The New York Times reports that bankruptcy is increasingly a fact of life for many senior citizens feeling a hard and unexpected financial squeeze. Many factors have gone into taking otherwise secure retirements into bankruptcy court and driving those even less secure into poverty that Social Security and other safety net programs were supposed to alleviate.
Monthly Social Security disbursements are funds that many seniors rely on to pay basic expenses such as food, rent, transportation, and Medicare co-pays. However, from time to time Social Security does make an error that results in Social Security overpayments to individuals. Once a Social Security overpayment occurs, the Social Security Administration will contact you and explain that you have been overpaid, present options for repayment, and advise you of your rights to appeal or ask for a waiver.
In already tight financial circumstances, having to repay can tip someone on a tight budget into a spiral of debt or deprive them of the ability to pay for the basics of daily life. However, this does not need to tip anyone into bankruptcy.
If you believe that you have not received an Social Security overpayment or that the amount you are being charged is incorrect, you have the right to file a written appeal against repayment, terms of repayment, or the amount of repayment. In order to ask or a waiver, you’re wired to prove that the overpayment was not your doing and that being required to pay back cause severe financial hardship. Unfortunately, both of these steps sometimes fail, and the sole option left to affected seniors is to file for bankruptcy.
The stock market crash of 2001/2002 wiped out investments that took a lifetime to build. In 2006, the United States and a larger part of the world crashed into a crippling recession that saw people losing their homes and jobs at a point in their lives when they should have been building retirement savings.
At the same time, many Baby Boomers and late Gen Xers were taking on debt in order to further their Millennial and Gen Z children’s education with Parent PLUS and private loans, some even borrowed against the equity in their homes. Additionally, students graduating into the great recession were unable to find jobs and return home to parents who are already struggling financially Other conditions led to massive amounts of credit card debt, not for luxuries, but simply to afford gas, food, and basic expenses.
Then, as the 2000s began, reforms to Medicare in the shape of Medicare Part D left seniors on the hook not only for modest copayments for their medicines but a $5,000 deductible “donut hole.” If a Medicare patient has been enrolled in Part D since 2006, then the donut hole could have eaten $60,000 in retirement savings by 2018. When taken alongside the steady erosion of the middle class and blue-collar jobs, and pressures from inflation, stagnant wages, and lack of substantive middle-class tax relief, even seniors who entered retirement just a decade ago with a substantial cushion may be living close to the bone now.
Nobody ever really plans for filing bankruptcy. A chapter 7 or 11 bankruptcy is a circumstance that often arises completely on its own and out of control. A significant medical expense, a natural disaster, or a significant financial loss can tip an otherwise comfortable retirement into a desperate scramble to preserve a roof overhead. In addition, nobody can really plan or significant events such as recessions, bubbles, and other financial world boondoggles. However, bankruptcy is a constitutionally protected right that allows those who file for to be shielded from their creditors by virtue of an automatic stay.
You see, Social Security overpayment penalties are considered unsecured debt – just like medical bills and credit cards. Upon the filing of the bankruptcy petition, the Social Security Administration immediately stops all collection activity. Furthermore, any payments that were made during the month that the bankruptcy petition was filed must be refunded. Federal courts have ruled that the Social Security Administration has no immunity from bankruptcy laws and that overpayment that can be discharged. Please note that this applies only to overpayments made through no fault the payee. Overpayments being recouped for fraud and misrepresentation cannot be discharged for bankruptcy, though they will be affected by the automatic stay.
When filing for bankruptcy as a chapter 7, petitioners must provide information on income received in the previous six months. However, Social Security income is exempt from this means test, along with other benefits. Other exemptions include certain retirement accounts, pensions, and disability benefits such as SSDI, SSI, or private disability insurance. Death benefits paid to a surviving spouse may also qualify for the exemption.
No one would ever call bankruptcy a cure-all, it can take years to regain a financial footing after filing for bankruptcy and seniors understand that they may not have time ahead of them to do so. However, getting rid of credit card debt, medical bills, judgments, loans, court fees, HOA fees can substantially lighten the burden on seniors. Debts that cannot be discharged child support, alimony, and fines levied by a court of law along with penalties and restitution.
Seniors facing bankruptcy need special help even if you have had a previous bankruptcy. Bankruptcy is a highly specialized legal procedure that can vary from state to state, with different exemptions at the state level in addition to those decided and enshrined at the federal level.
Van Horn Law Group is an experienced bankruptcy law firm with the right kind of know-how to help you through a trying and stressful time. We can resolve complicated situations such as Social Security overpayment while safeguarding other assets from garnishment and seizure. Call us today and set up a free initial consultation at our Fort Lauderdale or West Palm Beach office.
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