Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

A recent study by the University of Michigan School of Law has found that an increasing number of people over the age of 65 are filing for bankruptcy protection.  The study states that even before the financial meltdown of 2008, the percentage of older Americans filing bankruptcy had risen steadily, from 2 percent in 1991 to 4 percent in 2001 to 7 percent in 2007.

The reasons for these older people filing bankruptcy are varied, but the study found that “the dominant force appears to be overwhelming burdens related to credit cards.”  Researchers found that elder bankruptcy debtors reported 50% more in credit card debt than younger bankruptcy debtors.  Credit card interest and fees were cited as a reason for filing bankruptcy 50% more frequently.  This suggests that elder debtors rely upon their credit cards more that younger debtors.  The author of the study, law professor John Pottow, states, "These findings are both striking and ominous."

Debtors over 65 had a median credit card debt of $22,562, while younger debtors had a median of $13,615.  Nearly 60 percent of elder debtors said their financial troubles resulted from medical bills.

Financial struggles can be especially overwhelming for someone on a fixed income.  While younger debtors may be able to juggle finances, increase income, or decrease expenses in order to pay off debt, in most cases an older debtor’s fixed income pays only for the bare necessities.  There are few options to paying off high interest credit card debt.  In some extreme cases an elder debtor may forego necessary medicine, food, or utilities in order to pay monthly credit card payments.

If you have an older loved-one who is experiencing credit card debt, speak with an attorney and discover how the federal bankruptcy laws can relieve burdensome credit card bills.  Bankruptcy is powerful protection against creditor harassment, lawsuits, and income garnishments.  For most elder debtors, credit card debt can be discharged without losing any property.  Call today and protect your property and your peace of mind.

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Most retirement savings accounts are considered either exempt or not part of the bankruptcy estate and, therefore, are protected from turn-over during Chapter 7 bankruptcy. When an account is considered “not property of the bankruptcy estate” it cannot be taken by the bankruptcy trustee for distribution to creditors.

The U.S. Supreme Court has held that an employee’s interest in an employer pension plan (that qualifies under ERISA) is not property of the bankruptcy estate. The Bankruptcy Code also protects certain retirement funds during a Chapter 7 bankruptcy case. Retirement accounts classified under sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code are exempt from collection (up to certain amounts). These sections cover most retirement plans and include pension plans, profit sharing plans, stock bonus plans, employee annuities, IRAs, Roth IRAs, government deferred compensation plans, plans of tax exempt organizations, and certain trusts. The laws generally exempt these accounts up to a million dollars for each debtor.

Other retirement accounts not otherwise exempt are protected if they are necessary for the support of the debtor and the debtor’s dependents. Finally, bankruptcy laws protect certain retirement accounts like 457 deferred compensation plans, 403(b) tax deferred annuities, and health insurance plans regulated by state law.

However, every case is different. This year one bankruptcy court in Texas found that an IRA that was inherited by a debtor in bankruptcy did not receive the same retirement account protection under the bankruptcy laws. In that case the court found that the IRA would only receive retirement account protection in bankruptcy if the debtor was the account holder and not merely a beneficiary.

If you are experiencing debts you cannot pay, speak to an experienced bankruptcy attorney before taking any withdrawals from your retirement account. In many cases your debts can be discharged during bankruptcy and your retirement account fully protected from creditors.

Just because a relative is older and living on a fixed income does not mean that he or she is also debt-free.  Many older Americans struggle each month to pay unsecured debts from very modest incomes.  The most common forms of unsecured debts are credit cards and medical expenses, and for many of our elderly even a small unsecure debt can be a big financial complication.  Some face the difficult decision to cut back on food, prescription medicine, or home utilities in order to make minimum payments on these debts. 

Many of our elderly try to avoid bankruptcy because they believe that they can pay their obligations with minimum monthly payments.  The unfortunate truth is that it takes many years to pay off even a small high interest debt with minimum monthly payments.  In the meantime a changed interest rate and annual fees can cause that minimum payment to increase.  Additionally, forgotten payments can lead to creditor harassment or lawsuits which can result in a real estate judgment lien and/or an asset seizure. 

Discussing personal bankruptcy with an older loved one can be difficult.  In many cases there is great concern over losing property or income.  The federal bankruptcy laws have changed significantly over the past fifty years and offer great protections for the elderly.  For instance, retirement income and social security are protected from creditor garnishment during bankruptcy.  In most cases all of the bankruptcy debtor’s property is exempt from turnover; however your bankruptcy attorney can discuss any property that may be at risk.  The bankruptcy laws offer many options for retaining property and discharging debts.  After the typical case the unsecured debts are discharged and there is more money available to pay necessary living expenses. 

Another common concern is the embarrassment of bankruptcy.  A personal bankruptcy can is usually a very private legal process.  Friends and family are not contacted and bankruptcy cases are not published in the newspaper. Only creditors and co-debtors receive notice of a personal bankruptcy.  

If an older relative is struggling with debt, discuss the situation with an experienced bankruptcy attorney.  The federal bankruptcy laws contain many protections that shield the assets and incomes of the elderly while discharging burdensome creditors.  Don’t let the stress of credit cards and medical bills tarnish your loved one’s golden years.