Sacramento Retirees Facing Special Challenges in Bankruptcy

All Sacramento area residents have been hit hard by the economic downturn of the last several years. Unfortunately, this downturn has begun to disproportionately affect senior citizens and people leaving the workforce. In the early 90’s people over 55 accounted for approximately 2 percent of bankruptcy filings. Today, seniors account for roughly 22 percent of all bankruptcy filings.

The main reason seniors have been subject to Chapter 7 and Chapter 13 in recent years is due to the rising costs of medical care and their reliance on expensive medications. According to a recent study, 70 percent of seniors who live in poverty have suffered from a major medical condition. Only 50 percent of seniors living above the poverty line have faced these maladies that range from cancer, heart disease, high blood pressure, etc . to name a few.

Seniors therefore face a unique set of challenges when confronting economic turbulence. This is due, in large part, to the fact that elderly people tend to have limited incomes and there exists a lower probability of increasing income or earning additional income from employment opportunities as the individual continues to age. These real limitations have a direct impact on the individual’s decision of whether to file a Chapter 13 or a Chapter 7 bankruptcy.

Fortunately, federal law protects Social Security incomes from garnishment in a personal bankruptcy. Unfortunately, when this income is commingled or mixed with income from other sources, the creditor may not be able to distinguish the funds. Therefore, it becomes important to keep any income derived from Social Security segregated from any other income or bank account.

Additionally, pensions and other retirement plans are typically exempt from liquidation in a bankruptcy. The incomes generated from these accounts, however, could prevent an individual from qualifying for a straight Chapter 7. Provided the individual has enough disposable income at the end of every month the senior may qualify for a Chapter 13 repayment plan.

One final concern facing senior citizens exists with regard to the prospect of living in an assisted living facility at some point. These facilities often take financial considerations into account when making the decision to admit a new individual. In some cases a bankruptcy could prevent the person from being accepted into this new environment. On the other hand, those same facilities would often reject a person who maintains an excessive debt burden. Luckily, Anti-discrimination laws protect individuals in any facility that accepts Medicaid.

Medical bills have historically been one of the main reasons for Chapter 7 filings. Luckily, they are completely dischargeable in bankruptcy and can be eliminated.

As a Sacramento bankruptcy attorney I have varied experience dealing with individuals facing all types of problems related to an unmanageable debt. Call my office to schedule an appointment where I can give you a direct evaluation of your present economic condition and give you some ideas of how to manage the circumstances facing your future.