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Seniors Can Use Bankruptcy to Protect Assets from Creditors

Posted on in Bankruptcy

Senior Can Use Bankruptcy to Protect Assets from CreditorsDebt has become an increasing problem for senior citizens, who do not have the same income stream to keep up with their payments as they did when they were still working. Several factors are contributing to the rise of senior debt, including:

  • Increasing health care costs;
  • Social security no longer being sufficient income to meet daily, necessary expenses; and
  • Retirement accounts depleted by the recent recession.

Your debts can pile up because of your reduced retirement income and increased need for doctor visits and medical treatments. Rather than depleting your retirement savings to pay off your debts, you should see whether filing for bankruptcy may help. Bankruptcy laws protect many of the assets that senior citizens need. 

Social Security

Your Social Security benefits during a Chapter 7 bankruptcy case are protected from your creditors, as long as you keep that money separate from other funds. Social Security money is vulnerable to a bank levy if it is co-mingled with other money in a bank account. This includes mixing it with money you receive from your retirement accounts. The best way to avoid this is to create a separate bank account for your Social Security income. In Chapter 13 bankruptcy, the Social Security benefits you receive each month are not considered part of your income used to determine your repayment plan.

Retirement Income

The money in your retirement savings accounts is protected from creditors in bankruptcy. Traditional and Roth IRAs are the only exceptions, with their protection capped at approximately $1.2 million. Your retirement income may be vulnerable once you withdraw it from its account. 


Texas’s homestead exemption allows you to protect the full value of your home in bankruptcy, as long as you have lived in the state for at least 40 months and your property size does not exceed the maximum acreage. In states without a full homestead exemption, seniors can be at greater risk of losing their home in bankruptcy because of the amount of equity they typically have in their home. 

Bankruptcy Option

Some seniors feel reluctant to file for bankruptcy because they have always managed to pay their debts without help. Bankruptcy allows you to discharge your health care and credit card debts while also protecting your vital assets. A Frisco, Texas, bankruptcy attorney at The Page Law Firm can tell you what to expect from the bankruptcy process. To schedule a free consultation, call 214-618-2101. 


National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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