The recent article in the New York Times, “Too Little Too Late’: Bankruptcy Booms Among Older Americans,” stirred up quite a bit about the financial situation many older adults are facing. As the article points out, many older adults are turning to bankruptcy as a solution to their problems.
More Older Adults are Filing for Bankruptcy
In 1991, older adults (those over 55) made up 8.2% of all bankruptcy filers. This number jumped to 22.3% by 2007 (https://assets.aarp.org/rgcenter/consume/2008_11_debt.pdf). Fixed incomes, increasing bills, and limited options have pushed many to bankruptcy.
Bankruptcy as the Best of the Worst
Bankruptcy has a negative connotation associated with it. None of us want to feel like “failures” or like we’re not making good on our promises. Pride, morality, and ethics lead us to believe that bankruptcy is wrong. When faced with limited options, though, maybe bankruptcy is the best of all the awful options. A mountain of debt and a dwindling asset reserve leads many families to consider depleting their savings, use up all of their income, forgo necessary care services or medical treatments in order to pay off their debts and avoid bankruptcy. Is bankruptcy worse than not getting needed medications, hiring a home care aide, or endangering future long-term care needs?
Never Deplete Your Retirement Funds to Avoid Bankruptcy
We have seen many families use up their retirement funds to pay off debts and refuse to consider bankruptcy because it’s “wrong.” What many don’t understand is that retirement funds are usually protected from debt collectors—they are usually “judgement-proof” assets.
Consequences of Bankruptcy for Older Adults
There could be very few consequences for an older adult who files for bankruptcy. The hit on their credit score only matters if they need to secure a loan in the near future. Most of their income and assets may be protected from creditors. Social Security income, for instance, cannot be garnished.
The article in the New York Times has generated lots of discussion about our economy, our lifestyles, bankruptcy laws, aging in America, and more. We have some big issues to sort out as a nation and community. For our clients, bankruptcy is a tool in the toolbox we may recommend as we are trying to help our families find, get and pay for the best care possible. I will continue to recommend that our clients pay for the care they need over an old credit card bill and to refer out to bankruptcy attorneys as needed. Hurley Elder Care Law does not handle bankruptcy filings, but we do connect our clients with appropriate counsel when necessary.
To learn more about Hurley Elder Care Law, please call us at (404) 843-0121. You may find this article helpful: https://hurleyeclaw.com/practice-areas/asset-protection/