It can be heartbreaking to face bankruptcy during your senior years, but it is happening more and more frequently. Most bankruptcy filings are a result of health care costs, so it only makes sense that so-called “Gray bankruptcy” is on the rise as America ages. No matter what your age, if you are unable to pay your bills then filing for bankruptcy is a consideration, but as a senior citizen, there are certain factors to which you need to give special consideration.

The goal of bankruptcy is to wipe out debt and give yourself a fresh start. Though this may make sense for people who are still establishing themselves, or who are still in a position where they’re earning money, for seniors it may not provide as good an option. The first reason for this is that people generally file for bankruptcy to protect their belongings from creditors taking them, but for many seniors, this is not applicable: a bankruptcy wouldn’t allow a creditor to take necessities, and they may not have anything that a judgment would satisfy. By contrast, some seniors have so many assets that would not be protected from creditors that a bankruptcy filing would put them in jeopardy of losing things that they don’t want to give up unless they agree to a higher repayment plan under a Chapter 13 filing

To determine whether a gray bankruptcy makes sense for you, you need to determine whether the debt you have could be discharged in Chapter 7. This would be the case for both medical debt and credit card bills. You also want to determine which of your assets would be exempt, and therefore protected. As a senior, there’s a good chance that your home has significant equity, which would be nonexempt and therefore could be used to pay creditors. By the same token, the money in your retirement accounts would be exempt if they aren’t withdrawn, as are your Social Security benefits if you keep them in a separate account. It’s important to note that even if you don’t file for bankruptcy, your Social Security payments are protected from creditors and that they do not count as income for qualification for the bankruptcy means test, but they can be used in planning a bankruptcy budget.

Planning for or considering a gray bankruptcy is far trickier than at almost any other time in your life. An experienced gray bankruptcy attorney can guide you through all these questions and help you make the right decision. Contact the offices of Jensen Bagnato today.