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You never thought it would happen to you. But…..life happens. Maybe your daughter needed help with her student loans. Maybe your son got divorced, moved in, bringing the grandkids, and that new job just didn’t work out. Maybe your car needed one repair too many. Or you needed a new roof. Or maybe the medical bills just keep piling up and you don’t see how you will ever get out from under them.

You may be willing to go back to work, but just not able.

What can you do? Will you be left penniless? Will you lose the house?

What protections are available when filing for bankruptcy?

In Texas, your home and most retirement plans can be protected. Throughout the country, your Social Security retirement benefits, VA benefits, Supplemental Security Income, and pension can only be garnished for taxes and federal student loans.

You can eliminate credit card, medical, long-term care and nursing home debt—but not debt that has been secured by a mortgage or an automobile loan. You cannot eliminate child support, alimony, most student loans, court restitution orders, criminal fines or most taxes. You cannot eliminate debts which arise after you file for bankruptcy.

Most people file under Chapter 7 of the Bankruptcy Act, also called “liquidation.” A court-appointed trustee will determine whether there is anything which can be sold to pay your creditors. Your homestead, car and most retirement funds are exempt. Most people find that all of their property is exempt and that they no longer need to pay unsecured creditors.

Once you are back on your feet, you will not be able to again file for bankruptcy for several years. That does not mean that you will never incur debt again. You may want to cut up your credit cards and squeeze your pennies. You can ask your county central appraisal district to defer your property taxes until your death, at a cost of 5% per year. You may consider a reverse mortgage.

And maybe you do not need to file for bankruptcy in the first place. If you are “judgment proof”: if none of your income can be garnished and none of your assets can be sold to pay the debts of your unsecured creditors, you might just write them a letter stating this and asking them to cease and desist from further attempts to collect.


Elder law attorney, Terry Garrett, is a member of the National Academy of Elder Law Attorneys and is an Approved Guardianship Attorney. She assists people in elder law, estate and special needs planning, guardianship and settling estates. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.

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