The bankruptcy rate for Americans over age 55 is soaring. This age group now accounts for over 20% of all bankruptcies filed. Some analysts estimate that for every older person who files a bankruptcy petition, there are two more seniors who should, because of their dire financial straits.

What’s going on? Retirees used to be seen as financially stable, kicking back on their savings and pensions, mortgages all paid off – enjoying their golden years. But not any more.

But wait … aren’t retirees “judgment proof?” Why should seniors worry about their debts, when, in most cases, creditors can’t touch their pensions or their homes during their lifetimes? If Social Security or IRA income each month can’t be levied by a creditor, grandma or grandpa can stop stressing, right? And if a creditor puts a lien on your aging mother’s home, what does it matter to her? She will continue to live there until she dies, and after that, the creditor will get the money from the sale of her house.

“Judgment proof” is not the best way to describe the financial situation of many older Americans. The term is commonly used to mean that creditors can’t collect money from assets that are protected – pension, IRA, or Social Security income – or the home you live in, while you continue to live there. But a creditor can still file a lawsuit against you, and a court might agree that you owe the money and issue a judgment against you. So technically, virtually no one is “judgment proof.”

A better term is “collection proof” – because, even if you have a judgment against you, the creditor can’t collect it from your exempt assets. So if you have debts you can’t pay after you retire, or even if there is a judgment against you, why should you care? Here are two very important reasons:

Creditors are shameless and relentless. They never give up trying to get money out of you. They call, send mail, and use every means to get your attention. To an older person who may be in declining health, or barely able to make ends meet every month, the constant harassment by creditors takes a heavy emotional and physical toll.

Creditors will often get judgments against you. You must respond to the Notice or Summons you receive from the court. If you do not take action, the court may very well authorize a levy or a freeze on your bank account. The county sheriff is responsible for carrying out the levy, by ordering your bank to freeze your account and/or pay the debt out of your account. Neither the sheriff nor the bank may know that all of the funds in your account came from pensions or other exempt income. Once a freeze is in place, it can take weeks or months to get it reversed. In the meantime, your money is out of your reach.

Creditors can ruin a retiree’s life in ways that are far worse than their effect on younger people. Seniors have few chances to go back to work to pay off debt. There is little or no prospect of their paying off their debts in their lifetime. Credit card debt, in particular, grows rapidly, as retirees pay higher interest on interest over the years. A lien on a senior’s home to pay off that inflated debt after death often means there is little or nothing left to pass on to their children or grandchildren.

For retirees caught in the clutches of creditors, bankruptcy is often a good solution.

It usually wipes out credit card, medical and other unsecured debts, and makes it possible for most people to again manage their everyday living expenses within their income. A huge relief and peace of mind make a fresh start possible for seniors.

This article was originally posted HERE.