What Retirees Need To Know About Bankruptcy In Ohio

You likely don’t anticipate filing for bankruptcy in your retirement years, but with more and more older adults dealing with medical debt and serving as cosigners, it can be a real concern. Instead of living comfortably and spending time with family and friends, you could find yourself being hounded by creditors and concerned about the security of your dwindling funds. Rest assured that the team at Hausen Law understands what’s at stake and is ready to help. Here’s what you need to know about filing for bankruptcy in Ohio as a retiree.

Debt In Retirement

At this point in your life, you probably didn’t imagine that finances would be tight and that you would be even considering filing for bankruptcy. But thanks to inflation and the rising cost of living, plus medical bills, credit card debt, high healthcare costs and your fixed income, you’ve found that finances are much harder to manage in this phase of your life than you anticipated they would be. Add in the cost of raising a grandchild or helping family members financially and clearly, there could quickly be an unbearable strain on your hard-earned assets that were meant to see you through your golden years. Depending on your housing situation, you may still be carrying mortgage debt along with your own or others’ student loan, auto loan, and personal loan debts.

Clearly, there are many reasons why bankruptcy finds you in your retirement–and that’s nothing to be ashamed of! Filing for chapter 7 or chapter 13 bankruptcy in Ohio is a valid way to reset a risky financial trajectory and get back on good footing. Let’s get into what you need to know as you decide whether bankruptcy is right for you.

Regular Income in Retirement

When we speak about “income” in retirement, this isn’t a wage received from a full-time job, clearly–you are retired. However, some retirees do choose to retain a part-time job that allows them to limit their reliance on retirement or social security benefits. At the same time, income can also refer to social security benefits, pensions, annuities, and revenue from rental properties. The term’s application and definition varies based on your personal circumstances.

Chapter 7 Bankruptcy and Retirement

Relief from many types of unsecured debt–including medical debt–is possible with chapter 7 bankruptcy in Ohio. In fact most medical debt that you carry is typically able to be wiped away as long as you pass the means test. Once you file for bankruptcy, the automatic stay prevents creditors from hounding you, and you can be sure that the financial stress will lessen.

Chapter 7 bankruptcy is best for retirees who don’t own many assets that are above and beyond the necessities. For instance, as long as the equity in your car is fully protected by state exemptions and you either own it outright or are current on payments, the trustee cannot sell it. But trouble could arise if you have a luxury vehicle that far exceeds the available vehicle ($5,025 single, $10,050 joint) and wildcard ($1,675) exemptions–a trustee may be able to sell it and use the proceeds for debt repayment. For specific advice, consult with an Ohio bankruptcy lawyer.

Chapter 13 Bankruptcy and Retirement

Retirees who file for bankruptcy in Ohio and have a steady income with the ability to repay some of their debts are best suited to a chapter 13 bankruptcy. This may also be the best course of action for those who have substantial equity in their vehicle or home along with non-exempt assets that they wish to retain. For those who fit these criteria, they will likely have failed the means test anyway, so chapter 13 bankruptcy will be their best option. Again, for specific, tailored advice, it’s always best to consult with an experienced Ohio bankruptcy lawyer.

Retirement Funds And Social Security Benefits And Bankruptcy

In chapter 7 and chapter 13 bankruptcy, you can rest assured that your key financial accounts–401(k)s, 403(b)s, IRAs, annuities, pension plans and Social Security benefits–are protected from seizure. Federal Law protects them. 

While social security funds are exempt assets, if they have not been kept separate from income, gifts, or other monetary assets, it may be hard to determine how much in social security funds you have.. Documentation and separation are vital to ensure that social security benefits remain with you, where they belong. The only other situation in which social security benefits may be in jeopardy is if you owe taxes, have unpaid child support, or unpaid federal student loans–in that case benefits may be garnished to repay these debts, as they are almost never discharged in bankruptcy.

Earlier we mentioned the means test, which is the way that the trustee determines whether or not you can qualify for a chapter 7 bankruptcy or if you need to file for a chapter 13 bankruptcy in Ohio. In this process, your income is compared to the Ohio median for households of the same size to then calculate disposable income. If your income is below the Ohio median, then you pass the means test. When filing for bankruptcy in Ohio, it’s good to know that your social security income is not included in this calculation, so long as it is kept separate from other cash assets.

The same is true when filing for chapter 13 bankruptcy. And when restructuring debts with chapter 13 bankruptcy, separate social security or disability funds will not be used in your repayment plan. During the bankruptcy process and prior to filing, it is recommended to keep contributing to your retirement accounts, as they are safe and protected. To ensure that you receive the best legal advice possible, make sure to speak with a bankruptcy attorney who fully understands the needs of retirees in Ohio.

Life After Bankruptcy In Ohio

Once your debts are cleared or being handled via a structured repayment plan, you can likely breathe a sigh of relief. Now is the time to regain financial footing and take solid steps forward into your future in retirement. Beyond the requisite credit counseling course that every bankruptcy filer must take, credit repair courses are also available to help you rebuild your credit in just two years’ time.

Work With An Ohio Bankruptcy Lawyer

At Hausen Law, you’ll find an experienced team of chapter 7 bankruptcy lawyers, ready to take on your case and advocate for your best interests. James F. Hausen has handled over 2,000 cases in his efforts to provide legal counsel to all of Northeast Ohio, including the Akron, Canton, Cleveland, Columbus, Dayton, Cincinnati and Youngstown communities. Contact us today to set up a free consultation and learn more about your bankruptcy options. Feel free to inquire about our credit counseling and credit repair programs too. It’s our sole aim to help you get back on a positive financial path.