Typically when harassment by debt collectors is overwhelming people start to think about filing for bankruptcy.  But for low income seniors bankruptcy may not always be the best option, especially if the debts in question involve debts like medical bills or credit card bills.  Social security, retirement or disability payments are usually protected from garnishment for these kinds of debts under federal laws.  If a low income senior chooses to file Chapter 7 to stop debt collection harassment they may put their home at risk.  If there is equity in the home above the exemption amounts the Chapter 7 trustee might try to claim an interest and sell the home.  In terms of Chapter 13, a low income senior usually cannot afford the payments required under Chapter 13 to protect the home.  Those risks have to be balanced against the ability of an unsecured creditor to proceed against a home with excess equity.  In most states, the judgment becomes a lien that just sits on the home until its sold or transferred.

Also, sometimes seniors have other assets that aren’t covered by Chapter 7 exemptions and, if a senior files for bankruptcy, these assets could be sold by the trustee to pay an unsecured creditor when, if the senior had never filed for bankruptcy, the unsecured creditor would have never been able to access these assets.  In reality, unsecured judgment creditors do not typically seek execution of judgments against nonexempt personal property.

What about the IRS?  We all know that old saying, “you can’t escape death and taxes.” What happens if a low income senior has tax debt?  Well, the IRS does not, as a practice, garnish pensions.  They will sometimes garnish social security benefits up to 15%.  But a low income senior can try and get “uncollectable status” with the IRS and stop any social security garnishment.  What if the taxes you owe are state and not federal?  States cannot typically take social security payments to pay old state taxes.

If you are a senior struggling with debts please contact a good bankruptcy attorney and if you feel the attorney is just filing bankruptcy without considering any of your other options, shop around, and speak to another attorney.  Most offer a free consultation and you want an attorney who will provide you with thoughtful personalized advice.

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