This article is written by Peters and Associates.
Question: I’m a 74-year-old widow, and I’m struggling to pay my bills. It’s gotten to the point where I can’t afford my monthly expenses and I’m getting calls from people demanding payment and threatening to sue me. I’m on a fixed income, and there just isn’t enough money. Is there anything I can do?
Answer: Unfortunately, this situation is all too common among senior citizens, but it’s important to know you’re not alone.
According to the Employee Benefit Research Institute, in 2013 a reported 65.4 percent of households headed by an adult age 55 or older carried some level of debt. The median amount of debt for those households was an estimated $47,900 — a 167.6 percent increase since 1992.
Making matters worse, the Federal Reserve Board conducted a 2015 survey reporting that 27 percent of nonretired respondents age 60 or older had no retirement savings or pensions at all.
While personal debt is an overwhelming burden for millions of Americans, it’s a particularly common and complicated issue for seniors. Between insufficient retirement benefits, minimal savings, increasing health care costs and longer life expectancies, living on a fixed income as a retiree can be difficult under the best of circumstances. When debt is involved, the situation can quickly become unmanageable.
Luckily, you have options.
Debt relief and bankruptcy
Seniors have the same set of debt relief options as anyone, including debt settlement and bankruptcy. However, seniors have very different priorities to consider than younger people do in the same situation.
Most seniors aren’t buying new homes, cars or contemplating other major purchases that require a healthy credit score to secure a loan. This can give them the upper-hand when dealing with the bank because a credit score dinged by settlement or bankruptcy is less impactful under those circumstances. Of course, the banks, collectors and scammers will disagree with this premise.
If filing for bankruptcy is your best option to get out of debt, your credit score will be affected but it can also be rebuilt to a 700 or higher in about two years. Most of the time you’ll be able to keep your home and car as well.
Your retirement shouldn’t be threatened and terrorized by bill collectors. Once you engage an attorney for debt settlement or bankruptcy, the collection calls will stop and you can begin the process of relieving your debt.
Beware of Debt scams and collector harassment
Seniors can be especially vulnerable to unscrupulous debt scams and collection practices.
They may feel that having debt is embarrassing or that not paying a bill is shameful. Debt collectors often exploit these emotions when trying to collect money, and they frequently try to bully seniors into making payments.
Scammers prey on this shame too, and often trick seniors into paying debts that never existed. If you have a question about whether or not a debt is legitimate, contact an attorney before making any sort of payment.
What does it mean to be judgment proof?
When you’re in debt, the lender can sue you and get a court order to forcibly seize your money and/or assets. However, the law limits what can and cannot be seized if the lender does obtain a judgment. If you don’t have funds or property that can be taken, you may be considered “judgment proof.”
This is important for seniors because income from Social Security and pensions are usually protected from garnishments/levies. If Social Security and/or a qualified retirement account — such as a 401(k) or pension — are your only sources of income and you have no personal savings or assets, there’s likely nothing the creditors can take.
Regardless, many seniors still file for bankruptcy — even if they’re judgment proof — to get creditors off their backs and gain peace of mind, knowing they’re no longer in debt.
Who can I reach out to for help?
Often, seniors hide debt and their family doesn’t find out until it’s too late. If you have trusted family members, remember that there’s no shame in calling them for help. It’s best to deal with debt early, so involving your family as soon as possible can help immensely.
Whether or not you tell your family, the next step is to call a debt-relief attorney for a free consultation. Only trust reputable firms with a bricks-and-mortar location you can visit in person, and never give detailed information over the phone to anyone promising debt-relief services.
Please note: The information in this column is intended for general purposes only and is not to be considered legal or professional advice of any kind. You should seek advice that is specific to your problem before taking or refraining from any action and should not rely on the information in this column.