HELP LOWER INCOME SENIORS AND
DISABLED PERSONS
By Eric Olsen, Esq.
Executive Director, HELPS nonprofit law firm
Salem Oregon
L
ower income seniors, and disabled
persons with debt problems,
sometimes present a dilemma
for bankruptcy attorneys. Their
income, social security, retirement,
and disability is protected from
garnishment by federal law. Even if
they are buying a home they often
have minimal or no equity. Many don’t
really need or can afford to pay for a
bankruptcy. However, if they don’t pay
old debts collectors can call and make
their lives miserable. Sometimes they
have enrolled with a debt consolidation
company and are making a payment
they can’t afford and really don’t need
to make.
When I was running a multi-state
bankruptcy firm I saw hundreds of these
clients. Their numbers are growing
as our population ages. The Kaiser
Foundation recently reported that close
to half of Americans over 65 have
incomes within 200% of the poverty
line and are classified as economically
vulnerable. One in seven has income
under the poverty line. The Consumer
Financial Protection Bureau recently
reported that collector harassment is
the number one complaint of seniors.
Sometimes there are other reasons,
aside from protected income, why a
bankruptcy for a senior or disabled
person might not be a good option. For
example, some seniors have enough
equity in a home where a chapter 7
trustee might claim an interest and try
to list and sell the home. These same
seniors can’t afford the payment a
chapter 13 would require to “protect”
the home.
50
CONSUMER BANKRUPTCY JOURNAL
I have only seen an unsecured
judgment creditor proceed against a
home with excess equity on one or
two occasions in nearly 40 years of
practice. It just doesn’t happen. And if
it does there is solution. The judgment
becomes lien on real property in most
states and simply sits there until the
home is sold or transferred. Filing a
bankruptcy and risking a trustee sale of
the home or putting a senior in poverty
with a chapter 13 payment probably
doesn’t make sense.
Sometimes seniors have other assets
that exceed available bankruptcy
exemptions. Assets that a chapter 7
trustee would go after if a bankruptcy
were filed, but a typical unsecured
judgment creditor would never touch.
In real life, unsecured judgment holders
seldom seek execution of a judgment
against nonexempt personal property.
And if they attempt to do so, again,
there are solutions.
Sometimes seniors owe past due
income taxes. The IRS does not,
as a practice, garnish pensions.
Occasionally the IRS will garnish 15%
of social security benefits.
Lower
income seniors who owe past due
income taxes can often easily obtain
uncollectable status with the IRS and
stop any garnishment of social security.
States cannot take social security or
retirement monies for past state taxes.
Most seniors are not aware of this, and
most states do not inform them of this
fact.
It is easy then to see the dilemma
attorneys sometimes face advising the
Winter 2016
elderly and disabled who seek them
out for bankruptcy. Bankruptcy often
is a good solution for many reasons,
however sometimes it just doesn’t
make sense, let alone financially
feasible.
However, as consumer
bankruptcy attorneys we feel a duty to
help persons who contact us, especially
seniors who are more helpless and
vulnerable in our society. We worry
what will happen to them if they don’t
file when the collectors call.
Is there a solution to stop constant
harassment by collectors?
One
solution is to advise a senior about a
“cease and desist” letter under the Fair
Debt Collection Practices Act. A written
notice sent by the debtor advising the
collector to cease both written and
phone contact regarding a debt. But
often even when this is explained to
seniors, and a template provided, they
may be unable to prepare or send the
letter. Most seniors have a very difficult
time dealing with collectors on their
own.
I faced this dilemma too ever since
I filed my first bankruptcy as a solo
practitioner in 1978.