Top Reasons Why the Elderly Don’t Want to File Bankruptcy (But Should)

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Being elderly, living on a fixed income, and dealing with mounting debt can be frightening.  Although retirement funds, pensions and social security checks are almost completely protected from creditors looking to recoup their money, they can still harass you for payment and make life difficult.

 

Here are some of the most common reasons elderly people give for avoiding bankruptcy and why those reasons are invalid. 

It’s embarrassing. 

We’ve all been taught to pay our debts and not shirk our obligations.  However, in a predatory lending environment like the one we’ve seen in this country over the past 10 years, it’s far too easy for people to be taken advantage of by unscrupulous lenders who pile on so much interest that it’s almost impossible to repay the debt.  The embarrassment should be on their part—not the victim of their predatory lending. 

It costs too much money. 

Actually, many bankruptcy attorneys will take payments and in consideration of the amount bankruptcy saves you through discharged debts, it costs less than doing nothing at all. 

It ruins your credit. 

In many cases, particularly Chapter 7 bankruptcy, filing for bankruptcy can actually raise your credit score—particularly if you’ve been behind on payments for a while, or are more than 90 days late on several accounts.  If your credit score is indeed lowered, a few months of paying your now-reduced and affordable payments on time will quickly raise it. 

It sets a bad example for the children.

Taking responsibility and admitting that you are in over your head is the best example you can set, and that’s what bankruptcy allows.  If you pass away with all that debt in your name, your estate will not go to your children and family—it will go to creditors.  With that in mind, which approach do you think your family would most benefit from?  The answer, of course, is bankruptcy.  

If I live in an RV or mobile home as my primary residence and I'm behind on my payments, can I be evicted if I have nowhere else to live? Can bankruptcy prevent this?

Car Loans and Bankruptcy: What You Need to Know Before Filing

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If you think that the car dealer who sold you the car you drive was or is concerned about whether you can handle the payment, think again.  In fact, the majority of car dealers are quite happy to place a customer in a car and car loan with high interest rates and unaffordable payments for one reason and one reason alone—they still get the commission from the sale, whether that customer can afford the car or not. 

In fact, for some car dealers, there are no limits to the amount of “tweaking” that can be performed to an applicant’s application to make sure the deal happens.  Whether it’s using the entire household’s income to get the applicant approved, or encouraging the applicant to use credit cards as down payments, car dealers and salespeople are certainly not in your corner (from a wise financial standpoint) when trying to sell a car. 

Many people end up filing for bankruptcy partly due to driving a car they can’t afford.  The good news is that in most cases, if the car is repossessed, the balance that remains can be discharged (eliminated) through bankruptcy.  In cases where you need that car to drive to and from work, some auto loans can be retained despite filing for bankruptcy. 

Under Chapter 13 bankruptcy, if the car loan is less than 910 days old, you might have to pay the full value of the car loan to keep the car.  However, there is a possibility that the interest will be reduced under the bankruptcy restructuring.  If the car loan is older than 910 days, the bankruptcy court will likely provide a prorated payment amount based on the vehicle’s worth, not the amount necessary to pay off a high-interest loan.  In Chapter 7 bankruptcy, you’ll likely be given the opportunity to either reaffirm the debt, redeem the car or surrender it.  

What will happen to my car and car loan if I file bankruptcy?

Knowing the Right Bankruptcy Tools Essential to Saving Your Home

When people get into serious financial difficulty, to the point where their very home is threatened as they fall behind on loan and mortgage payments, they often turn restlessly to bankruptcy as a solution.  Unfortunately, they often only have a vague idea of how these tools can be used most effectively – and using the wrong tool can be disastrous.

The RV as Primary Residence

One complicating factor is how you define your home – if you used a loan to purchase an RV and then fall behind on that loan, what form of bankruptcy can help? The wrong choice can leave you homeless: Chapter 7, for example, won’t protect you from having the RV repossessed by your lender, even if it’s your primary (or only) residence.  Many people make the mistake of thinking that banks and other lenders can’t (or won’t) put your family on the street.  The fact is, they can – and they will - unless you use the right tools.

The Right Tools

In this scenario, Chapter 13 Bankruptcy is a much better choice.  Chapter 13 can prevent repossession/foreclosure as it enters you into a five-year plan for paying down your debt.  You’re assigned a court-appointed trustee and a payment plan is created.  As long as you make your payments, you can’t be pushed out of your home or RV.

Even better, Chapter 13 can be organized with what’s known as a “cramdown” mechanism that can help people whose homes or RVs are “underwater” – that is, worth less than they owe.  Using a cramdown provision, the filer can pay just what the home is worth plus reasonable interest over the course of the five-year period instead of the full balance of the loan, and emerge fully paid.

The right tool is essential in any bankruptcy filing.  If your financial situation has you frantically researching bankruptcy on the internet, contact a professional today for sound advice as to what tool you should be using.

Is Bankruptcy an Option if My Debt Includes Medical Bills?

The simple answer to this questions is, “Yes, you can declare bankruptcy if medical bills have caused you financial hardship.” As a matter of fact, many people have few financial issues until a medical emergency strikes.  The medical bills are what trigger their need for bankruptcy. 

If you have medical bills AND credit card debt, you include both in your bankruptcy filing.  You do not have the option to pick and choose which debts are included in your bankruptcy. All of the debts that fall under a similar classification will be included in the bankruptcy.  This means if you have credit card debt and you were able to keep up with the monthly payments (the cards are not behind or in default), but you are struggling with medical bills, it will still all be included in the bankruptcy.

The goal of bankruptcy is to help you get a handle on your finances, while also helping your creditors receive the money they are due.  In many cases, creditors receive just a portion of the total amount owed, but they must be treated fairly across the board.  One creditor cannot receive a better payment arrangement than another when it comes to a debtor’s bankruptcy.  No creditor, including any debts you have to friends and family, can receive what in bankruptcy code is known as “preference.”

Medical bills and credit card debt, as well as some tax debts and personal loans, are “general unsecured debts.” This means that under bankruptcy law, they must all be treated in the same manner.  In the end, when you file for bankruptcy, all of these general unsecured debts must be included in your bankruptcy.

Bankruptcy can be a very effective tool for helping those with medical debt.  An experienced bankruptcy expert can help you evaluate your specific circumstances.