A few weeks ago I wrote about a Boston-area man who lost his high-paying white-collar job and filed bankruptcy to discharge Parent PLUS student loans he took out for his children. Since that post, it appears the debtor settled with the creditors. Saliently, he had been unemployed for fourteen years, which raises the topic of why middle-aged Americans should consider bankruptcy over other options for dealing with debt (if not necessarily student debt) compared to younger Americans.
(1) Age discrimination is real. It’s a frustrating truth, but while much news about young Americans focuses on their debts and employers’ preferences for experienced workers, older Americans are looked at as less skilled and less resilient. It’s particularly difficult as good jobs shift toward relatively rapidly changing sectors, e.g. Web development. As a result, older Americans might try to struggle to pay down debts longer than they may think it will take them to find a new job.
(2) New York Bankruptcy protects retirement savings. Relatedly, many older debtors try to get out of debt by drawing on their retirement savings, specifically their 401(k) and IRA accounts. There are a few reasons not to do this. One, the Bankruptcy Code protects more than $1 million in retirement savings, so it’s almost never going to be an asset that will go to the bankruptcy estate. The New York exemptions apply to all money in these accounts, and at least 90 percent of the distributions debtors take from them. Two, debtors may pay tax penalties for early disbursements from these accounts. Bankruptcy works so much better. You can read more on retirement savings in New York bankruptcy here.
(3) Bankruptcy protects home equity. Some older Americans may owe more than others, but anyone with assets has more options for shielding them from the bankruptcy estate. This goes beyond retirement savings to home equity. New York’s homestead exemptions are quite generous, so bankruptcy can work better than selling a home to pay down debt.
(4) Older Americans are more likely to have medical debts. Even without the Affordable Care Act, many bankruptcies are still driven by unpayable medical debts. If employment is tough to find, then these debts are going to weigh more heavily. Most younger debtors’ student loans can be placed into an income-based repayment plan, but medical debt doesn’t come with those kinds of repayment options. Bankruptcy can help those debts, especially because medical problems reduce incomes.
If you are an older American dealing with difficult financial problems, then talking to an experienced New York bankruptcy lawyer can help you resolve them with less difficulty than you might think.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy law changes Bruce Weiner for a free initial consultation.