As millions of seniors struggle to make ends meet each month, many are looking for a way to change the situation. Being able to make sure that you are having your basic needs are being met is imperative, and that means there needs to be enough money to pay for necessities and still have money to pay for other bills. When this becomes a challenge, some people may find bankruptcy the solution they need to help ease the situation.
Bankruptcy is a legal action that seniors can take to help get themselves out of a debt hole. Those who have found themselves in a situation where they owe more in debt than they can pay for will begin to not be able to keep up with bills. The further behind that they fall, the more they feel they are in a hole that they cannot crawl out of. Rather than continue in such a challenging and stressful way, it may be best to consider filing for bankruptcy.
Bankruptcy for Seniors Defined
When debt becomes too much to handle, many people turn to legally addressing it through a process called bankruptcy. The government allows people to file for bankruptcy to help address the debt that they feel they can no longer keep up with so that they can get a fresh start.
There are two main types of bankruptcy that people file in the U.S. It’s a good idea to explore each of them to determine which one is the better option for your situation. They include:
Chapter 7 Bankruptcy – This type of bankruptcy is often thought of as a liquidation route. This is because you are going to have to sell some of your assets that have value. Once you sell the items, the debt will be able to be settled. This route also allows you to have things like your credit card debt forgiven. There are some things that you will not have to sell, such as your home or main vehicle, but there are other things you will need to get rid of that you may still owe, and that are of value that will allow you to help reduce your debt burden. Many people opt for this type of bankruptcy so that they can legally get rid of some things that are costing them a lot of money and so that they have their credit card debt wiped out.
Chapter 11 Bankruptcy – This type of bankruptcy requires the person to pay for all of their debt, but they will be able to restructure it. By doing this, it becomes more manageable for people to keep up with the payments. For example, if making payments of your debt right now comes to $1,000 per month and you feel you can only afford to pay $500 per month, this type of bankruptcy would legally allow you to pay the lower amount each month and just take longer to pay it off. Without bankruptcy giving you the legal right to do this, the creditors would add huge fees if you don’t send in enough money each month. This will help keep your debt from increasing from big interest additions and fees that would otherwise be tacked on.
What Bankruptcy Doesn’t Include
It is important to note that not all debt can be discharged in a bankruptcy filing. Some of the things that you cannot get removed in the process include student loan debt, child support and alimony debt, and debt that you have from owing taxes. This kind of debt is going to remain with you no matter what type of bankruptcy you file for. In some cases, depending on the source of debt, the government can withhold some of your Social Security payments to cover the debt that you owe. This type of debt has to be paid for, or it will never go away.
Bankruptcy Assistance and Process
Filing for bankruptcy isn’t something people tend to do on their own. Rather, you need to work with someone who can help file it for you. Typically, an attorney will file this legal action on your behalf. You will usually need to work with an attorney or someone who understands how the legal process works.
To get bankruptcy assistance, it is a good idea to start by contacting a couple of bankruptcy attorneys in your area. Most will offer a free consultation to start with. You can go for a free consultation, explain your situation, and get their advice about the best bankruptcy route to addressing your debt. If you decide to work with one of them, then you will enter a legal agreement and pay them for your service. Paying them for help filing bankruptcy is going to cost less than making the payments for all of your debt, so don’t let the attorney fee scare you away.
Once your bankruptcy paperwork has been filed with the local court, you will be given a court date. When your court date arrives, you will have to go to court before the judge. The judge may ask a few questions about your situation and why you are filing for bankruptcy. The judge will then make recommendations and a ruling, usually that your bankruptcy filing has been approved. Then, the information will be legally filed, and your creditors will be notified as to the judgment and what that means for the accounts you have with them.
Some people are concerned that filing for bankruptcy will damage their credit long term and make it to where they may not get credit again. While it can have an impact on your credit for about seven years, it doesn’t mean you will not be able to get any credit. There are many places that will still extend credit, but they may require you to put down a deposit. Your credit situation may be impacted the most in the first year or two after being approved for bankruptcy, and then you will begin to get more credit. It is important to try to stay out of debt again once places begin giving you credit again.