[COLUMN] Why more and more seniors are filing bankruptcy

According to a new report, the number of seniors filing bankruptcy is increasing rapidly. The average senior who files bankruptcy these days owes approximately $17,390 according to the report (although I have to say that most seniors who come to me for debt help actually owe a lot more!).

Some of the reasons mentioned are increased financial risks during retirement age, insufficient income (Social Security benefits are almost never enough to cover all personal living expenses unless seniors are getting financial help from family) and rising medical expenses. When seniors who are still working lose their jobs, it is also difficult or impossible for them to seek new employment, as they often have to compete with much younger applicants.

It is even more difficult for struggling seniors who have not stashed money away for retirement or a savings account because they usually have no other financial resources other than their Social Security benefits. So, a lot of them resort to bankruptcy to wipe out debts they can no longer pay or perhaps restructure them in a way that makes them affordable.  Unfortunately, by the time they file, a lot of them have also used up whatever savings they have, and they do not have enough years (unlike younger people) to be able to get back on their feet.

Another common reason for seniors filing bankruptcy is medical debt. Unpaid medical bills can lead to lawsuits and eventually a judgment that the creditor can enforce by wage garnishment (Since COVID started, actually not just seniors- but everyone who got buried in medical bills have the same problem). In California for example, a judgment creditor can take up to 25% of the debtor’s disposable income. How would you survive if you were already struggling as it is and then lose 25% of your available income? Facing unscrupulous debt collectors, seniors worry about their future knowing that they can’t pay their bills. Of course, the debt collectors don’t care; they just want their money and seniors seem to be an easy target for collection harassment.

If you’re a senior who owns your home, your home is likely your biggest and most important asset. Fortunately, in California, the law allows you to protect up to $600,000 of the equity in your primary residence depending on how long you’ve owned your home and the previous year’s home median value in your county. In most cases, this amount is more than sufficient to keep your home safe. If it’s not enough because you have more than that amount in equity, you should speak with an attorney who can help you explore other options to protect your home from creditors.

A lot of seniors are unaware that their retirement plan is exempt even if they file bankruptcy. Under federal law, most retirement plans including 401K/403b plans and IRA’s cannot be touched. So instead of taking money out of your retirement plan to pay debts that you cannot afford (and still possibly end up filing bankruptcy later on, anyway), it is better in most cases to file bankruptcy now and leave your retirement money untouched.

If you are reading this article and can relate to what I am saying here, my advice to you is to seek help as soon as possible if you are in serious debt trouble. Do this before you deplete any retirement money or savings, not after.  If you’ve tried your very best to repay your debts but nothing seems to be working, I can help you figure out all your options.  If you have parents who are in this situation, I also encourage you to help them get the assistance that they need.

I can do a thorough analysis of your debt situation and give you my best recommendations. Since 1997, I have helped more than 5,000 clients in finding the best solution to their financial problems.

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NOTE: Due to virus safety concerns, I am offering free consultations BY PHONE OR VIDEO to anyone who needs help in dealing with their debt problems. 

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE  1-866-477-7772.

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