For Hardworking Seniors, Chapter 13 Bankruptcy Can Be The Right Compromise
Retirees face most of the same financial pressures as the rest of the population. That may include considering filing for bankruptcy—something that more than 1 million people do each year. But seniors facing this option often have some unique obstacles and a few possible aids. How can they find the best debt relief in this situation?
The Moral Dilemma
The first barrier to bankruptcy that many retirees face is not a financial one, nor is it the red tape or costs involved. It is a moral objection to the idea of having their debts wiped out rather than paying them 'fair and square'. Deeply-held values including a strong work ethic, belief in caring for oneself and one's own family and memories of past financial problems can often lead a senior to forgo the legitimate option of having the slate cleaned via bankruptcy. But, sadly, this often only makes matters worse.
One solution to this moral quandary—for those who have the means—might be a Chapter 13 bankruptcy. In this type of bankruptcy, a person (or family) who has a stream of reliable income can create and present to the judge a plan for paying the debts over either a 3-year or 5-year period. Often called a wage earner's bankruptcy, Chapter 13 is a reorganization plan that allows a person to keep their assets and pay over a longer period of time, with only the remainder forgiven after the payment period expires.
Chapter 13 bankruptcy might work well for a retiree because of the steady stream of income that many retirement accounts provide. If a petitioner has a regular check coming from Social Security, pensions and/or personal retirement accounts, it can all be considered by the judge as a means for working out a payment plan under Chapter 13. Younger people who have reached the point of applying for bankruptcy often do not have this advantage and may be barred from doing Chapter 13.
The First Steps
The first step toward determining if a bankruptcy—and which kind—would be best for you is to meet with a qualified bankruptcy attorney (such as one from Baxley Law Firm LLC). He or she can first help you evaluate if you really need the protection of bankruptcy or if you have so few assets and income that you are essentially 'judgement-proof' (meaning there's simply nothing for creditors to take). The next step is to figure out which chapter of the bankruptcy code is in your best interests—usually a decision between Chapter 7 and Chapter 13. If you choose Chapter 13, your attorney will then help you work out a debt-payment plan. The courts in some states have worksheets that can guide you through how to make this plan to their satisfaction.
Choosing to declare bankruptcy is never easy. For some older persons, it can be an even more difficult decision than normal. But for retirees, Chapter 13 options might provide both the financial help and the peace of mind that they're looking for.