Seniors and Bankruptcy

Before filing for bankruptcy, it’s important to consider all of your options. If you’re an older adult wondering whether bankruptcy is the right option for you, watch the video above. You can also read the transcript below. In the video, SeniorLiving.org editor-in-chief, Jeff Hoyt, speaks with attorney Eric Olsen about why most seniors may not need to file for bankruptcy.

Jeff Hoyt: Hi, I'm Jeff Hoyt, editor-in-chief of SeniorLiving.org. Today, I'm speaking with attorney Eric Olson about seniors and bankruptcy. Eric is an expert on this topic, as he is the founder of the HELPS nonprofit law firm, which serves senior citizens and disabled persons struggling with debt. Based on his vast experience and knowledge, Eric believes that bankruptcy could help very few seniors with their financial struggles. As Eric is in Salem, Oregon, and I'm in Los Angeles, we will be conducting the interview online via Zoom.

Jeff Hoyt (via Zoom): Hi, I'm Jeff Hoyt, editor-in-chief of SeniorLiving.org. Today I have the pleasure of speaking with Eric Olsen. Eric's an attorney, and he's also the founder of the HELPS nonprofit law firm, which helps seniors and others with their finances. How are you today, Eric?

Eric Olsen: I'm good, Jeff.

Jeff Hoyt: Thanks for taking the time. We want to talk about bankruptcy today. It's a scary word. Let's start out with this, what experience do you have with bankruptcy as an attorney?

Eric Olsen: I've been an attorney for almost 42 years now, and I founded a very large consumer bankruptcy firm. I’ve probably filed or been responsible for filing close to 40,000 to 50,000 bankruptcies in several states, so I know bankruptcy really well. That was the focus of my practice for decades.

Jeff Hoyt: Great. It sounds like I'm talking to the right person then. So why would a senior consider bankruptcy as a course of action?

Eric Olsen: So what happens, Jeff, is that seniors, when they retire, normally, their income goes down. They're not making as much money as they were when they were working. Maybe a spouse passes away, and so part of the income that the couple had went away, and now the surviving spouse is living off of one income. But the debt's still there, and it can be very difficult to pay the debt. And if for some reason they're not able to pay the debt, creditors will call them on the phone, send them demand letters, maybe even file a lawsuit. And so it can be extremely scary for a senior, and they don't know what to do. And so they think, and they hear the word “bankruptcy,” and they consult with a bankruptcy attorney about the possibility of filing a bankruptcy.

Jeff Hoyt: Is that the best move in many cases? When would a bankruptcy be a good move for a senior to consider, and when would it be a bad move?

Eric Olsen: When seniors used to come in to me when I was filing thousands of bankruptcies, I would tell them, “Hey, do you realize that your Social Security, your pension, your disability, your VA benefit, and all your income is protected by law? No one can take it from you. Even if they sue you and have a judgment, they can't garnish or take that money from you. You really don't need to file bankruptcy, and bankruptcy costs money.” But yet, I knew that when the senior went home, even if they realized that their income was protected, creditors could still call, and it could be very difficult for them to file. Most seniors, frankly, don't need to file bankruptcy because their income is protected. Their assets are protected, and there are other ways to get creditors off their back. There are a few cases where bankruptcy makes sense, but frankly, there's not a whole lot of them.

Jeff Hoyt: So, in most cases, bankruptcy is not the way to go for seniors. So, you mentioned a senior being harassed by debt collectors. What alternate methods can they use that are better, that offer more benefits than bankruptcy for seniors?

Eric Olsen: Well, OK, sometimes I used to compare a senior filing bankruptcy to using a sledgehammer to kill a gnat. Yeah, you can use a sledgehammer to kill a gnat, but there are a lot less-intrusive ways to get rid of the problem than using a sledgehammer.

There's a federal law called the Fair Debt Collection Practices Act that provides when a person sends what's called a cease-and-desist letter, a debt collector can no longer communicate or talk to that person anymore. They have to leave them alone. That law is well established, a copy can be found on the internet, and we have a copy on our website. So, there are ways to get creditors off your back, other than filing a bankruptcy. As a practical matter, an unsecured creditor that gets a judgment, a credit card company, for example, would never, ever take action to foreclose or take your home from you. They just don't do it. If they sued you, which in itself could be doubtful, but if they did sue, it would be a judgment. It would become a lien on the house that would be paid either when you sell the home or by your estate when you pass away,

Jeff Hoyt: How does declaring bankruptcy affect someone's credit?

Eric Olsen: Well, OK, it's definitely a negative on your credit. That could be one reason to file bankruptcy. For example, if you carry a lot of debt and you're a younger senior – maybe lower 60s or something like that and have fairly decent income – one advantage to filing a bankruptcy is you get rid of the debt, and then you can rebuild your credit. It takes a little bit of time to rebuild credit, but you can do it again.

But, a lot of people are worried about their credit. For one thing, if you file bankruptcy and you've got a credit card that's good, that credit card is going to go away. Credit card companies subscribe to a service that lets them know when someone files bankruptcy. Even if you don't owe them anything, they're going to cut your credit off. Whereas if you didn't file bankruptcy, and you kept current on that credit card, you'd keep it. Banks don't care if you don't pay your other debt, as long as they're getting paid. So by filing a bankruptcy, you're going to zilch your credit, period. But if you didn't file bankruptcy, you could keep the credit you do have.

Jeff Hoyt: And then my fear is that if someone goes to a bankruptcy attorney for advice, that a bankruptcy attorney might advocate bankruptcy, because that's what they do, that's what they know.

Eric Olsen: That's a good question. And you're right, it doesn't always happen. But I would say this, if a senior went to a bankruptcy attorney to file bankruptcy and that bankruptcy attorney didn't tell them, “By the way, Mrs. Jones, you really don't need to file this bankruptcy. You should understand that all your Social Security and your pension that you receive is protected by law. And it can't be taken from you.” If that's never mentioned to the senior, then that's not good. The attorney isn't giving that person the complete information they deserve to know.

Jeff Hoyt: And then can you explain in wrapping up how the HELPS nonprofit law firm can help seniors who are considering bankruptcy?

Eric Olsen: Sure. Well, that's why I started HELPS; seniors would come in and talk to us, and I'd tell them, “Hey, you don't have to file bankruptcy. Your income is protected.” But I knew when they went home, the creditors were going to bother them, drive them crazy, and a lot of them couldn't afford to file bankruptcy. Their income won't allow it. Bankruptcy isn't cheap. It's expensive, and it's unnecessary. I think it's almost a travesty to go into a bankruptcy hearing and see a 75-year-old widow in there, because you know she really doesn't need to be there. So under federal law, if a person is represented by an attorney, debt collectors have to leave you alone.

And so HELPS is a national nonprofit law firm that represents seniors in every state of the union who have debt they can't afford to pay; they're generally lower-income seniors. They don't have to deal with debt collectors anymore. They call us on the phone, and we go over their situation. We don't turn anyone away. And when they enroll in our program, they give us the creditors they owe money to. We send that creditor or collector a cease-and-desist letter. And then, under federal law, that debt collector can no longer call that person or send them letters anymore. If there were 10 commandments of debt collectors, commandment one is: If the person has an attorney, I can no longer talk to that person. So, what we do is we represent persons ongoing, not just one time, for years into the future. Forever essentially. If they get sued, which does happen occasionally, we write the attorney a letter, telling them, “Hey, here's proof their income is protected, go and take your judgment. They don't have anything. Don't touch their bank account.” And they won't.

We'll call the senior on the phone and assure them and provide them information so they understand that they don't have anything to worry about. So that's what HELPS does. We're the only law firm in the nation that does this. We're nonprofit. It's very needful, because there's a lot of help for seniors that have money. There's just not a lot of help for seniors that are poor. Occasionally, seniors come to us, and bankruptcy does make sense. Then we refer them to someone for bankruptcy. It doesn't happen very often, but it does. It's just pretty specialized conditions.

Jeff Hoyt: How can someone get in contact with HELPS?

Eric Olsen: It's really easy. [HELPS stands for] help eliminate legal prompts for seniors. [Our website is] Helpsishere.org. Our phone number is 855-HELPS-US. Help with an “S” on the end, Helps US or Helps us. And like I said, we don't turn anyone away that needs our help.

Jeff Hoyt: Great, thank you very much for your time, Eric, and for working with seniors.

Eric Olsen: Thanks, Jeff.