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Seniors and Bankruptcy in Montana

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Another great post from my insightful peer, and bankruptcy guru, Cathy Moran, California Bankruptcy Lawyer. Her post (below) about the fastest growing demographic group of bankruptcy filers, provides food for thought on how baby boomers can have a more peaceful retirement.

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What age group  turns increasingly to bankruptcy for debt relief?

The newly fledged college grad, who used credit to help get through school?

The sandwich generation, educating kids and caring for their parents?

No.

The fastest growing demographic group of bankruptcy filers is those over 65.

The reasons are diverse: fewer traditional pensions; increases in the cost of medical care; availability of easy credit before the Great Recession; and efforts to help younger family members all play into the mix. Seniors are frequently reluctant to share their financial difficulties with family members.  Too often they succumb to pressures of bill collectors, paying unsecured credit card debt before food and pharmacy.

There are stories going around about collectors telling their prey that “bankruptcy is no longer available for your kind of debt” or more frightening still, “we’ve investigated you and you don’t qualify for bankruptcy”.

Frightened seniors pay more of limited incomes to high pressure collectors.

Elders and bankruptcy “reform”

Retirees, and those saving for retirement, are perhaps the only group to have benefited from some provisions of the “05 bankruptcy amendments.” Social Security income is excluded from the means test, and ongoing repayment of 401(k) loans is protected . So, it is easier for elders to qualify for bankruptcy relief.

Recent cases have held that a senior can file Chapter 13 and confirm a reorganization plan that leaves their Social Security income out of the calculation. Social Security benefits are exempt from the claims of creditors under non bankruptcy law.  In Montana, retirement income is exempt from creditors. Keep it separate and keep it.

Why bankruptcy for seniors

Seniors tend to see paying their debts as a moral issue. They are prone to paying credit cards at the expense of food, medicine and heat. In my view those are poor choices when there isn’t enough money to go around.

Seniors often want to leave something to their family at their passing. It’s worth noting that the exemptions that allow a bankruptcy debtor to keep assets despite filing bankruptcy are often not available to protect a legacy from creditor claims.

Get rid of debts during your lifetime, and you have a more peaceful retirement and have something material to pass on to the next generation. Even if creditors with a judgement can’t reach a senior’s assets, seniors may want to consider filing bankruptcy nonetheless as a mental health matter. Bankruptcy stops the stress that comes with being hopelessly in debt.

It’s no wonder that some geriatric doctors are prescribing bankruptcy as a means of stress relief and better quality of life.

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Jim Cossitt is committed to helping clients in Montana untangle their most complex debt issues while protecting their best interests. His extensive bankruptcy experience, spanning four decades, allows him to help seniors find pragmatic, customized and cost effective solutions to their debt problems so they can get on with their lives.

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