If you have no assets and your sole income is Social Security, then you may not have to file chapter 7 bankruptcy. It really depends upon your level of stress and aggravation that you can handle. Creditors are going to attempt to collect on a debt until they realize that they have no means to actually collect on the debt. What I mean to say is this: if a creditor is seeking an outstanding debt of $15,000 due to a credit card charge, the creditor is going to pursue collection on that debt. The creditor may even file a lawsuit and obtain a judgment. The creditor then may seek what’s known as post-judgment collection efforts. It is at this time that the creditor will first realize that there are no assets to administer, there are no wages to garnish, and they have reached the end of the line with regard to collecting on the debt. Until such time, the creditor is going to continue to collect on that debt as if it were readily collectible.
For this reason, you as a debtor on Social Security with no assets have to make a decision. Should you allow the creditor to go through the practice of collecting on the debt only to find out that it’s uncollectible due to your Social Security income? Or, do you nip everything in the bud by filing a chapter 7 bankruptcy to avoid that protracted collection effort? If you are someone who can stomach the collection calls, potential lawsuits, and potential collection efforts after judgment, then you may not need to file. You can simply advise the creditor that you’re on Social Security, perhaps send them proof, and hope they stop all collection efforts. In my experience over the last 23 years, most creditors will continue to collect to obtain a judgment. They do not know that you don’t own any real estate. They do not know if you own a paid-up vehicle. They do not know if you have money on account. For these reasons, most collectors have to assume that if they obtain a judgment, they’re going to collect on a judgment in one way or another.
I have had many clients whose only income was Social Security, however, they decided to file a chapter 7 bankruptcy to stop all the collection efforts and get a fresh start. They simply did not want to be burden by bill collectors for the rest of their life. They were not really concerned about the credit since they were living happy with the income that they had coming in. They were not looking to buy a new house or finance a new vehicle or finance a furniture purchase. They were simply trying to live out their golden years in peace. It’s pretty hard to live in peace when you’re getting creditor phone calls day and night, lawsuits requiring you to file an appearance or otherwise appear in court, and post-judgment court appearances known as citations to discover assets.
So the decision on whether or not to file bankruptcy when you’re on Social Security with no assets is entirely up to you. When faced with that situation, approximately 75% of my clients have opted for the fresh start. They knew that they didn’t have to file legally. They knew that the creditor had no way of actually collecting any money from them. They knew that bankruptcy would be a short process that would require some funds as well as some credit counseling and financial management instruction. However, the majority of my clients wanted to end their debt nightmare. They wanted to be free from creditor harassment. They wanted to enjoy the rest of their life without the reminder of the mistakes that they made in the past. For these reasons, I do recommend that someone who is on Social Security yet has no assets, file a chapter 7 bankruptcy and get a fresh start. I deemed is necessary under most circumstances.
