Can I File for Bankruptcy in Retirement?


More Elderly Chicagoans Filing for Personal Bankruptcy
Many retired Chicago residents wonder whether they should consider filing for bankruptcy.  According to a study from the University of Michigan Law School, the fastest-growing group of people who file for personal bankruptcies are those aged 65 and older.  While the number of Americans who filed for bankruptcy protection increased substantially during the earlier years of the economic downturn, filing for bankruptcy may not be “such a bad idea” for older adults today, according to an article in USA Today.
For many seniors, expenses tend to rise as income decreases.  Most Oak Park residents who are living on pensions, retirement savings, and Social Security have growing medical costs and taxes that aren’t always covered by their incomes.  Accountants who have studied bankruptcy trends among the aging population have emphasized that “Social Security hasn’t had a cost-of-living adjustment in a long time and pensions and retirement accounts took a huge hit during the recession.”  And often, solutions other than bankruptcy that target older adults, such as reverse mortgages, don’t offer long-term solutions to growing financial worries.  As a result, many seniors consider filing for bankruptcy protection.
Medicare Doesn’t Cover Everything
One of the primary reasons that seniors don’t have sufficient income and consider filing for bankruptcy is the cost of medical care.  According to Jean Setzfand, the director of financial security at AARP, “most people think ‘Oh, I have Medicare—I’m covered.’”  However, many Americans over the age of 65 don’t realize that there are a number of out-of-pocket expenses associated with medical care.  In particular, the rising prices of long-term care aren’t an issue that most of us even consider until we need it.
In addition to medical expenses, many people in retirement still have monthly mortgage payments.  When you add the rising costs of medical care to a high monthly mortgage payment, and you factor in the lower incomes associated with retirement, many older Americans turn to credit cards to make ends meet.  According to the study from the University of Michigan Law School, “elder Americans carry 50 percent more credit card debt than their younger counterparts.”
Bankruptcy as a Solution?
While many baby boomers fear that filing for bankruptcy “carries a stigma or personal failure and shame,” it can alleviate substantial financial concerns in old age.  How can filing for bankruptcy help seniors to live their retirement years without persisting financial anxieties?  First, it can help to erase substantial debts that can plague a person’s daily life.  And more significantly, filing for personal bankruptcy can prevent seniors from paying all of their limited incomes to creditors—instead, they can use some of their income for everyday expenses and can enjoy retirement a bit more.
Most importantly, many older adults worry that filing for bankruptcy will require them to give up all of their retirement savings and to turn over Social Security checks to their creditors.  This isn’t true.  Have you heard about exemptions?  When you file for bankruptcy, you can exempt certain property, including Social Security and retirement savings accounts (up to a quite high amount).  In addition, homestead exemptions allow most people who file for bankruptcy to keep their homes.  As a result, most seniors who file for bankruptcy are able to keep their sources of income and their homes while discharging credit card debt and substantial medical bills.   
For many elderly Americans, bankruptcy can help to ease the burdens of unsecured debt.  If you have questions about filing for bankruptcy protection, contact one of the experienced Chicago bankruptcy lawyers at the Emerson Law Firm today to learn more.
See Related Blog Posts:
Illinois Debtors Should Ensure That Bankruptcy Petitions Are Prepared Legally

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