Special Issues In Grey Bankruptcies

Overall, the consumer bankruptcy filing rate has declined significantly since 2005. That year, some major changes to the Bankruptcy Code, mostly regarding Chapter 7 eligibility, took effect. However, the over-65 filing rate has tripled since that date. Medical bill inflation is the primary culprit. Since the end of the Great Recession, medical bill inflation has outpaced overall inflation. And, unpaid medical bills are the leading cause of bankruptcy filings in Indiana.

Briefly, in order to qualify for Chapter 7 bankruptcy, the debtor’s income must generally be below the average amount for that state, As of May 2021, that amount is just under $92,000 per year for an Indiana family of four. Other people may qualify for Chapter 7 based on their actual income/expense balance on a monthly basis. The Chapter 13 qualifications remain essentially unchanged.

No matter which version you file, the Automatic Stay is perhaps the best benefit of bankruptcy. Section 362 of the Bankruptcy Code immediately halts most creditor adverse actions, such as repossession, foreclosure, and wage garnishment. Bankruptcy also protects your assets, as outlined below. Furthermore, a Chicago bankruptcy lawyer can unlock some advanced bankruptcy features which, in many cases, could save your family thousands of dollars.

Social Security Benefits

Many older Americans depend mostly, or entirely, on Social Security benefits to make ends meet. These families are understandably worried that filing bankruptcy could interrupt these benefit payments, or even cut them off completely. Generally, monthly income is not an exempt asset in a consumer bankruptcy. In many cases, creditors may seize nonexempt assets and liquidate them to pay debts.

However, according to federal law, government benefits, including Social Security benefits, are exempt assets. The exemption usually applies to Social Security payments as well as workers’ compensation, unemployment insurance, VA disability, and other benefits payments.

Commingling is sometimes an issue in these situations. As mentioned, wage and other income usually is not exempt. So, if Social Security payments mix with regular wages, it’s difficult to distinguish between the two. Therefore, it’s usually a good idea to keep Social Security and other benefits payments in separate bank accounts.

Always speak with a Chicago bankruptcy attorney before you move money prior to a bankruptcy filing. Such actions could be considered evidence of bankruptcy fraud.

Retirement Accounts

Much like government benefits, 401(k)s, IRAs, and other nest egg accounts are usually exempt assets. The account balance is irrelevant.

The exemption usually applies to earned retirement accounts. The exemption might not apply to inherited retirement accounts.

Home Equity

Many older adults have substantial equity in their homes. The Hoosier State has a rather limited home equity exemption. Only $28,600 of equity is exempt.

But this low figure is often misleading. For example, if an attorney creates a tenancy of the entirety, all home equity is normally exempt. It’s illegal to seize one person’s assets to pay another person’s debts. Therefore, if the house is titled solely in one spouse’s name, and the other spouse is technically a tenant, all home equity is safe in bankruptcy. Outside bankruptcy, your home’s equity could be vulnerable.

Count on Diligent Cook County Lawyers

No matter what kind of financial problem you are having, bankruptcy could be a way out. 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:

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