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Let’s discuss bankruptcy for seniors

Home Attorney Jefferson City Let’s discuss bankruptcy for seniors
202111.23
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Let’s discuss bankruptcy for seniors

Few seniors who have successfully declared bankruptcy will tell you the process is an effortless discharge of debts followed thereafter by a wonderfully fresh and new life filled with rainbows and butterflies. To some, bankruptcy is an embarrassing admission of fault, defeat, or insufficiency. Afterall, they are the children of the Greatest Generation and paying your debts at all costs was the philosophy of their parents. Still others consider it a terrible chapter of their life and one of the top five life-altering negative events one can endure, along with divorce, severe illness, disability, and the loss of a loved one.
Nevertheless, not all seniors are discouraged from filing bankruptcy. According to the United States Department of Justice, the number of Americans filing bankruptcy grew from approximately 110,000 annual filings in 1960 to over 1 million in 2013. The number of total filings fell during the Covid pandemic. In 2020, there were 522,808 cases of personal bankruptcy filed nationwide in the United States. But between 2013 and 2016, 1 in 8 bankruptcy filers in the United States was age 65 or older.
Some Pros of Filing: By filing, it stops all collection actions by creditors including foreclosures, repossessions, and garnishments. By filing, seniors can begin to rebuild credit. Credit card companies love to issue cards and accounts to recent bankruptcy clients because they make for the safest card applicants. You are precluded from filing again for many years so whatever you charge will likely stick this time. Finally, it may prevent multiple lawsuits against you to collect debts thereby preventing your name from being published in court records or newspapers.
Some Cons of Filing: According to recent research by the National Bureau of Economic Research, the average cost to file for Chapter 7 bankruptcy protection is more than $1,500. Those fees may not include $335 to file, fees for mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course. By filing bankruptcy, seniors generally lose all their credit cards (unless they are paid off before filing) and they may lose some of their luxury possessions such as extra vehicles, motorcycles, trailers, four-wheelers, second homes, timeshares, etc. A bankruptcy makes it more difficult to obtain a traditional mortgage and the filing of bankruptcy remains on a senior’s credit report for approximately 10 years, making it more difficult to purchase items such as insurance and luxury items at competitive rates. To some, a bankruptcy makes obtaining employment more difficult. Finally, it is certain that your name will appear in court records and newspapers if you file.
Not all debts are automatically discharged in bankruptcy. Student loans and taxes are often excluded from debt relief. The United States Bankruptcy Code, specifically section 523(a)(8), spells out that student loans are exempted from forgiveness unless it poses an “undue hardship” to the party filing. The Brunner standard sets forth a list of three circumstances that must be demonstrated to qualify for student loan discharge: (1) if the loans are repaid, it will make you unable to maintain a minimal standard of living for you and your family; (2) your financial circumstance is likely to continue through the remainder of your loan repayment term; and (3) you have made good faith efforts to repay your student loans.
To obtain student loan forgiveness, you must take extra steps. Your bankruptcy attorney is generally caused to file an adversary proceeding, a separate lawsuit associated with the bankruptcy. The process is akin to suing the student loan creditor to obtain relief from some or all of your debt. You are strongly encouraged to hire legal counsel to address this debt topic. According to a Harvard law school study, most successful parties who discharged some or all of their student loans were unemployed; had a medical hardship or were in a lower income bracket the year before filing. According to that same study, 70,000 people each year discharge some of all of their student loans in bankruptcy equating to approximately 40% of those who request some relief from student loans.
In summary, bankruptcy is a life-altering event and should be carefully considered before filing. Because the costs are high, it would be prudent to consult with an experienced attorney to discuss debt consolidation and debt defense first. Such a counseling session may lead to legal services that will allow you to avoid filing bankruptcy altogether. If your decision to file bankruptcy is concrete, an experience attorney should be consulted in all cases and most importantly if your goal is to discharge student loans or tax liabilities.
In the majority of cases, a senior seeking protection from financial disrepair will file a chapter 13 bankruptcy or a chapter 7 bankruptcy. A chapter 13 bankruptcy is also called a wage earner’s plan. For those senior adults with regular income, they can perform a court-approved plan to repay all or part of their debts. Pursuant to a chapter 13 bankruptcy plan, senior debtors propose a repayment plan to make installments to creditors over three to five years. If the senior’s current monthly income is less than Missouri’s state median, the plan will be for three years unless the court approves a longer payback period “for cause.” If the senior’s current monthly income is greater than Missouri’s state median, the plan generally must be for five years. At no time may the senior’s plan for repayment exceed five years. 11 U.S.C. § 1322(d). During the payback period, a stay order forbids creditors from starting or continuing collection efforts on the senior’s debts covered by the plan.
A chapter 7 bankruptcy does not involve the filing of a plan for repayment as in a chapter 13 bankruptcy. In most instances, a senior files a chapter 7 bankruptcy seeking the discharge of all debts and no repayment at all. But if the senior has some nonexempt assets as defined by the Bankruptcy Code, a court-appointed bankruptcy trustee gathers and sells the senior’s nonexempt assets and uses the proceeds of such assets to pay creditors recognized by the court in accordance with the provisions of the Bankruptcy Code. Accordingly, seniors should realize that the filing of a petition under chapter 7 may result in the loss of property. Of course, the Bankruptcy Code also allows a senior filing chapter 7 to keep “exempt” property. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.
If you’d like to know more about filing for bankruptcy as a senior or you want to speak to someone about your mounting debt, we can help. Contact the Law Office of Todd Miller, LLC at (573) 634-2838 to schedule your initial consultation.
Todd Miller is a monthly contributor and regularly writes and speaks on various legal topics including bankruptcy, estate planning, probate, and elder law. He formed the Law Office of Todd Miller, LLC, 1305 Southwest Blvd., Ste. A, Jefferson City, Missouri in 2006. He has been awarded the Substantial Contributor Attorney Award by the Missouri Bar and ranked as one of the “Top Attorneys in Missouri” by The Legal Network. He is legal counsel for several area organizations and he is the current President of the Jefferson City Host Lions Club and a board member of the Jefferson City Chamber of Commerce. Mr. Miller earned his juris doctorate degree from the University of Missouri School of Law in 1999 and graduated with honors from Lincoln University in 1991. You may find him at www.toddmillerlaw.com (573) 634-2838 or on Facebook, Instagram, and Twitter.

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Let’s discuss bankruptcy for seniors | Law Office of Todd Miller, LLC - Jefferson City, Missouri - (573) 634-2838
(573) 634-2838 - 1305 Southwest Blvd., Ste. A, Jefferson City, MO 65109 Follow us on:

Let’s discuss bankruptcy for seniors

Home Attorney Jefferson City Let’s discuss bankruptcy for seniors
202111.23
0
0

Let’s discuss bankruptcy for seniors

Few seniors who have successfully declared bankruptcy will tell you the process is an effortless discharge of debts followed thereafter by a wonderfully fresh and new life filled with rainbows and butterflies. To some, bankruptcy is an embarrassing admission of fault, defeat, or insufficiency. Afterall, they are the children of the Greatest Generation and paying your debts at all costs was the philosophy of their parents. Still others consider it a terrible chapter of their life and one of the top five life-altering negative events one can endure, along with divorce, severe illness, disability, and the loss of a loved one.
Nevertheless, not all seniors are discouraged from filing bankruptcy. According to the United States Department of Justice, the number of Americans filing bankruptcy grew from approximately 110,000 annual filings in 1960 to over 1 million in 2013. The number of total filings fell during the Covid pandemic. In 2020, there were 522,808 cases of personal bankruptcy filed nationwide in the United States. But between 2013 and 2016, 1 in 8 bankruptcy filers in the United States was age 65 or older.
Some Pros of Filing: By filing, it stops all collection actions by creditors including foreclosures, repossessions, and garnishments. By filing, seniors can begin to rebuild credit. Credit card companies love to issue cards and accounts to recent bankruptcy clients because they make for the safest card applicants. You are precluded from filing again for many years so whatever you charge will likely stick this time. Finally, it may prevent multiple lawsuits against you to collect debts thereby preventing your name from being published in court records or newspapers.
Some Cons of Filing: According to recent research by the National Bureau of Economic Research, the average cost to file for Chapter 7 bankruptcy protection is more than $1,500. Those fees may not include $335 to file, fees for mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course. By filing bankruptcy, seniors generally lose all their credit cards (unless they are paid off before filing) and they may lose some of their luxury possessions such as extra vehicles, motorcycles, trailers, four-wheelers, second homes, timeshares, etc. A bankruptcy makes it more difficult to obtain a traditional mortgage and the filing of bankruptcy remains on a senior’s credit report for approximately 10 years, making it more difficult to purchase items such as insurance and luxury items at competitive rates. To some, a bankruptcy makes obtaining employment more difficult. Finally, it is certain that your name will appear in court records and newspapers if you file.
Not all debts are automatically discharged in bankruptcy. Student loans and taxes are often excluded from debt relief. The United States Bankruptcy Code, specifically section 523(a)(8), spells out that student loans are exempted from forgiveness unless it poses an “undue hardship” to the party filing. The Brunner standard sets forth a list of three circumstances that must be demonstrated to qualify for student loan discharge: (1) if the loans are repaid, it will make you unable to maintain a minimal standard of living for you and your family; (2) your financial circumstance is likely to continue through the remainder of your loan repayment term; and (3) you have made good faith efforts to repay your student loans.
To obtain student loan forgiveness, you must take extra steps. Your bankruptcy attorney is generally caused to file an adversary proceeding, a separate lawsuit associated with the bankruptcy. The process is akin to suing the student loan creditor to obtain relief from some or all of your debt. You are strongly encouraged to hire legal counsel to address this debt topic. According to a Harvard law school study, most successful parties who discharged some or all of their student loans were unemployed; had a medical hardship or were in a lower income bracket the year before filing. According to that same study, 70,000 people each year discharge some of all of their student loans in bankruptcy equating to approximately 40% of those who request some relief from student loans.
In summary, bankruptcy is a life-altering event and should be carefully considered before filing. Because the costs are high, it would be prudent to consult with an experienced attorney to discuss debt consolidation and debt defense first. Such a counseling session may lead to legal services that will allow you to avoid filing bankruptcy altogether. If your decision to file bankruptcy is concrete, an experience attorney should be consulted in all cases and most importantly if your goal is to discharge student loans or tax liabilities.
In the majority of cases, a senior seeking protection from financial disrepair will file a chapter 13 bankruptcy or a chapter 7 bankruptcy. A chapter 13 bankruptcy is also called a wage earner’s plan. For those senior adults with regular income, they can perform a court-approved plan to repay all or part of their debts. Pursuant to a chapter 13 bankruptcy plan, senior debtors propose a repayment plan to make installments to creditors over three to five years. If the senior’s current monthly income is less than Missouri’s state median, the plan will be for three years unless the court approves a longer payback period “for cause.” If the senior’s current monthly income is greater than Missouri’s state median, the plan generally must be for five years. At no time may the senior’s plan for repayment exceed five years. 11 U.S.C. § 1322(d). During the payback period, a stay order forbids creditors from starting or continuing collection efforts on the senior’s debts covered by the plan.
A chapter 7 bankruptcy does not involve the filing of a plan for repayment as in a chapter 13 bankruptcy. In most instances, a senior files a chapter 7 bankruptcy seeking the discharge of all debts and no repayment at all. But if the senior has some nonexempt assets as defined by the Bankruptcy Code, a court-appointed bankruptcy trustee gathers and sells the senior’s nonexempt assets and uses the proceeds of such assets to pay creditors recognized by the court in accordance with the provisions of the Bankruptcy Code. Accordingly, seniors should realize that the filing of a petition under chapter 7 may result in the loss of property. Of course, the Bankruptcy Code also allows a senior filing chapter 7 to keep “exempt” property. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.
If you’d like to know more about filing for bankruptcy as a senior or you want to speak to someone about your mounting debt, we can help. Contact the Law Office of Todd Miller, LLC at (573) 634-2838 to schedule your initial consultation.
Todd Miller is a monthly contributor and regularly writes and speaks on various legal topics including bankruptcy, estate planning, probate, and elder law. He formed the Law Office of Todd Miller, LLC, 1305 Southwest Blvd., Ste. A, Jefferson City, Missouri in 2006. He has been awarded the Substantial Contributor Attorney Award by the Missouri Bar and ranked as one of the “Top Attorneys in Missouri” by The Legal Network. He is legal counsel for several area organizations and he is the current President of the Jefferson City Host Lions Club and a board member of the Jefferson City Chamber of Commerce. Mr. Miller earned his juris doctorate degree from the University of Missouri School of Law in 1999 and graduated with honors from Lincoln University in 1991. You may find him at www.toddmillerlaw.com (573) 634-2838 or on Facebook, Instagram, and Twitter.

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