Perhaps more disturbing - There has also been a steady increase in the age of the population who file for bankruptcy -
And the sharpest increase (according to some statistics) is in those people over 55.
One reason is the high credit card debt being carried in the general population.
For many families, one economic crisis, for example a serious illness or loss of job, can bring financial ruin and lead to bankruptcy.
A recent webinar of Justice in Aging titled: Bankruptcy protection for Older Consumers, with John Rao, attorney of the National Consumer Law Center was an excellent overview of what protections filing for bankruptcy can offer…and what it cannot.
Filing for bankruptcy:
can stop home foreclosures (including reverse mortgage) and allow customers to cure the default.
does not eliminate the mortgage and liens without payment.
can often prevent repossession of a car and other property - for example rent- to -own property.
might lower monthly payments on some debt and enable loan modifications.
The above are just some general examples used in the webinar, but there are also exceptions.
Bankruptcy stays on a person’s credit report for ten years.
Mr. Rao noted that people often delay filing until their credit is ruined.
Timing is important in the filing for bankruptcy. For example, If you are overwhelmed by medical debt, but anticipate more medical debt, a delay in filing for bankruptcy may be the correct strategy.
There is pre-bankruptcy counseling available and it is (usually) mandatory (there are some exceptions) , and there is a fee for the counseling. That fee might be waived under certain circumstances.
There are several types of Bankruptcy
Chapter 7- most common for individuals
Chapter 13 – is a type of ‘reorganization’
Chapter 11 – usually for businesses
Chapter 12 – usually for family farmers
Recommended in the webinar was the book: Broke: How debt bankrupts the middle class edited by Katherine Porter- 2012 – “Broke…. explores the consequences of this unprecedented growth in consumer debt and shows how excessive borrowing undermines the prosperity of middle class America.” Note: Although the book may not be readily available, there might be copies through biblio.com as a used book. (New $24.95)
There are attorney fees associated with filing for bankruptcy as well as filing fees. According to creditslips.org …“Most people who file bankruptcy do so with the assistance of an attorney. Their ability to pay the attorney’s fee thus may become an issue. Based on CBP data, attorneys charge on average about $1,200 to file a chapter 7 bankruptcy, and about $3,200 to file a chapter 13 case bankruptcy. The Code allows people who file chapter 13 to pay attorneys’ fee during the repayment plan. In contrast, almost all bankruptcy attorneys require .. their fees in full before filing the case.”
(If you are interested in scholarly articles accompanied by sound statistical data, you can visit the creditslips.org website and blog.)
Means testing: There was a ‘means test’ added to rules in 2005 making it more difficult for "wealthy" consumers to file for bankruptcy.
For more information, you can access “2007 Consumer Bankruptcy Project”
Filing for bankruptcy is a serious decision and an attorney who is knowledgeable in bankruptcy law should be consulted.
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