For many Americans, including those entering retirement, being in debt is a way of life. According to numbers published by the Transamerica Center for Retirement Studies, four in every 10 retirees report getting out of debt as a top priority. Many of them are struggling to the point where bankruptcy is their only way out. In fact, the Consumer Bankruptcy Project reports that one in every seven bankruptcy filers is over the age of 65.
One of the reasons why seniors are struggling financially has to do with living on a fixed income. All it takes is for one medical crisis to strike to set them back significantly in their financial goals. The hopes of entering retirement debt free can be difficult for those carrying large amounts of credit card debt and student loan debt. It also does not help that larger companies cut back or even took away pensions for American workers who pinned their hopes of retirement on these plans.
The fact that many older Americans are carrying a mountain of debt does not mean that all hope is lost. Financial experts recommend that they first take an inventory of all debt that they do have, noting interest rates for each account and repayment terms. They recommend tackling one account at a time, starting with those that have the highest interest. This category normally involves credit cards and unsecured loans. It can be tempting to use credit cards to supplement fixed incomes, but financial experts warn against this practice.
Rather than use credit cards to pay a high bill, it is recommended to directly work with the creditor to put together a payment plan or even negotiate down the total amount owed. If the consumer already has a high balance on his or her credit card, a balance transfer to a card with a zero percent interest rate can help so long as the person is able to pay the balance down before the promotional period ends.
Mortgages also present a problem for many older Americans. Approximately 40 percent of all homeowners over the age of 65 still had a mortgage as of 2016, which is up 20 percent from figures reported in 1989, according to the Joint Center for Housing Studies. While this type of debt is not as concerning as credit card debt, it can still be difficult for seniors living on a fixed income. The last thing they want to do is use money from their retirement to pay off a mortgage. Many homeowners have tried to refinance to pay off a mortgage before retirement, but this plan can backfire. One possible consideration instead could be to downsize and move into a smaller residence that is less expensive with less upkeep and fewer taxes. By selling the bigger home and using that cash to purchase a smaller home, seniors can save themselves years of paying down a mortgage into retirement.
Another type of debt that seems to plague older Americans more than others is medical debt. Of those older Americans who have filed for bankruptcy, around two-thirds of them say that medical debt is the reason for their filing. Many times, these consumers only bring in enough money to pay for their daily living expenses. Medicare often does not fully pay for seniors’ medical expenses, which pushes them to rely on credit or other methods to pay down these bills. Bankruptcy is a way for these individuals to discharge this debt since it is not considered a priority debt in bankruptcy. Prior to that, seniors are encouraged to negotiate directly with the medical provider on financial assistance to pay down the bill.
Dealing with creditors or debt collectors is stressful, however, which is why we encourage seniors struggling with debt to consult with an experienced bankruptcy attorney. Credit counseling can also be a viable option, so long as the counseling agency is reputable. Nonprofit credit counselors may be able to work with the consumer directly to set up a debt management plan, but these companies should be properly researched to ensure that they are not a debt settlement scam.
If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
Source: Kiplinger – Tips for Dealing with Debt in Retirement