Dear Bankruptcy Adviser,
My husband died October 2004. I have a home and I'm on Social Security disability. I cannot pay off my credit. I need to just take care of the mortgage for a place to live. I only receive $641 a month on disability. I got fuel assistance last year and will go for help to the welfare office. If I don't file bankruptcy, what can happen to me? I don't really have the money to file.
-- Dee
Dear Dee,
Hang in there. I can see that you're in a difficult situation, but there is some good news: Creditors cannot garnish, or take away, any of your Social Security income. This means that if you file for bankruptcy, not only will you eliminate your credit card debt completely, but you will keep all of your monthly disability check.
Here's another piece of good news: In order for you to be paying the mortgage using only your Social Security, your mortgage balance must be pretty low. This means that even if a creditor has a lien placed against the house, you may be able to protect most or all of the equity.
This depends on what state you live in. But suppose you live in California, your home is worth $200,000, and your mortgage balance is $50,000. If you're age 65 or over, the law says you can protect $150,000 of the value of your home, and thus none of your home would be at risk. If you're under 65, you can protect $75,000 (and the remaining $75,000 would be at risk).
Talk to a bankruptcy attorney to see how much of the equity in your home you can protect. As well, you may wish to consult a mortgage broker. There may be a way to access the home equity to help you through this difficult time. However, be very careful when using home equity to pay off unsecured credit card debt. You may not want to waste the equity on unsecured credit card debt, but rather use it to supplement your retirement income.