Should seniors be more open to filing for bankruptcy?

We tend to think that financial difficulties are somehow more of an issue for younger people, but this is far from the reality. Indeed, older people, even those who have worked hard to accumulate substantial assets over the years, regularly encounter financial difficulties thanks to everything from health problems and divorce to unemployment and helping their fiscally challenged children.

While younger and older generations are therefore similar in their ability to encounter financial troubles, they do differ significantly when it comes to debt relief solutions. For instance, younger people seem to be more open to the idea of bankruptcy.

This reluctance on the part of seniors to consider bankruptcy, say experts, can usually be attributed to their view that being in financial straits is somehow indicative of a personal failing or otherwise stigmatizing.

While this is understandable to a certain degree, it is also highly unfortunate, as bankruptcy can prove to be a very effective mechanism for these seniors to manage otherwise insurmountable debt and protect their assets.

How exactly is this possible?   

• 401(k)s, pensions and profit-sharing plans are exempt from creditors in bankruptcy.
• Individual retirement accounts up to $1.245 million in value are exempt from creditors in bankruptcy.
• Social Security retirement benefits are exempt from creditors in bankruptcy.
• Homes are typically exempt from creditors via a homestead exemption.

While seniors may also harbor fears that filing for bankruptcy will somehow destroy their credit and leave them unable to repair the damage over the remainder of the lives, this is far from the case.

The reality is that while a person may see their credit score dip after filing for bankruptcy, they can take steps to see it restored to its previous levels relatively quickly.  

If you are a senior who would like to learn more about the fresh start and peace of mind offered by either Chapter 7 or Chapter 13 bankruptcy, consider speaking with an experienced legal professional as soon as possible.