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Senior Bankruptcy on the Rise

Even though the senior population in the U.S. is increasing, the number of older Americans being forced to file bankruptcy is even higher, according to statistics. Recent data shows that over 12% of bankruptcies being filed in the U.S. are households being headed by seniors. The culprit seems to be the cutbacks in these seniors' social safety nets, such as more out-of-pocket healthcare costs and a decrease in government assistance. Experts only expect these numbers to increase as by 2050, one-quarter of the U.S. population will be older than age 65, compared to only 15% currently.

Would Bankruptcy Work for You?

Even though filing bankruptcy is not always a necessity, or beneficial, in some situations it can be the answer for seniors who are struggling financially. To determine if bankruptcy might be the answer for you, ask yourself these questions:

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Filing for Bankruptcy

The process of filing for bankruptcy in Illinois courts can be a confusing and intimidating one. There are special rules that may not make sense on their face to average individuals and many procedures which require the guidance of an experience chapter 7 bankruptcy attorney to navigate.

One resident of Illinois found that out in the most inconvenient of circumstances. Penny Hamm's mother passed away leaving her and her siblings proportioned slices of her IRA. Unfortunately, in addition to dealing with the grief over the loss of a loved one, Hamm also filed for bankruptcy shortly thereafter.

In her pleadings Hamm tried argued that the IRA funds she inherited from her mother were immune to bankruptcy proceedings. However, the court disagreed and stated that under state and federal law, “inherited” retirement funds (IRAs) do not qualify as normal retirement funds, which are exempt in bankruptcy. Therefore, Hamm's creditors had access to the IRA she inherited, which was undoubtedly devastating for her as the funds exceeded $10,000.

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Know the Right Time to File Bankruptcy to Regain Financial Losses

According to a law review posted this year, the longer an individual delays in filing bankruptcy the more difficult it gets. This not only damages the person financially, but it affects his or her well-being or health. Once debt becomes unmanageable and assets start depleting, lawsuits for debt collection start piling up and people become unable to afford basic necessities. For this reason, it is important to understand the right time to file for bakruptcy.

A recent report from Notre Dame Law Review says that waiting and suffering in debt has become a common scenario within America. It also shows that the number of people who waited for five years or more before filing bankruptcy has doubled compared to last year. Research shows that if you wait, your financial situation will get worse rather than improving.

So, when should you consider filing for bankruptcy? CEO of GreenPath, Kristen Holt, says that one should call the counseling agency as soon as stress starts building up. One can consider the following factors to determine the right time:

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Increase Bankruptcy Among Elderly is Becoming a Social Issue

According to new research, more seniors are facing financial crises than ever. Bankruptcy cases filed by Americans 65 years and older are increasing in number and that number is likely to keep growing. Some experts believe that it brings about a grave social issue worth looking into. This could be a result of rising medical costs, low savings, and dwindling pension benefits.

The government needs to look at the ways to make medical care facilities affordable and provide better pension plans for an aging population that is living longer than ever before. It is reported that population in Michigan is aging quickly when compared to the national average. Paul Bridgewater, CEO of a Detroit Area nonprofit agency, has been compiling the data to come up with a solution to curb this prevailing social issue.

In a national study conducted by four researchers from Indiana and Illinois universities on bankruptcy filers since 1991, people aged 65 and above filing for bankruptcy increased from 17% (in 1991) to 19.3 % (in 2015). Employers shifting from pension benefits to 401(k) plans, over a period of time, has created a financial burden on the aged population.

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Should We Tell Our Kids We are Filing for Bankruptcy?

Discussing finances with your children is hard. Many parents avoid this topic because they feel it is taboo to discuss money and financial issues with their children, sometimes because they do not want the children to worry about the family's finances and in other cases because they have been conditioned to view these topics as private matters. As a parent, it is your job to set your child up for financial success later in his or her life.

Be honest with your child about the financial struggles you have faced and those you are facing now. You do not have to get into the intimate details of your finances, but telling your child that you are filing for bankruptcy can help him or her understand the changes that are coming to your household.

Your Bankruptcy Will Affect Your Children

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