Debt Relief For Seniors 101
Senior or advanced age indebtedness, something which was once unheard of in America, is now as common as turkey on thanksgiving. Receiving phones from nagging debt collectors and reading credit card reports is almost overtaking fishing as America’s most common senior pastime, and it’s disheartening.
Gone are those good-ole days when one could retire with no debt whatsoever and spend the latter part of their years by the lake enjoying the fruits of their labor. Senior indebtedness has been increasing these past thirty years. In 1984 only 26% of seniors had mortgage payments. Compare that to 2013, where 57% of seniors between 65 and 74 still have mortgage debt.
With the right help and planning, you can bring those days back (at least for you) and clear some of the debt you have left.
How You Got Here In The First Place
There are a million ways to end up with a $7000 credit card debt, but there’s only one way to clear it up. These are some situations that may end up leading seniors to untenable debt situations. They include:
- Unexpected Expenses
We would all love all our expenses to fit in our budgets and everything to fall in place, but that’s not always the case. A visit to the dentist here, a gasket replacement there, and a trip your son in Michigan in between can eventually add up.
- Outliving Your Payments
Retirement, to many, means living on a fixed income. Depending on your lifestyle, a social security check may not be enough to cover your expenses. Everything one spends above their means after retirement is most likely going towards debt.
- Financial Irresponsibility
Many, even in their old age, struggle to wrap their heads around shrewdness and financial responsibility. For them, life is there to be lived, and money is there to be spent. Coupled with a credit card, that mentality can get someone deep in debt within a few months.
- Compounding Debts
Many seniors who are indebted accumulated their debts over time. Some have managed to cut off a chunk of that debt, while others may still be in the early stages of dealing with that debt.
What Options You Have To Get Yourself Out
Being in debt as a senior is not the end of the road. The good news is that there is a way out. There’s always one. One of these suggestions or a few of them put together can offer you a way out of your debt.
You should consider:
- Figure Out A Debt Repayment Plan
Failure to plan is planning to fail. Before you start tackling your debts, you need to have a strategy that will guide you throughout the process.
You can either start by paying the highest interest loans first, hence paying less money on accrued interest in the long run. On the other hand, you can clear your smaller debts first, which will give you motivation and momentum to complete paying the other debts.
- Don’t Rule Out Debt Settlement.
Under debt settlement, you can get into an agreement with your creditors to lower your debt obligation. This can either be through lower interest rates, interest rate forgiveness, or forgiveness on the balance due. There’s no guarantee your creditors will agree to it, and your credit score will definitely take a hit.
Debt settlement will stay on your credit report for a long time, actually seven years, but the upside is that you will have cleared your debt.
- Consider Credit Counselling/Debt Management
Debt management is one of the best options you have out there. Just the same way you take your car out to the mechanic, you can take your debt situation to an expert.
Seeking the help of a debt manager can bring more context to a debt situation. A debt manager will help you learn the extent of your debt and draw possible solutions to getting yourself out of debt.
- Declaring Bankruptcy
Bankruptcy is one of those words that have a negative connotation to it. This is especially for seniors who come from a time when promises had meaning, and people paid their debts.
Well, there is nothing noble about being in debt; it is as bad for you as it is for your creditor. You can clear your debts by either declaring a chapter 7 or a chapter 13 bankruptcy.
Under a chapter 7 bankruptcy, your assets are liquidated by a third party and used to pay off what is left of your debt, leaving you debt-free.
Under a chapter 13 bankruptcy, you get to keep most of your assets but agree to a three-to-five-year repayment plan to complete your debts.
- Debt Consolidation
Many seniors have different types of debt. It’s not uncommon to find a senior who has credit card debt, student loans, and car payments all at the same time.
Under a debt consolidation plan, you get to consolidate all your debts into a single debt. This may be through taking one huge loan and paying all the other debts. In some circumstances, the interest on the debt consolidation loan is likely to be lower.
- Negotiate A Takeover
For many seniors, especially those in their late 80’s and 90’s, keeping track of their debts may become an uphill task. This may make them victims of predatory lending or a target for scammers and frauds.
If you can no longer keep track of your finances and debts by any chance, you can organize a takeover. Under a takeover, one of your close relatives, like your children, can step in and help take manage your debts.
- Reverse Mortgage
A reverse mortgage helps you tap into the equity of your home to pay some of your debts. This loan, only available to citizens above sixty-two years of age, is taken with the house or property as collateral.
Instead of making repayments like your typical mortgage, the bank pays you while at the same time charging interest. You can then use these repayments to pay off some of your loans.
One does not need to repay the loan so long as they maintain the property per the FHA requirements. . One downside however, is that if you die before completing the loan, your loved ones may be forced to pay upfront or sell the house for the payment.
- Life Insurance Loans
Whole life insurance policies usually offer an accumulated cash value. Using this cash value as leverage, you can consolidate and pay off some of your debt or pay off some of your higher-interest debts.
Taking a loan against your life insurance cash value can be a lifesaver since the loans are usually given at a lower rate than banks offer.
What You May Be Doing Wrong?
Well, after covering some of the things you may be doing or should do to get yourself out of debt, it’s only fair we cover a few you should avoid. These include:
- Using Your Retirement Fund
Being saddled with debt makes it tempting to chip into your retirement funds to pay off some of that debt. This is not a very good idea because retirement funds withdrawals are taxable. Withdrawing a lump sum from your retirement plans will see you lose a significant amount of that withdrawal to taxes.
- Buying Into The Minimum Payment Lie
Before you consider it as an option, you need to fully comprehend minimum payments. Although minimum payments create short-term relief, they make you stay in debt longer and pay more money over time.
If possible, overpay your monthly credit card payment in order to eat into the principal that accrues interest as much as possible.
- Living Above Your Means
Last but not least, live within your means. This is both financially, physically, and emotionally. If you can reduce the number of fishing trips, do it. If you can take fewer road trips, over to a smaller house, or drive a cheaper car, give it a chance.
Moreover, stay healthy. Living on junk food and soft drinks as a senior can also be considered living above your means and can throw you further into debt in more ways than one.
The Take-Away.
More than anybody else, seniors deserve to live debt-free and live the rest of their lives stress and hassle-free. Here at DebtBlue, we have spent a significant part of the past decades helping seniors, and other Americans beat credit card debt through debt settlement programs.
For more information about credit card debt and for help beating it, contact us today, and we will be more than willing to help.