Tips for seniors dealing with debt

Tuesday, June 5th, 2012 By

An elderly man gazes on with furrowed brow.

He dreads dealing with debt in old age. (Photo Credit: CC BY-SA/Highway2783/Wikipedia)

Carrying a heavy debt burden is never fun, regardless of the debtor’s age. Debt in old age is another matter entirely, however. It’s harder to make a dent in large amounts of debt when a person lives on a fixed income. Nobody plans for it to happen, but seniors dealing with debt have become increasingly common.

Pay it down before the golden years

The ideal plan is to pay down debt so that it doesn’t become the gorilla in the room during retirement. But the best laid plans of mice and men aft gang agley. Some experts argue that there may be no point to bothering with paying down debt if you’re old enough, but if you aren’t, you’re stuck with the specter of bad credit continuing on into your golden years.

Numbers creditors can’t ignore

Here’s a nightmare scenario of senior debt burden. Let’s say you have a personal loan on the ledger for $2,000. Maybe there’s big-time credit card debt that exceeds $15,000. These are things that creditors won’t ignore, even if the borrower is elderly. The law will be on the side of the creditor, too, and as such, the creditor will do everything it can to pursue the borrower via aggressive collection efforts via mail, telephone and more. For a senior citizen with relatively few assets and a fixed income, all it takes is a court’s judgment against you for seizure and misery to take hold. A lien can be placed against a home when the debt is sizable enough, but thankfully, Social Security benefits are protected under federal law. Unfortunately, the same may not hold true for employee pensions, depending upon the state.

Senior living with bad credit

Even if a senior decides that forking over every last dollar to creditors isn’t worth it, bad credit can still be an issue. If the senior is still driving and needs a new vehicle, auto loans are much more difficult to come by without good credit – but not impossible.

Bad credit can also cause automotive and homeowners insurance premiums to rise, because insurance companies are scavengers constantly on the watch for financial carrion. The worse an insured’s credit is, the more they’ll pay. Similarly, bad credit can cause required security deposits on rental properties, utilities and cellular telephones.

Ways for seniors dealing with debt to get help

While solutions are difficult to come by, all is not lost when it comes to dealing with a serious debt load in one’s elder years. Non-profit credit counseling is available. Resources like the National Foundation for Credit Counseling (NFCC.org, 800-388-2227) is a place where anyone can locate reputable local credit counselors. Make a budget and pay back the debt in the most optimal way possible. By working out a debt management plan, credit counselors can help consumers to lower their interest rate and waive certain penalty fees. A monthly deposit over to the credit counseling agency of choice then goes direct to creditors. It may take several years to dig out, but it is a disciplined approach to a bad credit situation.

Sources

Bankrate

Debt Counsel for Seniors and the Disabled

Smart Money

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