Consumer Bankruptcy Journal Winter 2016 - Page 50

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.