy outweigh the risks or if there are other debt relief alternatives available that may work better for you.