What Happens When People Over 60 File Bankruptcy?

We get this question a lot, mostly because the over-60 filing rate has tripled since the 1980s, while the overall bankruptcy filing rate has declined. Once again overall, people of all ages, genders, ethnicities, and citizenship status can file bankruptcy, provided they have a Social Security number and otherwise qualify.

Everyone has the same rights in bankruptcy, but people over 60 have some special financial needs. A good Chicago bankruptcy lawyer anticipates these needs and is prepared to deal with them. This anticipation and preparation includes not only the financial aspects of a gray divorce, but also the emotional aspects. As outlined below, many of the assets in such matters have both financial and emotional aspects. A lawyer isn’t a psychologist, but a lawyer can and should make the bankruptcy process less emotionally taxing.

Home Equity

The statutory homestead exemption in Illinois is only $15,000. Many older people have substantially more equity than that in their homes. So, an attorney must look beyond the statute to protect the family home in bankruptcy.

Proper valuation is one example. Under the Bankruptcy Code, debtors must list the as-is cash value of their homes, motor vehicles, and other assets. Frequently, a home’s current fair market value is much lower than its tax appraisal value. In fact, many as-is cash sale home investors only offer pennies on the dollar. The lower the home’s value, the easier it is to protect it.

A tenancy in common is another example. Assume George and Gracie are experiencing financial distress. George files bankruptcy without Gracie. If Gracie is a tenant in common, their house may be safe, regardless of the equity exemption. In Illinois and most other states, it’s illegal for a creditor, or anyone else, to seize one person’s property to satisfy another person’s debts.

Always work closely with a Chicago bankruptcy lawyer in such situations. These measures, and others like them, could draw allegations of bankruptcy fraud.

Retirement Account

Frequently, an older couple’s IRA, 401(k), or other retirement nest egg has a greater value than a home. Additionally, these accounts may have an even larger emotional value. Retirement accounts mean future financial security. They also mean a reward for a lifetime of savings.

Under current law, such accounts are 100 percent exempt in bankruptcy, regardless of their financial value. Once again, be very careful if you move more money than usual into such an account, especially within 90 days of a bankruptcy filing.

Government Benefits

Much like retirement accounts, Social Security and other government benefits are exempt in bankruptcy. According to the Social Security Administration, these benefits are like a refrigerator or other personal property which is almost always exempt. This broad exemption also applies to VA disability benefits, workers’ compensation benefits, and almost every other kind of state or federal benefit.

Income, on the other hand, usually isn’t exempt. So, to prevent commingling, we usually tell our clients to deposit Social Security and other benefits into a separate account.

 Connect With a Savvy Cook County Lawyer

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. After-hours visits are available.

Source:

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