Seniors, Credit Card Debt, and Bankruptcy

A new study conducted by the University of Michigan Law School indicates that more than two-thirds of Americans 65 and older who turn to bankruptcy protection for financial relief cite overwhelming credit card debt as one of their primary reasons for filing.

This is a troubling statistic, particularly if you or your parents fall into the category of senior citizens who might be at risk for heavy credit card debt. Here’s what you need to know to help yourself or your loved ones.

The Costs of Aging

Seniors can be at risk for serious credit card debt for a number of reasons:

Limited income: Senior citizens who rely only on Social Security or some other form of reduced income generally have less money on a month-to-month basis than those with supplemental pensions or hearty savings accounts. As prices rise, those on fixed incomes may find they have nowhere to turn to cover their expenses other than credit cards, which can lead to a cycle of debt.
Continued expenses: Seniors who don’t own their homes face a particular risk, because missing monthly payments for their living quarters could lead to homelessness (at worst) or serious financial headaches (at best). Plus, older people still making payments on their homes don’t have the option of turning to a reverse mortgage for funds if things get tight financially.
Unfamiliarity with new media: Seniors who go online may fall victim to online financial scams more easily than younger tech users who have developed more scam-conscious online habits.
Medical bills: Even with the help of Medicare, aging Americans may find their medical expenses climbing higher than they can reasonably afford. Naturally, the only reasonable cure may seem like taking on new credit card debt.

Helping Aging Family Members Deal with Debt

So what can you do if you or a loved one is struggling against debt on a limited income? Consider these pointers, culled from this post on seniors and debt from WalletPop.com.

Understand your rights: Under the Fair Debt Collection Practices Act, Americans have the right to ask debt collectors to stop contacting them about a specific debt. This request has to be made in writing, but once made, debt collectors can no longer call a debtor with threats or harassing messages.
Consider the bankruptcy option: For seniors with significant assets worth protecting, filing for Chapter 13 bankruptcy may be a viable way to eliminate their unwanted debts. But bankruptcy may not be the right option in some cases.
Know the alternatives to bankruptcy: While bankruptcy appeals to many harassed seniors because its automatic stay prevents creditors from making contact with filers, it may not be the best option for someone with limited income and assets. Elderly Americans may benefit from credit counseling, debt settlement or simply living a frugal life while indicating to their creditors that they have no assets to take – essentially, by becoming judgment proof.

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