Special Issues in an Indiana Grey Bankruptcy

Largely because of a shrinking social safety net, the number of over-60 bankruptcies has increased 300 percent since 1991, even as bankruptcy filing rates among other age groups have fallen drastically. Part of that shrinking social safety net includes protection rollbacks in the Fair Debt Collection Practices Act. Once upon a time, seniors could count on the FDCPA to protect them from aggressive debt collectors. But that’s no longer the case.

A Chicago bankruptcy lawyer helps seniors facing financial stress protect the assets they have worked a lifetime to accumulate. Additionally, bankruptcy immediately stops adverse creditor actions, like foreclosure and collections lawsuits. No other debt protection mechanism, certainly the watered-down FDCPA, can offer that much peace of mind. When seniors reach out to us about a possible bankruptcy, they are usually most concerned about the three areas listed below.

Home Equity

Many people are concerned about the relatively small home equity exemption in Indiana. The statutory limit is $19,300 for a single filer. Most people over 60 who have lived in their homes for at least fifteen years have considerably more equity than that. But there are some ways an attorney can maximize this exemption.

One option is a tenancy in common. If Husband makes Wife a tenant in common, she is effectively a co-owner. And, in Indiana, it’s illegal to seize one person’s assets to pay another person’s debts. So, the exemption amount becomes irrelevant. The trustee could not seize the house regardless of the amount of equity.

Furthermore, there is usually a difference between the as-is cash value, which must be listed on Schedule A, and the fair market value. In many cases, the “garage sale value” is only a fraction of the fair market value. That’s especially true if the house needs substantial work. The tax appraiser’s assessment, which usually determines the fair market value, does not take these needed repairs into account.

Always work with an experienced bankruptcy attorney in these situations. Providing false or inaccurate information on Schedule A is normally a federal offense.

Retirement Account

401(k)s, IRAs, and other retirement accounts are exempt regardless of their value. This exemption usually applies to earned retirement accounts. Inherited retirement accounts might be exempt as well, in some situations.

Many people are tempted to take advantage of this generous exemption and move cash into their retirement accounts before they file bankruptcy. Always speak with a lawyer before transferring funds in this way. These transfers could be considered fraudulent, especially if they occur within 90 days of the filing date.

Social Security Benefits

Many people rely heavily on monthly Social Security benefits. Even though these benefits are paid like income, they are government benefits for bankruptcy purposes. As such, they are exempt as well, just like an earned retirement account.

Commingling is sometimes an issue as well. Some current wages are exempt, but the exemption is limited. So, if Social Security and other income goes into the same account, it’s not easy to separate the two. The best practice is to deposit Social Security benefits into a separate account. Once again, always talk to a lawyer before moving money. 

Connect with Dedicated Lawyers

When people over 60 file bankruptcy, some special issues are involved. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

nytimes.com/2018/08/05/business/bankruptcy-older-americans.html