by Sidney Wike, Law Office of Sidney Wike, LLC
Many seniors pride themselves on living within their means and are too embarrassed to discuss their situations with loved ones. When their fixed income no longer keeps pace with inflation, many max out their credit cards paying for doctor visits, prescription drugs and groceries. They struggle month after month to make minimum payments and suddenly find themselves facing aggressive debt collectors, lawsuits and judgments against their property. Tragically, many deplete their retirement savings before filing for bankruptcy.
Signs that an elderly parent may be trying to hide financial problems:
- Cutting back on necessities like medications, doctor visits or groceries.
- Letting the mail pile up
- Reluctance to talk about finances
In sum, seniors are often disproportionately affected during times of financial turmoil, and are unaccustomed to dealing with aggressive debt collectors.
At its core, bankruptcy is designed to give the debtor peace of mind by immediately stopping all collection efforts, including harassing phone calls, lawsuits and threatening collection letters. In addition to peace of mind, bankruptcy is designed to provide a fresh start by eliminating credit card debt, medical debts and in many cases, tax debts and judgment liens.
Most seniors considering bankruptcy have two options: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy
Chapter 7 bankruptcy typically discharges the unsecured debts and certain secured debts as well. The person filing offers to turn over to the trustee any nonexempt assets, which the trustee can sell to repay creditors. Fortunately, most people who file bankruptcy in South Carolina under Chapter 7 are able to keep their homes, keep their cars, and keep all their property.
Chapter 13 bankruptcy
In Chapter 13 bankruptcy, debtors make monthly payments to a Chapter 13 trustee who distributes the money to creditors. Car loans, tax debts, credit card debt, medical debts – even mortgage arrearages – all go into the Chapter 13 Plan. In South Carolina, the interest rate on unsecured debt goes to zero, and the interest rate on car loans drops to 5.25%.
Recent studies show that Americans over 65 years old are one of the fastest growing segments of bankruptcy filers. A number of factors have been cited as driving this trend, including mounting medical debts, the high costs of groceries and utilities, and helping adult children with living expenses. A significant number of seniors are also choosing bankruptcy as an estate planning tool so they can pass their assets to their children free from creditor claims.
In addition, the stigma once associated with filing for bankruptcy appears to be considerably less as the benefits of filing for bankruptcy become more widely known among seniors.
Bankruptcy is not for everybody!
Although the great majority of bankruptcy filers are able to keep their assets and emerge from bankruptcy unburdened by debt, bankruptcy can be a serious mistake if the person filing bankruptcy owns exotic cars, takes extravagant vacations or has fraudulently transferred assets to family members. Those who are unwilling to truthfully disclose their financial affairs or want to hide income or assets from the trustee should never file bankruptcy.
Exemptions are laws that protect your assets from being taken by the bankruptcy trustee. Subject to several important restrictions and conditions, the South Carolina exemptions are as follows:
Primary Residence……………$58,225 of equity ($116,450 if co-owned) is protected
Car………………………………….$5,825 of equity ($11,650 is co-owned) is protected
Household Items………………$4,625 of equity ($9,250 if co-owned)
Cash / money in bank……….$5,825 per person (as long as not exempting your house)
Pride and embarrassment cause many seniors to wait too long before taking action. All options – including non-bankruptcy options – should be explored with an experienced bankruptcy attorney before any missteps are taken.