Debt relief for seniors

Compare a couple of services and get a feel for how they operate. The credit counselor should spend at least 20 to 30 minutes with you in order to get a complete picture of your finances. Debt consolidation programs offered by legitimate organizations can be helpful to some consumers. These programs combine your existing debts into a single loan with a lower interest rate.

You deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors.

Bankruptcy should be your last resort for financial recovery. Federal law requires that you must receive credit counseling from a government-approved organization within six months before you file for any bankruptcy relief.

Some consumers turn to companies which claim they can fix credit problems. These companies, sometimes called "credit repair clinics," often charge high fees for doing the same things consumers can do on their own.

Updated August 8, In , a little over half of American families headed by someone 55 or older had debt. In , this number increased to two-thirds of families. This is a matter of concern. Our economic system is designed for people to save money so that they can retire by age Debt repayment can be a serious obstacle to reaching the retirement savings necessary to achieve this goal.

With older adults, time is of the essence when it comes to eliminating debt. Eliminating debt is even more important if you're a retiree.

If you're living on a limited income, making debt payments can make it more difficult to pay your regular living expenses. You may want professional help to determine your best strategy for dealing with debts as a senior citizen.

A nonprofit credit counseling agency is a good place to start. If you have very little time before retirement, consider having a free consultation with a bankruptcy attorney. Filing bankruptcy is the quickest route to debt elimination, but there are consequences to consider.

This article will explore bankruptcy as a potential solution for helping senior citizens eliminate debt. Then it will discuss other debt-relief, debt management, and financial assistance options.

If you're not yet retired, but you need to be saving for retirement, high debt payments make this more difficult. As a senior citizen, time is of the essence because there is less time until retirement. The most important rule to follow is this one: Do not take money from your retirement account to pay a debt unless you have explored all other options first.

Chapter 7 bankruptcy is a four to six-month process to eliminate most of your unsecured debts. Unsecured debts are loans not secured by collateral like a home or car.

Examples of unsecured debts include credit card debts, personal loans, and medical debts. In a Chapter 7 bankruptcy, everything you own is part of the bankruptcy estate.

Though it almost never happens, the bankruptcy trustee can take the assets you own and sell them to raise money to pay off the unsecured debts. For the trustee to be interested in an asset, it has to have enough nonexempt equity.

It's rare for a person filing a Chapter 7 bankruptcy to have enough nonexempt equity to lose assets. That means, for most people, the only thing they lose in a Chapter 7 bankruptcy is a lot of debt.

It's important to understand what nonexempt equity is. The first question is whether there is any equity in the asset. Say the asset in question is your house. But, do you have any nonexempt equity? Every state has a list of different exemptions for different types of property.

Though bankruptcy law is federal law, bankruptcy courts look to state law to determine property rights such as exemptions. There are exemptions for cars, clothes, household furniture, life insurance policies, homes, and much more.

Each state made its exemption list from scratch. The only commonality among the states is they all have a homestead exemption.

On April 1, , it jumped to its current level. Consider a hypothetical using the example above. If you file Chapter 7 bankruptcy, in this case, you'll probably lose your home. But, if you're using the adjacent state of Florida's exemptions, you might have an unlimited homestead exemption.

This means you would keep your home if you file a Chapter 7 bankruptcy. This illustrates how different these rules are in different states. So, which state's bankruptcy exemptions do you use? Federal law requires you to use the exemptions for the state where you live unless you moved to that state within days of filing.

In that case, you'll use the state where you lived before. If you lived in Alabama but moved to Florida and bought a home so you could keep it in a Chapter 7 bankruptcy, you would need to wait two years to be able to use Florida's exemptions.

Florida has other hurdles to its unlimited homestead exemption. If you're planning a move to Florida to take advantage of its homestead exemption, it's a good idea to talk to a Florida attorney first.

A Chapter 7 bankruptcy will eliminate most types of unsecured debts, but what about debts that are secured by collateral? These secured debts aren't eliminated in a Chapter 7 bankruptcy unless you change these debts to unsecured debts. A good example would be your car loan. Your car is the collateral for your secured car loan.

If you file Chapter 7 and you want to keep the car, you usually reaffirm the loan. This means you keep your car contract and keep making payments on it, just as if you had never filed bankruptcy.

You have the ability to change your car loan into an unsecured loan. You do this by surrendering your car to the loan company. You no longer have the car and the debt for that car is eliminated just as if it had been credit card debt.

not all unsecured debts can be eliminated in Chapter 7 bankruptcy. Some unsecured debts are nondischargeable debts. These debts include child support debts, some taxes but not all , and—in some cases—student loans. If you have these types of debt, a Chapter 7 bankruptcy might not be your best choice.

For many senior citizens, a Chapter 7 bankruptcy isn't the best choice. This is because many senior citizens have significant equity in their homes from paying on the home for decades.

Unless they live in states with a generous homestead exemption like Florida , they could risk losing their home. It's always best to consider Chapter 7 bankruptcy before considering Chapter 13 bankruptcy.

You only want to use a Chapter 13 bankruptcy if it's the best choice to meet your goals. The following are some examples of when you might want to use a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy.

You have too much nonexempt equity in property you don't want to lose. You have debts you need to eliminate that are nondischargeable but can be handled in a Chapter You've fallen behind on secured debts where you want to keep the collateral. In a Chapter 13 bankruptcy, the bankruptcy trustee doesn't sell things to pay the unsecured creditors.

The trustee gets the money to pay unsecured creditors out of your future income. While it's rare for a trustee to sell assets in a Chapter 7 bankruptcy, the trustee in a Chapter 13 bankruptcy is always going to get money out of your future income.

A Chapter 13 bankruptcy includes a month payment plan in the bankruptcy court. In a Chapter 13 bankruptcy, the unsecured creditors have to get at least as much money as they would have in a Chapter 7 bankruptcy.

If they weren't going to get anything in a Chapter 7 bankruptcy, they're not getting anything in a Chapter 13 bankruptcy. Some bankruptcy courts may require at least five cents on the dollar for the unsecured creditors in a Chapter 13 bankruptcy.

If you've owned your car for more than days 2. This is often a lot of money. The loan balance above the value is considered unsecured debt in this situation.

Sometimes this is referred to as a "fresh start". When Chapter 7 is filed, a bankruptcy trustee is appointed. Persons receiving an income over this level do not qualify for a chapter 7 bankruptcy. They may file another type of bankruptcy if they chose chapter 13 bankrukptcy.

Many seniors citizens and elderly persons with limited incomes fall within the median income limits. In chapter 13 bankruptcy, the debtor repays all or some of his debts over a period of three to five years.

Chapter 13 is normally filed for certain specific reasons. The major reasons are listed below. Typically, a person filing a bankruptcy will have to go to only one brief court appearance.

It is called a "First Meeting of Creditors" even though creditors rarely appear at this hearing. It is typically just the debtor, his or her attorney and the trustee who asks questions.

A judge is not present at this hearing. This hearing may also be referred to as a " a Meeting" after the code section in the Bankruptcy code that requires the hearing. These fees are usually required up front. Therefore, because their income is protected from debt collection, seniors do not need to worry about losing any of their monthly income to debt collector garnishment.

Concern about losing monthly retirement income to garnishment by a debt collector should not be a reason to file a bankruptcy. A senior citizen might not want to file a Chapter 7 bankruptcy if he or she is buying or owns a home that has equity over and above the homestead exemption in the state where he or she lives.

The balance would be used to pay creditors in the bankruptcy and if any money is left over pay that to the debtor as excess proceeds. Most seniors would not want a chapter 7 trustee selling their home.

A senior might also have personal property that a trustee could take and sell, e. a car that is worth too much. These are some reasons, among others, why a chapter 7 would not be a good idea for a senior citizen.

What if you do own a home with equity over the homestead exemption? Unsecured creditors like credit cards, medical creditors, and loan companies can sue you and and get a judgment for debts that are not paid.

With a judgment, a creditor can put a lien against your home. Some senior citizens worry that a judgment lien will soon be followed by a foreclosure. There are many reasons why this practice is extraordinarily uncommon.

If there is a mortgage, the lender has to be paid off first. And then, a homestead exemption will need to be paid to the debtor.

The process is expensive and very complicated. Any work spent pursuing this option could be foiled by a bankruptcy filing. Finally, if there is little to no equity in the home, a forced sale of the home would end up costing the judgment creditor more than what he could make from its sale.

This typically applies only to a home built on a foundation on land, and not a mobile home in a park. Senior citizens are often worried and scared about a judgment lien on their home, but as explained above, no actions are taken against the home.

The creditors will let the judgment sit there as a lien, hoping they eventually get paid when the home is sold. Creditors like credit card companies, loan companies, medical bills and collection agencies will sometimes file a lawsuit and get what is called a judgment.

Very simply put, a judgment is a court order or decree stating that a person owes certain money to the creditor. Most senior citizens in average circumstances have personal assets around or less than the exemptions where they live.

Unsecured creditors who obtain judgments virtually never attempt to go after personal property. Used personal property has very little resale value. To employ the services of the sheriff to enforce a judgment by way of collecting personal property is complicated and expensive.

The NCOA's EconomicCheckUp, a free online service, helps seniors to reduce debt, find work, cut spending and learn about using their home equity. Learn more at Many seniors struggle with debt in retirement. Learn how to consolidate debt, debt consolidation alternatives, and how to get help repaying debt Debt consolidation could help older adults get a lower interest rate and pay off debt faster. Learn more about debt consolidation for seniors here

Debt relief for seniors - Mounting credit card debt is a looming crisis for many retirees. Learn how older adults can get help paying it off using this guide from NCOA The NCOA's EconomicCheckUp, a free online service, helps seniors to reduce debt, find work, cut spending and learn about using their home equity. Learn more at Many seniors struggle with debt in retirement. Learn how to consolidate debt, debt consolidation alternatives, and how to get help repaying debt Debt consolidation could help older adults get a lower interest rate and pay off debt faster. Learn more about debt consolidation for seniors here

And this is even more true during COVID, when some are granting credit card debt forgiveness in certain specific situations.

That includes reviewing your income and expenses in advance and figuring out how much you can reasonably afford to pay back each month. Once you agree to any new terms, be sure to get them in writing.

Once you pay that card off, you add what you had been paying on it to your monthly payment on the card with the next-lowest balance. Each time you do this, your payments get bigger … just like a snowball rolling down a hill.

The avalanche method also involves paying off your credit cards one at a time. However, you prioritize their order based on interest rate, not balance. Once you pay that card off, you add what you had been paying on it to your monthly payment on the card with the next-highest interest rate.

Typically offered through a certified credit counselor, a debt management plan DMP consolidates your credit card debt into a single monthly payment. Your counselor will:. A debt management plan eliminates the need to juggle different payments and due dates. It can help you meet your debt obligations without worrying about late fees and harassing calls from debt collection agencies.

Credit counseling services offer expert guidance to help you navigate your way out of debt. This can be a worthwhile strategy if you:. However, before you take this step, be sure to do your research, Waterman advised.

Learn how it works, see where to find credit counselors near you, and understand what questions to ask before you choose a service.

The Consumer Financial Protection Bureau helps people learn vital money management and debt reduction skills. Learn more about its Get a Handle on Debt boot camp and enter your email address to receive free advice, tips, and tricks in your inbox.

News and MSN. Sarah can be contacted via sarahcbrady. Debt Forgiveness Options For Seniors. Updated: December 11, Sarah Brady. Is Credit Card Debt a Problem For Seniors?

Why Are More Seniors Using Credit Cards? A number of factors contribute to the rising use of credit cards amongst older Americans. Options for Seniors with Credit Card Debt There are several good strategies for managing and even paying off credit card debt, regardless of your age.

If you need relief from your credit card debt, consider these options: Debt Management Program Nonprofit credit counseling agencies offer help for a variety of financial issues, including credit card debt. Consolidate multiple credit card payments into one monthly payment.

Unlike with debt consolidation companies, all of your monthly payment goes toward your debt. Your creditors may reduce your monthly payments or your interest rates. Your credit scores can improve as you pay down your balances.

You receive professional advice and guidance throughout the payoff process. Contact Your Credit Card Companies Some credit card companies are willing to help out during hard times, but you have to ask.

Balance Transfer Credit Card Moving debt from one credit card to the next might feel like a waste of time, but it could give you the help you need. You may have to pay income taxes on the amount you borrow. Bankruptcy Many people think of bankruptcy as a bad word. If you qualify to file for bankruptcy, you may have these two options to choose from: Chapter 7: Chapter 7 bankruptcy can relieve you of the responsibility to continue paying money toward your debt, including medical bills, credit cards and certain loans.

This card can consolidate all of your debt into a single account, allowing you to pay one fixed amount each month. Debt settlement. Sometimes, outside help can be incredibly useful. A debt negotiator can negotiate with creditors on an agreed-upon amount to pay off.

The senior can then make the appropriate payment to pay off the debt. Payday loans. However, it should be noted that these types of loans can be debt traps due to their short day repayment period and high-interest rates. Reverse mortgage.

A reverse mortgage loan allows homeowners to access their home equity without making monthly payments to the lender. This is typically repaid when the borrower sells the home or passes away.

Debt relief for seniors - Mounting credit card debt is a looming crisis for many retirees. Learn how older adults can get help paying it off using this guide from NCOA The NCOA's EconomicCheckUp, a free online service, helps seniors to reduce debt, find work, cut spending and learn about using their home equity. Learn more at Many seniors struggle with debt in retirement. Learn how to consolidate debt, debt consolidation alternatives, and how to get help repaying debt Debt consolidation could help older adults get a lower interest rate and pay off debt faster. Learn more about debt consolidation for seniors here

You have the ability to change your car loan into an unsecured loan. You do this by surrendering your car to the loan company. You no longer have the car and the debt for that car is eliminated just as if it had been credit card debt.

not all unsecured debts can be eliminated in Chapter 7 bankruptcy. Some unsecured debts are nondischargeable debts. These debts include child support debts, some taxes but not all , and—in some cases—student loans. If you have these types of debt, a Chapter 7 bankruptcy might not be your best choice.

For many senior citizens, a Chapter 7 bankruptcy isn't the best choice. This is because many senior citizens have significant equity in their homes from paying on the home for decades. Unless they live in states with a generous homestead exemption like Florida , they could risk losing their home.

It's always best to consider Chapter 7 bankruptcy before considering Chapter 13 bankruptcy. You only want to use a Chapter 13 bankruptcy if it's the best choice to meet your goals. The following are some examples of when you might want to use a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy.

You have too much nonexempt equity in property you don't want to lose. You have debts you need to eliminate that are nondischargeable but can be handled in a Chapter You've fallen behind on secured debts where you want to keep the collateral.

In a Chapter 13 bankruptcy, the bankruptcy trustee doesn't sell things to pay the unsecured creditors. The trustee gets the money to pay unsecured creditors out of your future income. While it's rare for a trustee to sell assets in a Chapter 7 bankruptcy, the trustee in a Chapter 13 bankruptcy is always going to get money out of your future income.

A Chapter 13 bankruptcy includes a month payment plan in the bankruptcy court. In a Chapter 13 bankruptcy, the unsecured creditors have to get at least as much money as they would have in a Chapter 7 bankruptcy. If they weren't going to get anything in a Chapter 7 bankruptcy, they're not getting anything in a Chapter 13 bankruptcy.

Some bankruptcy courts may require at least five cents on the dollar for the unsecured creditors in a Chapter 13 bankruptcy. If you've owned your car for more than days 2. This is often a lot of money.

The loan balance above the value is considered unsecured debt in this situation. This also reduces the expense by a great deal. Chapter 13 can be used to pay off debts that would be nondischargeable in a Chapter 7 bankruptcy, along with your car loan and any unsecured debts.

Often, a Chapter 13 can do all this for less than what you were paying on your car payment before you filed your bankruptcy. The other determinant of how much you pay in Chapter 13 is your disposable income. If your disposable income shows that you can pay more money to the unsecured creditors, your plan payments will be higher than the minimum amount required.

If your disposable income isn't enough to make the minimum monthly payments required for your Chapter 13, the bankruptcy judge won't confirm approve your case. When a case isn't confirmed, it's dismissed. Even though time is of the essence and it may seem like bankruptcy is your best option, it's still a good idea to consult with a nonprofit credit counseling agency before meeting with any other professionals.

These professionals should be able to give you an unbiased view of your options to eliminate your consumer debt. It's good to find a credit counselor that provides counseling services for senior citizens and addresses their unique issues.

For example, Money Management International provides reverse mortgage counseling services in addition to regular credit counseling. com provides resources for retirement planning on its website. Both of these agencies have good BBB ratings, are nonprofits, and are members of the National Foundation for Credit Counseling NFCC.

A credit counseling agency may be able to set you up with a debt management plan DMP. These agencies usually handle basic counseling for free. But they may charge a fee for the work involved in administering a DMP.

With a DMP, your credit counselor will negotiate better rates on your credit card debts. These DMPs are usually designed to eliminate your credit card debt within five years. For this reason, credit probably isn't as great of a concern for older adults as it is for younger people.

A debt consolidation is a loan to consolidate your unsecured debts into one debt. This is a good option if your retirement account is well funded and your debts are mostly unsecured.

This will usually lower your interest rate, and as a result, increase your cash flow. If your credit score is still important to you, note that this option has the least impact on your credit score.

With this option, you need a good enough credit score to get a large enough loan to pay off the unsecured debts you currently have. Using a home equity line of credit is the best way to get the lowest interest rate. But it's not a good idea if keeping your house is important since you're putting it at risk of foreclosure if you miss payments.

In the future, you'll have less income to make the payments. Keeping your house may not be important to you.

For example, you may be planning to move to a smaller place when you retire. Seniors often have more options than younger adults. Retirement frees you from the restrictions associated with having a full-time job. You don't have to raise children. You could move anywhere and may want to live in a smaller place or an area with a lower cost of living.

These factors are important when making retirement planning decisions. Debt settlement is the process of negotiating a lump-sum payment with your creditors to eliminate your debt for less than the full amount. This will hurt your credit and might have tax consequences.

That being said, does credit matter to you? Are you planning to take out a new mortgage as a senior citizen? Which is more important: Your cash flow or your credit report?

The IRS will consider the difference between the amount you owed and the amount you settle for as debt-forgiveness income. The question is, do you care about the tax consequences?

You might not have taxable income. Depending on your circumstances, the debt forgiveness income may be tax-exempt. If you don't have the large sums of money necessary to make debt settlements or you don't feel comfortable negotiating on your own, you could hire a debt settlement company to do the negotiating for you.

These companies usually want you to pay into an escrow account for up to three years to build up enough money to make an acceptable debt settlement offer. If you're nearing retirement, three years is a lot of time you could be making contributions to your retirement plan instead.

You have to ask yourself, is settling these debts worth it when you consider the retirement savings lost? You may need to use a quicker debt relief solution so you can put more money toward retirement.

Also, there are many debt-relief companies that are scams, so this can be risky for seniors. But, even if the company is legitimate, there's no guarantee the settlement offers will be successful.

You could get into a much worse mess than you were in. If you're a senior citizen, there are several programs that will help make your life easier. There are several agencies that can help you with legal assistance. The U. Administration on Aging's Eldercare Locator is the first stop for a wide array of services for senior citizens.

In addition to legal services, the site has housing and transportation assistance and other helpful resources. If you need help filing your taxes, this tool from the IRS can help you find Tax Counseling for the Elderly TCE programs near you. During tax season, AARP can help you find tax assistance for seniors.

Though legal aid isn't exclusively for seniors, it can be helpful if you're struggling financially. Upsolve has a tool to find legal aid in your state.

Medicare is complicated. A complete discussion of Medicare requires its own article. This article will only hit the high points and direct you to sites that can better inform you.

Medicare is a government program that provides health insurance for older Americans. Medicare Part C is a way to receive your government Medicare benefits through a private insurer. These programs are sometimes called Medicare Advantage programs. Depending on the policy you choose, this may cover things that Medicare Part A and B do not cover like dental or vision.

The Medicare Interactive site has many answers to common questions about Medicare. gov is another good resource for information. This tool , provided by the U. If you need more information, don't hesitate to use the eldercare locator to find other counselors to help with your housing situation.

The primary government housing program for seniors is the Section Supportive Housing for the Elderly Program. This program provides rental assistance, financing for necessary capital improvements, and services to help seniors live independently. These services include cleaning, cooking, transportation, and more.

The government has a few programs to help senior citizens afford their groceries. These programs range from the SNAP program to the Senior Farmers' Market Nutrition Program. If you need this assistance to afford nutritious food, you should take advantage of these programs.

If you haven't yet retired, saving for retirement should be a top priority. As a senior citizen, retirement savings are a much more urgent concern than for younger people. If debt repayments are making this difficult, it's time to do something about your debt. There are many ways to ease the pain of debt repayments.

But simple budgeting is often not enough. Credit counseling is always the best place to start. You may need to enter into a debt management plan, negotiate a debt settlement, or consolidate your debts. A reverse mortgage may also be a good idea. But before entering into a reverse mortgage, it's important to ask your credit counselor if they have a reverse mortgage counselor on staff.

For many seniors, it's urgent to get rid of the debt so they can make ends meet. In these cases, bankruptcy might be the best option. Credit isn't as important if you're retired. You have Medicare for your medical bills. You probably aren't going to need a new mortgage.

If you do buy a new house, it's often downsizing after the sale of your home. In these cases, the proceeds from the sale of the first home often pays for the purchase of the new home. Then, use this card to pay off pending loans and credit cards. Debt settlement Debt settlement is also a great way to help lessen the weight of the debt.

Here, debt negotiators will negotiate with creditors to agree upon an amount that your older adult will be able to pay.

Reverse mortgage A reverse mortgage is quite similar to a home equity loan. The loan payments come due upon the death of the last living borrower. You must be 62 years old to qualify for a reverse mortgage, have a considerable amount of equity in the house, and be able to afford monthly payments for items like property taxes and insurance.

Advertisement Or, debt forgiveness through bankruptcy Many people carry debt into retirement, which can lead to lower quality of life and higher expenses.

Medical bills, mortgage payments, and even student loans can pile up and put a heavy burden on older adults after retirement. In some cases, filing for bankruptcy can be a good option to help lessen the burden.

When someone files for bankruptcy, numerous debts like credit card debt, personal loans, medical bills, utility bills, etc are eliminated. Harassing phone calls from debt collectors will also stop after filing bankruptcy.

Chapter 7 Through Chapter 7, someone can liquidates their assets to pay off their debt. In most cases, all debts can be eliminated except for child support, alimony, student loans, etc. Guest contributor: Lyle Solomon is a principal attorney for the Oak View Law Group in California, where he specializes in consumer finance.

He has also written several articles on financial well-being. For more information, see How We Make Money.

Seniors and Bankruptcy This is just one reason older adults are concerned about retiring with debt. Emergency Relief Assistance No. Dwbt, your Payday loan rollover score may senioes Debt relief for seniors few points if you DDebt in Debt relief for seniors debt management plan. Will this put me at risk? You can also browse BenefitsCheckUp to see how you can save money on the basic costs of living. If you are struggling with debt, there are steps you can take to avoid bankruptcy. List all your debts and prioritize the order in which they should be paid off.

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