Being a senior citizen on a fixed income provides certain advantages if you are considering bankruptcy because of overwhelming debts. Bankruptcy stops debt collectors from hounding you. Bankruptcy can ease the burden of debt and maximize the amount of money a senior citizen has available to pay monthly bills. Many senior citizens’ primary source of income – Social Security and other retirement accounts – is protected from creditors in a bankruptcy filing.
If you are a senior who is struggling with overwhelming debt, an Orlando bankruptcy lawyer at Florida Law Advisers, P.A., can review the details of your financial situation and help you determine whether bankruptcy is right for you. There may be other options, such as pursuing an out-of-court debt settlement with your creditors. If filing bankruptcy is the most advantageous option for you, we can help you file a bankruptcy case in Orlando and use exemptions that senior citizens are allowed to minimize your loss of assets.
Bankruptcy protection is a legal tool that is available to senior citizens in Florida who need debt relief. It provides protection from creditors. A senior who is facing insurmountable debt may be able to take advantage of bankruptcy law to make their later years more financially stable. Contact us today to schedule a free consultation to discuss debt relief options with an experienced Orlando bankruptcy lawyer at Florida Law Advisers, P.A.
Why Should Seniors File for Bankruptcy?
Chapter 7 bankruptcy allows a qualifying individual to discharge large portions of their unsecured debts. A Chapter 7 bankruptcy is also known as a liquidation bankruptcy. A court-appointed trustee handling the bankruptcy process will look for non-exempt property that can be sold to repay debts.
Not all seniors are eligible for Chapter 7 bankruptcy. If your monthly disposable income is too much for Chapter 7, you may need to pursue a Chapter 13 bankruptcy and restructure your debt with the goal of paying it off over three to five years.
Under federal bankruptcy law, assets in most tax-exempt retirement accounts, including 401(k)s, 403(b)s, 457(b)s, profit-sharing, and defined-benefit plans and pensions (including public employee retirement benefits), are shielded from liquidation in a bankruptcy filing. Money in IRA accounts and Roth IRAs is also exempted up to $1.5 million. The cap is adjusted every three years. It is next scheduled to change on April 1, 2025.
Social Security income is exempt if it is not commingled with other funds. Further, your Social Security benefits aren’t counted as income in the bankruptcy means test required to qualify for a Chapter 7 filing. Veterans’ administration benefits are exempted, as well.
To summarize, much of your retirement income from pensions and tax-deferred retirement accounts will be protected from creditors if you are a retired senior citizen who files for bankruptcy.
Are My Other Assets Protected?
If you pursue bankruptcy, Florida law allows you to claim exemptions that prevent many of your assets from being seized by the bankruptcy trustee and sold. They include:
- Your home in Florida. Under the state’s homestead exemption, your primary residence is protected if the land it occupies is not larger than a half-acre in a municipality or 160 acres in an unincorporated jurisdiction. You must have owned the property for 3.32 years before your bankruptcy filing.
- $1,000 or $4,000 worth of personal property. Florida’s wildcard personal property exemption allows you to choose nonexempt personal property worth up to $1,000 that you want to exclude from sale. If you do not take advantage of the homestead exemption, you can claim a wildcard personal property exemption worth up to $4,000 or $8,000 for joint filers.
- $1,000 in motor vehicle equity. If your car is worth more than $1,000 or $2,000 for joint filers, the wildcard exemption may be applied to help keep a car or truck.
- Prepaid funeral costs.
- Health and medical savings accounts.
- Catastrophe (hurricane) savings accounts.
- Education savings accounts, such as you might have established for grandchildren.
- Tax refunds and credits.
Debts That Can Be Discharged via Bankruptcy
Once you file for bankruptcy, debt collection efforts stop immediately, and many types of debt are discharged. Chief among the debts discharged in a personal bankruptcy are:
- Medical bills, which many seniors amass
- Credit card debt, which often carries high interest rates.
Additional types of debt discharged in a Chapter 7 bankruptcy filing include:
- Personal loans
- Past-due rent
- Past-due utility bills
- Overpayment of some government benefits, such as Social Security.
A Chapter 7 bankruptcy requires the sale of certain assets to pay debts that are not discharged. Debt that cannot be discharged includes:
- Money owed for alimony or child support
- Certain taxes
- Student loans
- Most government benefit overpayments
- Debts that were not discharged in a previous personal bankruptcy
- Penalties and fines arising from being convicted of driving while intoxicated or under the influence of drugs
- Debts incurred by willful and malicious injury upon another person or entity (i.e., payment ordered by a legal judgment).
In a Chapter 13 bankruptcy, debt that is provided for in the repayment plan or disallowed by the trustee overseeing the plan is discharged. Debts that are not discharged in Chapter 13 include:
- Certain long-term obligations, such as a home mortgage
- Money owed for alimony or child support
- Certain taxes
- Loans owed to or guaranteed by government agencies under specific statutes, such as student loans
- Government benefit overpayments
- Debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs
- Money owed as restitution or a criminal fine levied as part of a sentence for a criminal conviction.
Determining Whether Bankruptcy Makes Sense for a Senior
In a Chapter 7 bankruptcy, creditors may be able to claim any income or assets you have in an unprotected account beyond the amount of money you need to pay for basic living expenses.
For a Chapter 13 filing, the Bankruptcy Court will consider whether you have sufficient income to make monthly payments and adhere to a proposed debt management plan.
An experienced bankruptcy attorney at Florida Law Advisers will review your financial situation and determine whether bankruptcy makes sense for you. For example, Social Security benefits are usually not counted as income in a Chapter 7 bankruptcy, but it may be beneficial to you to count that money as income for a Chapter 13 filing. Further, if you are taking more than the minimum distribution from an IRA or another account, you may be able to adjust your monthly withdrawal to avoid a bankruptcy filing.
Another issue to consider if you are a homeowner is the equity you have in your home. If you have yet to downsize, you may have significant equity. Since only a portion of home equity is protected from a liquidation plan, bankruptcy may not be appropriate.
In general, a senior citizen may benefit from bankruptcy if:
- Most of their unsecured debts will be discharged, especially medical debt and credit card debt.
- Most of their personal property will be exempted.
- They can catch up on mortgage or auto loan payments.
- They can discharge enough debt to make the cost of bankruptcy worth it.
- They can pass the means test for Chapter 7 or can afford the monthly payments required by a Chapter 13 plan.
Get in Touch with Our Bankruptcy Attorneys in Orlando
If you are a senior citizen in Florida who cannot pay creditors and needs debt relief, you have the right to seek bankruptcy protection. The federal bankruptcy code and Florida state law provide certain advantages to seniors and retirees that may help you make a fresh financial start. An experienced bankruptcy attorney at Florida Law Advisers, P.A., can review your finances and help you make the necessary financial decisions while protecting the retirement accounts you have worked hard to build.
If filing for bankruptcy is the best option for you, we will help you gather and prepare the documents required for bankruptcy filing and represent you during bankruptcy proceedings in the U.S. Bankruptcy Court and in any negotiations with creditors. If you pursue a Chapter 13 repayment plan, we will help you devise a sound plan. We strive to help our clients find long-term solutions to address overwhelming debt. If bankruptcy is not necessary, we have other ways to help you.
Contact an experienced Orlando bankruptcy lawyer today at (800) 990-7763 or online for a free and confidential consultation about your finances and the legal protections available to you. Call now before your financial problems grow worse. We are ready to help you today.