Two Things That May Matter Most In An Indiana Grey Bankruptcy
Since the 2005 Bankruptcy Abuse Prevention And Consumer Protection Act, the overall bankruptcy filing rate has dropped steadily. But the over-65 filing rate increased more than 200 percent between 1991 and 2016.
Most seniors have no pensions and enormous medical bills. That income/expense discrepancy is a classic trigger for bankruptcy filings. Long-term employment with a single company, and therefore a stable pension, is simply no longer a reality in today’s economy. Meanwhile, Medicare exclusions and copays will eat up about 50 percent of Social Security income by 2030, according to one estimate.
Financial problems make many seniors feel isolated. They often blame themselves for their issues and often believe that no one cares about their plight.
Bankruptcy and the Automatic Stay
Most seniors reach out to bankruptcy attorneys when a creditor threatens a lawsuit. Section 362 of the Bankruptcy Code stops lawsuits. Your attorney needs to only file a notice with the court, and the entire action grinds to a halt. Moreover, since bankruptcy discharges most debts, the creditor may be unable to revive the suit after the bankruptcy ends.
The Automatic Stay applies to more than just creditor lawsuits. For the most part, people who file bankruptcy also receive immediate relief from:
- Foreclosure,
- Repossession, and
- Wage or benefit garnishment.
Bankruptcy petitioners do not have to prove fraud or any other fault. The Automatic Stay is, well, automatic. In some cases, mostly prior bankruptcy dismissals, Section 362 may have limited applicability.
Home Equity
Many seniors have lived in their home for several decades. As a result, they may have substantial home equity. In many cases, this equity may exceed the $19,300 ($38,600 for a married couple) exemption cap under Indiana law. But not to worry. There are options available.
Some people create a tenancy of the entirety. Husband and wife jointly own the property, and each one has an absolute right of possession. So, the house cannot be sold to pay the debts of either the spouse.
In Indiana, many property deeds already contain tenancies of the entirety. If not, an attorney can help you prepare one. It’s important to take this action several months before you file bankruptcy, so some pre-planning may be in order.
It’s also important to value the house correctly. Schedule A requires owners to list the as-is cash value of all their listed assets. There’s usually a significant difference between the fair market value (i.e. the tax appraisal value) and the as-is cash value. To determine the Schedule A value, an attorney might use one of the following:
- Quick Sale Value: According to the IRS, an asset’s QSV is 80 percent of its fair market value. This method has the advantage of government backing, so it’s difficult for the trustee (person who oversees the bankruptcy for the judge) to challenge a QSV calculation.
- Home Investor: Most home investors buy property for cash after a cursory, walk-through inspection. That act is the quintessential as-is cash sale. Most home investors offer a maximum 60 percent for most properties, and their initial offers may be much lower than that.
If you use the home investor valuation method, it’s usually best to get a written offer and either keep it available or attach it to the petition.
Contact Savvy Lawyers
Special bankruptcy protections apply to filers over 65. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.
Resource:
abcnews.go.com/US/soaring-bankruptcy-rates-signal-coming-storm-broke-elderly/story?id=57150897
