Financial troubles can hit anybody, anytime. Nearly half the senior citizen population in the U.S. was facing debts (mortgage, car loan, medical bills, etc.) in 2010, averaging at $50,000. When you have accumulated debts of such huge proportions, it is natural to be a bit worried as to how the debts are going to affect you and your heirs. While you are earning, there are still chances of you being able to repay the loan, but post-retirement, making monthly payments towards the debt is a bit difficult with a fixed income at hand. According to Los Angeles based law firm Recovery Law Group, many senior citizens often consult about their options with respect to debt.
Options available for seniors to deal with debt
The state of California offers a number of protections to senior citizens when it comes to debt collectors and collection actions. The Social Security, retirement accounts and other government benefits are protected by the law. These assets cannot be touched by any creditors who sue you for non-payment of debts. Many times, creditors refrain from filing a lawsuit against you since there’s not much that they can lay their hands on. The term “judgment-proof” is used to describe such a situation where almost all your assets are protected from collection actions. In case you are “judgment-proof” there is no need to file for bankruptcy to get rid of your debts. However, it is an option worth considering as your heirs might find have to bear the burden.
When a debtor passes away, the debts he/she owed do not lapse with the death. Though they aren’t passed to the heirs, they definitely affect the estate. After death, all your assets (your estate) go into “probate” which provides ample opportunity to creditors to file claims for payment. When it comes to inheritance, the creditors are paid before anything is passed on to the heirs. Unfortunate circumstances may see emptying of bank accounts and selling of house, car, jewelry or any other asset. The only respite available is for your home, which might be exempted in case of a surviving spouse or minor heirs who reside there. The probate court sets aside some assets to care for dependants, while the remaining assets are used to pay the creditors. On the brighter side, your heirs won’t be held liable for any debts left after the probate but if you leave your assets to them in a trust and the trustee does not inform the creditors, your debts might invariably be passed on to your heirs.
Bankruptcy and estate planning
Though bankruptcy is not essential for senior citizens, they surely can benefit from it, especially debtors who are judgment proof. California provides bankruptcy exemptions which protect a huge part of senior citizen’s property like retirement accounts, government benefits, etc. from creditors during bankruptcy. Since old age is often accompanied by numerous medical issues, senior citizens often end up accumulating huge medical debts as healthcare is undoubtedly expensive. Since medical debt is an unsecured debt, it is wiped off in bankruptcy. Thus after bankruptcy, you will be devoid of any debt and can save your property which can be passed on to your successors.
The effect bankruptcy has on credit score is a major consideration. Though bankruptcy has a negative effect, unpaid dues aren’t exactly helping to the cause. Since the majority of senior citizens already own a home and car, there isn’t much need to take any more loans. Thus, bankruptcy can have not much negative effect on the life of a senior citizen. Additional benefits include an end to the collection calls which are quite irritating. Despite you being judgment-proof, creditor harassment sees no end to see that they get a payment. Bankruptcy also helps relieve stress which can have numerous health benefits.
Should you file for bankruptcy?
Despite the advantages associated with bankruptcy, in case you have any doubts regarding it, you can call 888-297-6203 to get a better assessment of your financial situation. In case, you have mostly secured debts, bankruptcy will not be of much help for you, as this kind of debt is not discharged. Having large equity in your home is not a good option too as you might have to surrender it during bankruptcy. Discussion with a bankruptcy attorney can help you choose which set of the California state exemptions can help you protect your property. An estate planning lawyer can help you manage your estate in an efficient manner.
Many people strive hard to build their property with the intention of giving it to their children or heirs. Despite bankruptcy being a good option to get rid of your unsecured debts, it is better that you consult an experienced bankruptcy and debt management attorney to find out other options of getting rid of debt. You have the option of challenging those debts which have passed the statute of limitations, i.e. cannot be collected from you or your heirs. Alternately, you could also ask for debt consolidation or settlement before you pass away. If you are a senior citizen who is struggling with debt, or are judgment-proof but wish to keep your estate secure (against your creditors) for your heirs, then consult a bankruptcy attorney for a free consultation and case evaluation.