Elderly New Yorkers are typically not debtors. They often have no income aside from Social Security, pensions, and other savings, so if they do have mortgages or other debts, they’re usually being paid down. For the most part, people who file bankruptcy tend to be younger and do so because they’ve lost a job, suffered a family or medical emergency, or bought real estate at the peak of a bubble and are dealing with an underwater mortgage. By contrast, the elderly tend to have already taken care of themselves. However, there are circumstances where it’s worthwhile for older New Yorkers to consider bankruptcy.
Primarily, the elderly are concerned about how to leave their property to their children or other family members when they pass away. The probate process typically handles this. When someone dies (the law calls them a “decedent”) his or her property is gathered together in a probate estate, the executor liquidates as many assets as necessary to pay off its creditors, and the rest is distributed to the decedent’s heirs or assigns. If this sounds familiar, it should because it’s a lot like bankruptcy, except there are some important differences.
For one, in probate, decedents cannot create choose from a menu of exemptions to shield their property from creditors. For instance, in bankruptcy, a debtor can exempt large amounts of a house’s equity from being liquidated in bankruptcy. In New York, the homestead exemption depends on the county the house is located: $150,000 in New York City, Long Island, Rockland, Westchester, and Putnam counties; $125,000 in Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties; and $75,000 everywhere else. Filing bankruptcy can allow elderly debtors to keep their houses and discharge any other unsecured debts. The benefit is that those unsecured creditors aren’t around when the probate process begins, so there’s more left for heirs and assigns when the debtor becomes a decedent.
The bankruptcy code isn’t meant to be an estate-planning tool, but there are circumstances when it might be a good idea to try one process before another, especially when elderly New Yorkers have high amounts of debt.
For 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 Business bankruptcy lawyer Bruce Weiner for a free initial consultation.