Debt Relief for the Elderly

Too much debt still lingers from the mid-2000s. But if you are elderly or disabled, you have protections from rapacious debt collectors. Know your rights.

People who are employed have the flexibility to manage their financial situation. But senior citizens and the disabled are still struggling to come out from the dark pit of debt. This is because they are not in a position to generate income to pay off their obligations.

This vulnerable population sometimes gets harassed from debt collection agencies that resort to illegal tactics, such as threatening to imprison the borrower, repossess her home or other assets amd garnish her disability or Social Security income.

They often insist on harsh repayment plans and neglect to mention that the borrower might be eligible for relief. They sometimes even offer a huge write-down on already discharged debt. Don’t be fooled by these illegal tactics.

If debt collectors are harassing you and breaking the law, document what is going on and report the collector to the Consumer Financial Protection Bureau.

In many cases, debts can be resolved without bankruptcy or default. Rest assured that debtor’s prisons do not exist in this country. In some states, creditors can’t take your home to settle a debt. If Social Security, pension and disability benefits are the debtor’s only income, the creditors can’t take out money from these sources. This is the case even if creditors sue for the money.

Retirement accounts are exempt, as well. Though your creditors might ask you to withdraw money to pay off your debt, they can’t pull it from your 401(k). Those funds are protected, even in the case of bankruptcy. Individual retirement account assets are also exempt up to $1 million.

This doesn’t mean that debtors can forget about the money that they owe. Enrolling in a debt relief program can help the senior citizens and the disabled to settle their debt without losing too much of their monthly income – and sleep peacefully.

If you hire a debt relief company, professional arbitrators negotiate with the creditors on your behalf. They can lower the interest rate on the principal balance to make it affordable to pay off. Creditors often realize that they can’t demand retirees and handicapped folks to improve their earning power, and they often accept a more lenient settlement.

Senior citizens nearing the end of their life spans might balk at having to pay since they have the option of legal protection and don’t have much incentive to improve or preserve their credit ratings. But settling your account by enrolling in a debt relief program prevents blemishes on your credit report. Even if you don’t plan on taking out loans in the future, there is no telling when you might need good credit.

Kimberly J. Howard, CFP, CRPC, ADPA is a Certified Financial Planner and the owner of KJH Financial Services, a Fee-Only practice located in Newton, Mass. (781-413-4879). Please visit us at www.kjhfinancialservices.com or email Kim at kim@kjhfinancialservices.com. Follow us on Twitter at @kimhowardcfp.