Bankruptcy rates happen to run especially high among the elderly population due to decreased pension and rising healthcare costs. Fortunately, bankruptcy can offer a variety of benefits specifically for senior citizens. Here is a look at the top benefits of bankruptcy for seniors.
Save your retirement account.
Senior citizens have a considerable amount of money stashed in their retirement accounts, so they can benefit significantly from bankruptcy laws that protect retirement funds. Under chapter 7 bankruptcy, almost all retirement account and pension funds are exempt from creditors—meaning you can keep that retirement money when filing for chapter 7 bankruptcy. This includes funds in 401(k)s, 403(b)s, money purchase, defined benefit, and profit sharing plans. Funds in IRAs and Roth IRAs are exempt as well, up to $1,283,025 as of April 2016. State law protections for retirement funds in some cases can be even greater.
If filing for chapter 13 bankruptcy, these funds will not affect how much you must pay unsecured creditors.
Eliminate your medical bills.
Medical debt is a leading cause of bankruptcy, and senior citizens, on average, face especially high medical debt. Fortunately, medical debt is considered a dischargeable debt under bankruptcy law. By filing for chapter 7 bankruptcy, you can discharge your medical debt in as little as three months.
You are still responsible for medical debt when you file for chapter 13 bankruptcy, but you can handle your debt through the protection of a chapter 13 repayment plan. Moreover, many people with high medical debt who file for chapter 13 bankruptcy end up paying none of their medical debts.
Protect your home equity.
Many seniors also have significant home equity. Generally only a portion of home equity is exempt under chapter 7 bankruptcy. Many state and federal bankruptcy exemptions, for example, offer a homestead exemption that protects a certain amount of home equity. Some states even have a higher homestead exemption specifically for senior citizens. The laws on who qualifies for these exemptions vary by state.
Under chapter 13 bankruptcy, you can generally keep your home equity as long as you continue to make payments according to your repayment plan.