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Can Bankruptcy Benefit Seniors?

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Many senior citizens, between the ages of 55-75 have contacted my office wondering if bankruptcy is right for them. They are living on social security and/or a small income from part-time employment. Many times they don’t have any real asset or they have a home with some equity in it. They have mounting credit card debt and cannot pay this debt back on their social security income. Creditors are harassing them at all hours and they don’t appear savvy enough to just ignore these phone calls or collection attempts. Sometimes, they get served with a lawsuit from a creditor for unpaid debts. The lawsuit turns into a money judgement because they don’t answer the lawsuit in a timely manner. Bankruptcy actually may be a great debt relief option for senior citizens. I will identify a few benefits of bankruptcy for senior citizens.

First, social security income is exempt from collection. Many seniors ask me why they would even need to file bankruptcy, if their social security income is collection proof. My answer is almost always this—if there is a judgement against a senior citizen and the Sheriffs Department is directed to levy on your bank account, they won’t know whether your funds are social security income or not. The funds in your account could be tied up for a very long time while it gets sorted out and the levy is released. They would need to investigate how to get that money back either through hiring an Attorney or dealing with a large bank or the Sheriffs Office. All those actions take time and their funds wouldn’t be released immediately.

Second, they may own a home and think they aren’t eligible to file for bankruptcy. A person who is 65 years or old can actually protect up to $175,000 worth of equity in their home, pursuant to the California homestead exemption. They may even be able to protect that much if they are 55 years or older and can show their income is nominal or only from social security income.
Finally, bankruptcy STOPS aggressive debt collectors, harassing phone calls and letters in its tracks. The stress of these harassing collection attempts can really take a toll on their physical and mental health.
If you or a family member would like a free assessment of your financial situation, contact Khan Law at (925) 264-9083 or (209)-317-1700.