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Chapter 7 may help older residents struggling with debt

Last week on our Wayne County bankruptcy law blog, as we were discussing the consumer medical debt crisis in this country, we mentioned how some turn to credit counseling or debt negotiation agencies for debt relief. There may, as we mentioned, be underlying concerns about the true interests or even the legitimacy of some such companies. This week, we want to highlight another situation in which Chapter 7 bankruptcy may be a better option for Wayne County residents who are seeking a fresh financial start.

A reader recently commented in a national publication that her mother is almost 80 years old and struggling with debt. On top of that, memory problems make budgeting and paying bills a confusing and frustrating endeavor. While this elderly woman's Social Security and retirement benefits remain at a set level, her monthly credit card payments have been steadily rising thanks to exorbitant interest rates. These two factors -- increasing payments and a fixed income -- make for a seemingly impossible situation.

The daughter writing the letter had tried to work with a nonprofit company that would negotiate with creditors for lower interest rates and monthly payments. She found, however, that even those payments were not necessarily any more manageable, that the banks simply were not playing along and even dealing with the debt negotiation company was "a nightmare."

For older Wayne County residents in a situation like this -- where income is fixed, budgeting skills are not at their sharpest and returning to the work force is no longer an option due to health conditions -- Chapter 7 bankruptcy is an option well worth considering. Particularly if the majority of the debt is unsecured debt, like credit cards and medical bills, Chapter 7 will discharge these completely. Retirement benefits are an important concern for these individuals, and they are exempt from liquidation, as are vehicles below a certain value and even some equity in a home.

Eliminating one's unsecured debt with Chapter 7 can actually make living off of a fixed income a much more viable proposition. A legal professional can further discuss any concerns elderly residents and their families may have about how bankruptcy would affect their own situations.

Source: Huffington Post, "My Elderly Mother Is Struggling in Credit Counseling -- What About Bankruptcy?," Steve Rhode, July 30, 2014

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