I have more than a few calls each week from retired people inquiring about filing bankruptcy. I am not going to give you the answer you are expecting, but I will lay money on the fact that you will love what I have to say. The most recent call was a person whose only income is a modest amount of social security. Her husband had a small pension and social security. Only she wanted to file. They have a modest suburban home with a little equity.
I am not the only attorney she called. I bet I will be the last. The first words out of her mouth after “hello” were “how much do you charge?” My answer, as always, was, “it depends.” We spoke briefly about her circumstances.
I presented a novel idea saying: “Why are you thinking of filing at all?” Like most retirees she and her husband are “noncollectable”. That means they have nothing a creditor or collector could take from them in a court of law if they are sued. The worst she will have to deal with is the phone calls, but sometimes those can get nasty. So far that isn’t happening.
If you are retired or on social security you are noncollectable if:
- Your savings are all in retirement funds
- You are collecting social security
- You have a pension
- You have a military pension or other state or federal government retirement
- Your personal tangible assets are exempt from creditors
Everything I am talking about is exempt under either Federal law, State law, or both
This money has to be in some type of retirement savings. That could include an IRA, Rollover IRA, Roth IRA, 401k, or 403b. All these are protected from your creditors, in full, so long as you do not withdraw them and put them in a regular bank account. The exemption for retirement funds does not include savings you may have put into a savings account and called it retirement money, including proceeds from the sale of a home.
Any type of social security you receive is exempt and safe from your creditors. If it is direct deposited into a bank account, so long as you can tract it as from social security the only one who can take the money is you.
Pension funds are safe from creditors so long as they are in the pension fund. This includes military, as well as fire, public employee, and police pensions
That brings us to your only other major assets, your home and your car. Ohio has expanded the exemption in your home to $132,900 for each person whose name is on the title. Unless you live in a palace your equity will be safe from creditors. They are not quite so generous with your car, but if the equity value (the part you own) is less than $3,675.00 per titled owner then that is safe as well.
Bankruptcy WILL Stop The Collectors
I addressed the financial reasons bankruptcy might not be needed. There are some non-financial reasons to file if you are on retirement, pension or social security. The troubling thing is that collectors will call you and threaten to take your pension, house and car if you don’t pay up. They know they can’t do any of that. They are trying to scare you into action. The action they want is payment. I’m not telling you to not pay bills you can afford. You can stop the calls and harassment by filing bankruptcy. Peace of mind is certainly a very good reason to declare bankruptcy.
I also told you she called a number of other bankruptcy attorneys and asked the same question. Before me, each quoted her an “arm and a leg” as she put it. No other lawyer suggested an option not to file bankruptcy. You need, however, to talk with a real bankruptcy lawyer who can honestly help you assess your situation so you can plan the next step.