Senior citizens in debt can opt to file bankruptcy or find assistance through a government-approved credit counseling agency. While bankruptcy is always a serious undertaking, some states, including Michigan, allow people over age 65 to keep more of their assets even after filing for bankruptcy, notes Bankruptcy Action.
Credit Counseling
Senior citizens can take advantage of government-approved credit counseling services to either prepare for bankruptcy or avoid this step, notes the Federal Trade Commission. The elderly should be leery of any credit counseling agency that tries to force them into a debt management plan. While such plans can be helpful in reducing debt, they do not offer the same protections as bankruptcy, especially when it comes to assets. Sometimes a senior citizen can get out of debt through simply rethinking her budget; a good credit counselor can assist with this.
Chapter 7 Bankruptcy
Seniors with few assets other than retirement accounts and who earn less than their state's median income level usually can qualify for complete bankruptcy, notes the book "How to File for Chapter 7 Bankruptcy." Chapter 7 eliminates many debts and prevents creditors from calling or suing someone who has filed a case. As of 2011, the qualifying income level for a single person in California was $48,009, while the same person living in Puerto Rico could earn up to $21,273 and file Chapter 7.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy enables elderly people with steady income to partially repay their debts; senior citizens are less likely to forfeit assets under Chapter 13 and can use the process to resolve any past-due mortgage problems, according to the United States Bankruptcy Court. During a Chapter 13 repayment plan, an elderly debtor cannot get any new credit without a judge's permission. Also, it takes three to five years to finish Chapter 13.
Ineligible Debts
Even if you are elderly, you cannot include some types of debt in a credit counseling plan or bankruptcy. You must deal directly with the government agency to resolve tax debts incurred less than three years ago or any issues with court fines, child support and alimony, warns the book "How to File for Chapter 7 Bankruptcy." If you are severely disabled, you can petition a bankruptcy judge to forgive any federally-backed student loans you still owe. Regardless of your age or disability, you cannot include future debts or debts incurred by a crime or lying on a credit application in any type of debt relief program.
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