Seniors Make Up Largest Group Filing Personal Bankruptcy. This is unfortunate but it is true in our ever increasing bankruptcy. It breaks my heart to see so many seniors in the bankruptcy trustee’s lobby.
The seniors’ retirement funds may be protected by bankruptcy. Seniors who are living on government pension and social security may be judgment proof as any judgment holder cannot or should not be able to execute any judgment obtained against seniors as nothing can be garnished. Social security pension is granted under federal laws and by nature a garnishment cannot be granted as this would violate the supremacy clause of the constitution.
In the last eight years, Americans aged 55 and older have become the group most likely to file for personal bankruptcy, according to the AARP. Over half of people aged 50 and older that have debt spend the majority of their monthly income paying it off. Mortgages, home-equity loans, large credit-card balances, and loss of income are all reasons seniors are experiencing financial distress.
The economic situation is so dire, that retirees and senior citizens are withdrawing heavily from their IRA’s and spending on their daily expenses more than ever. In a perfect economy, they could have been able to downsize their homes to pay off their debts, or get reverse mortgages. However, with the current declines in housing markets, many do not have enough equity in their homes to do so. Seniors that refinanced their mortgages during the real estate boom may have enormous mortgage payments. In many cases seniors owe more on their homes than they’re worth.
According to the National Foundation for Credit Counseling, seniors carrying high credit card debt into retirement, and the high interest payday loans against Social Security checks, produce the biggest burdens for senior debtors. With no income coming in our seniors has fewer options for paying off the credit cards…and interest can grow quickly.
Sometime and it has happened many times that seniors has been ripped off by their own children. Many parents try to help their children financially even if they can’t afford to do so and lots of them have given their own guarantees for student loans or car payments. Many times bankruptcy is the best option for seniors with large debts. People with large medical debts can declare bankruptcy and keep their savings because assets in IRAs and other retirement accounts are protected from bankruptcy judgments up to $1 million. Depending on state laws, some debtors can keep their home as well.
One should be careful in filing bankruptcy for senior citizens. Many of their debts are not their own and can be settled without filing a formal bankruptcy. Also, the harassing phone calls can be stopped by few letters instead of filing complex bankruptcy.