File for Bankruptcy or Take Out a Reverse Mortgage Loan?
Some seniors have accumulated debt in the form of credit card dues and other debts. They have already used up their home equity option. Then they may be wondering what the other best option is: file for bankruptcy, or take a reverse mortgage to pay off the debts?
In any case, the senior in question can contact a good reverse mortgage expert to find out exactly how much is he or she eligible for, under a reverse mortgage. This can help the senior decide whether this amount is enough for paying off the debts. Note that a reverse mortgage may not actually be taken, but a ballpark estimate would be sufficient.
A qualified credit counselor can help further in putting together a spending plan that does not go beyond the income limits. Then it is advisable to get the advice of an experienced bankruptcy attorney.
A Chapter 13 bankruptcy filing may require making continued payments for the next five years, and squeezing the living budget allocation. This may not always be feasible. Increased payments need to be made if the incomes increase.
A Chapter 7 bankruptcy filing has some qualification criteria, but if the senior meets them, it can wipe off most consumer debts. A chapter 7 bankruptcy case does not need the filing of a repayment plan as required in Chapter 13 filings. The trustee gathers and sells the debtor’s assets to pay creditors’ claims, all subject to the Bankruptcy Code. The debtor can usually keep some “exempt” property, but the trustee will liquidate all the remaining assets. So this filing can result in loss of property on the part of the senior. Compare this to a reverse mortgage where the senior continues to keep the home and enjoy all benefits out of occupancy.
Ultimately, the answer to the question is that a lot depends on the specific financial circumstances of the senior in question. Only an expert can provide the right direction. Taking a reverse mortgage can be a better option. This will allow the senior to live in the same home as an owner and get additional monthly income in the process.
