When Is Chapter 7 Bankruptcy a Good Idea For Senior Citizens?

 Posted on March 17, 2025 in Elder Bankruptcy

Sometimes life throws you curveballs, and even the most well-intentioned plans can be sidetracked. If you are a senior citizen, you may be facing significant debt and financial difficulties at a time when you likely envisioned yourself retiring. You may even be contemplating bankruptcy.

Yet it is not all bad news. First of all, it is common to face serious financial difficulties later in life due to unexpected events like an illness. Most importantly, in some cases, Chapter 7 bankruptcy can actually provide significant benefits to senior citizens. An experienced Greenbelt, MD bankruptcy attorney can advise you if bankruptcy is right for you, 

When Might Bankruptcy Be a Good Option for Seniors?

To determine whether filing for bankruptcy is the right option for you, you should consider your current financial situation, primarily the types of debts and assets that you have:

You Have Assets In Retirement Accounts

Many seniors have retirement accounts with significant assets, and use these accounts as a safety net and to pay for living expenses. Federal law does not include most tax-exempt retirement accounts as part of the bankruptcy estate. Rather than using your retirement accounts to pay off your debt, filing for bankruptcy might help you clear that debt while keeping many of your retirement accounts. 

Your Debt is Mostly Medical and Credit Card Debt

Chapter 7 bankruptcy generally discharges medical and credit card debts, making bankruptcy an appealing option if most of your debt falls into this category.  

You Want to Protect Your Social Security Benefits

Many seniors rely on social security benefits, which are generally exempt from bankruptcy. In order to ensure that your social security benefits are safe from the bankruptcy estate, these funds should be kept in a separate account.

You Do Not Have Much Equity In Your Home

Although you can file for bankruptcy and still retain your home in Maryland, the considerations are more complex, which is why filing for Chapter 7 bankruptcy is ideal for a senior who does not have much equity in their home or who rents. 

The reason for this lies in Maryland’s homestead exemption of up to $27,900 for your primary home. This means that your home is exempt from bankruptcy only up to this amount.  If your home exceeds the value of the homestead exemption, it may not be shielded from the bankruptcy estate in Chapter 7. 

Call a Greenbelt, MD Bankruptcy Attorney

It can be difficult to face significant debt as a senior citizen, but you do not have to face these hardships alone. An experienced Upper Marlboro, MD bankruptcy attorney can advise you on whether bankruptcy is right for you and represent you throughout the process. At The Law Office of Donald L. Bell we provide our clients with hands-on guidance to tackle complex financial difficulties. Call our offices for a complimentary consultation at 301-614-0535.