People get in financial difficulties for all sorts of reasons. Older people, in particular, have demands on their finances that may be difficult to meet. Medical expenses can add up quickly. In addition, in today’s tough financial times, they may often be called upon to help out their kids and younger relatives.
While it is ideal to always pay what you owe, seniors have some unique advantages when it comes to filing for bankruptcy. Most or all of their assets may be protected from being used to pay debts in bankruptcy. It may be better to file for bankruptcy early, rather than use all your resources to pay off debts.
Retirement assets are protected in bankruptcy proceedings. 401K’s, retirement savings, and pensions cannot be touched by the court to pay off debts. This is a big reason why filing bankruptcy early may be a better idea. Rather than draining these accounts, you can file for bankruptcy when financial trouble hits. Your debts will be discharged, and you will still have most of your assets.
Some people are afraid their homes will be sold off in bankruptcy, or the equity otherwise used to pay off debts. For senior citizens this can be a particular worry. Most states, however, have laws that will protect your primary residence from being seized. These laws, called homestead equity exemptions, allow you to keep the equity up to a cap.
The terms of the homestead exemption vary depending on the state. In Hawaii, there is a cap of $30,000 for people over 60. Getting more information on the terms for this exemption in Hawaii is essential to allow you to find the right choice for you and your future.
There are two types of bankruptcy. Chapter 7 includes the seizure of assets that are used to pay off debts. Chapter 13 creates a structured payment plan. Which is best for you depends on your income and financial situation. The type you qualify for is determined through a means test. Those with higher income and more assets qualify for Chapter 13. Those with fewer assets qualify for Chapter 7.
Again, retirement assets may not be included when determining which type of bankruptcy you qualify for. Social security income, for example, is not used in determining your total income.
You may want to try a few strategies before deciding to file for bankruptcy, as doing so will have a big impact on your credit. Negotiating with creditors is often an option. Hospitals will often cut down bills, and credit cards are sometimes willing to lower interest rates in order to see some of the debt repaid.
However, if seniors find themselves in financial difficulties, it might be better to consider bankruptcy sooner rather than later. Doing so can resolve your debt while allowing you to keep most of your retirement plan intact.