Debt Consolidation for Senior Citizens

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Few people have more financial choices, yet more opportunities to be overwhelmed by those choices, than senior citizens. Seniors are among the largest demographic of mortgage-free home owners. They also tend to be financially practical and frugal, incurring as little debt as possible. Unfortunately, the rise of more options designed to help seniors also has made the debt consolidation process more difficult to understand and act upon.

Seniors are among the most conscientious and credit-worthy borrowers in America, but this unfortunately has translated into two bad statistics. First, credit card debt has doubled for those over 65 in one decade. Second, bankruptcy has tripled! In the ever-changing world of finances, senior citizens cannot be left behind.

Senior citizens are the number one target of scammers seeking to get personal data. Almost half of all identity theft in America involves misappropriating credit card data. Thus, it would be wise for seniors who have had problems with credit card debt to review all of their credit card data both past and present, and to keep close watch for unusual items, unexplained costs, or repeated charges.

Fortunately, lawmakers and defenders are beginning to crack down on the problem. For example, the State of Washington recently settled a lawsuit against a financial advisory company that practiced visits at senior citizens’ homes. The Attorney General’s office declared that there was a serious risk that the salespersons could obtain personal data in such a setting.

This is not to say that seniors cannot handle their own affairs, obviously. Seniors often have no problem taking on a fight and certainly do not have a problem winning. Credit cards can be made safer through simple strategies that you can ensure for yourself. You should ask your issuing bank about identity theft protection, find out limits on liability, ask about security cards, require a photograph on your card, and consider cards with intentionally low credit limits.

Consolidating debt without the use of a home is preferred, because a home often is a senior’s irreplaceable asset. In other words, seniors need to be twice as cautious as the rest of the population when risking a home. Seniors who have fixed incomes face greater risk to the durability and stability of that income. For example, an illness or needed prescription may mean that there is no disposable income left for a home loan. If you decide to opt for debt consolidation using home equity after working with a certified credit counselor, you also should consider cutting up those credit cards to celebrate!

As is the case for anyone worried about debt payments, examining your budget is useful. Credit counselors are specially trained to help seniors, and you should not hesitate to see a counselor before you come across a problem. Most large communities have volunteers for such a purpose. Contact your local social services department for a list of approved advisers who will provide you with a free initial consultation.

Seniors additionally have some creative legal options that can successfully utilize the home to pay off credit card debts. You must consult with a lawyer to this end. Lawyer referrals can be found by contacting your local or state bar association. Ask for a no-cost consultation or an attorney who provides ‘pro bono’ (Latin for ‘no cost’) work for seniors.

One such legal option is the reverse mortgage, in which a bank pays a homeowner out of the home equity. At the end of the process the home may have no equity left for inheritance, but, on the other hand, it almost turns your home into your job. Another option is to sell your home (perhaps to your kid(s)) while keeping a life estate, thus assuring that your house will remain a home for the rest of your life.

The unique circumstances of senior citizens mean unique options and risks when it comes to debt consolidation. There almost certainly are free sources in your community that are trustworthy and will help you determine your best financial plan. There also are competent lawyers with whom you may speak. No matter which direction you choose, you deserve piece of mind and the money for which you have worked so hard.