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Senior News April, 2005 Vol. 24. No. 4
Published by the Humboldt Senior Resource Center in Eureka, California. HSRC is a non-profit community-based organization offering services for senior citizens, multi-generational families and caregivers.
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Humboldt Senior Resource Center Back issues Table of Contents
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Bankruptcy reform doesn't help poor By Barbara Clark, editor of Senior News. Eureka bankruptcy attorney Thomas Hjerpe has seen financial security change to insecurity for many Northcoast seniors. But it isn't the medical emergency that puts seniors over the edge of solvency, he said. More and more of them are getting in trouble with credit card debt and finding it impossible to get out from under it. It starts gradually. The fixed income often barely covers the basic necessities. You need to put some automobile work on your credit card because your monthly income won't stretch to pay for it. Then you have some unforeseen medical bills. Then a set of tires. All the while the income is stretched farther to make the minimum payment on the credit cards. It can take years, but ultimately the debt grows so large that you'll never be able to pay it off. Creditors start telephoning you round the clock for payment, and the stress increases. You turn in desperation to the bankruptcy attorney. For many seniors, even bankruptcy may not be the best option, Hjerpe said. Under bankruptcy laws, seniors' equity in their homes is only protected up to $150,000. With increasing real estate values, many seniors have more equity in their home than they can protect in a bankruptcy. If you would lose your home in a bankruptcy, the only other option is to refinance the house and take out enough equity to repay the credit card debt, but few seniors on a fixed income can afford the higher mortgage payment. To make matters worse, Congress is passing new bankruptcy laws that will have the effect of making bankruptcy more expensive and less effective for many debtors. Filing fees and attorneys' fees will be increased, which hurts lower- and fixed-income seniors the most because it requires them to pay a higher percentage of their income to get bankruptcy relief. Under the new laws, many debtors will be required to enter into five-year payment plans where payments are based on a hypothetical budget rather than the debtor's actual needs. This will force many people into payment plans that they simply cannot afford. One benefit of the reform act, Hjerpe said, is that it will mandate financial education, something that he recommends to anyone who comes to him anyway. But, he said, few people currently take advantage of the budgeting and financial management classes taught by Rosie Wentworth at Consumer Credit Counseling Service (CCCS) in Arcata. If you are overloaded with credit debt, you can call the CCCS at 822-8536 and get them to help you negotiate a lower interest rate and set up a payment plan. If you're not yet overloaded with credit debt and don't want to fall down that slippery slope, call them to take budgeting basics, money management for a nominal fee or other classes they teach about using credit wisely, buying a home and using checking accounts. If all else fails, call a local bankruptcy lawyer and schedule a free consultation. |
Senior News