Editorial Policy

Elderly Couple Stuck in a Debt Trap

Erica Sandberg

September 5, 2012

QDear Erica,

What do you recommend for an older couple who cannot work but has racked up an enormous amount of debt and is losing their home because they have no income? Social Security is only enough to provide food. Living with a relative is not possible. — Holly

AHi Holly,

To give precise advice, it’s important to know why this couple got into debt and whom they owe. Was it due to compulsive shopping? Under-planning? Extreme emergency expenses? It matters!

For example, if the bills were a result of medical procedures (a strong possibility, since as we age our health costs tend to increase), it’s not a spending issue. Tragically, millions of Americans of all ages are saddled with astonishingly high medical debts. Savings can disappear quickly when trying to cover them all.Ask Erica

The good news is that medical bills are unsecured. If the couple can’t pay, the worst that can happen is a lawsuit. That may sound bad, but even if the creditor wins the case, a judgment would do very little if there is no property or income to take. Unless the house has a lot of equity in it — unlikely, if they are facing foreclosure — the property is probably safe from a forced sale. Social Security income is protected. For these reasons, this couple might be considered “judgment proof.” To put an end to the collection calls (which they are likely to receive, if they aren’t getting them now), they can send a cease and desist letter or even file for bankruptcy.

Assuming that the couple can afford to manage their house payments and necessary expenses if they stop paying their creditors, they ought to concentrate on paying for those needs. They may be able to save their house and eat this way. Still not enough money to go around? They will have to be realistic and possibly give up their current home to move into one that they can afford.

However, if the couple has over-used plastic, that’s a different problem. Lines of credit are not paychecks and banks aren’t charities. Age and circumstances notwithstanding, when you charge an item or a service, you are borrowing money. The lender has every right to expect repayment. It is the cardholder’s responsibility to send at least the minimum payments that the issuing bank expects.

If it sounds like I am being un-sympathetic to the struggles of financially strapped senior citizens who owe money to their credit accounts, please trust me that I’m not. Quite the opposite in fact, because it pains me to see anyone — especially older people who cannot work — deal with demanding creditors, as they can be quite scary.

If credit card debt is the problem, my recommendation is to visit a nonprofit credit counseling organization. Appointments are free, and the counselor will review the couple’s situation in great detail and then develop a plan based on their cash flow and needs. They will not suggest a debt management program unless the couple can afford it, so don’t worry about them being shoved into such an arrangement.

Again, as with medical bills, credit card debt and personal bank loans are not secured by property. They are given in good faith, and the only way for the bank to claim what’s due is through legal channels. And if this couple is judgment proof, there would be few — if any — repercussions.

Finally, I would urge them to reach out to organizations that can help with the necessities. Every accredited credit counseling agency also provides contact information for local and national charities, as well as guidance on how to qualify for reduced phone service and utility programs that are available to low-income individuals.

Got a question for Erica? Send her an email.