“Dear Steve,

Old bank secured line of credit loan – already went to court – judgment against me for debt – judge said being on SS is not reason enough to dismiss – was actively working until I had a triple-bypass 5 years ago – haven’t been able to work since then & due to high medical bills (I have no insurance – only medicare) I incurred following the surgery & the year+ it took me to recover, payments on the loan stopped & I have not been able to afford payments ever since without severely cutting back on my food/bill costs I’m already juggling.

I’m 76 – had triple bypass heart surgery 5 years ago as a result of going to the ER for not feeling well. I was actively working & paying bills until that time – took about 1 full year to recover from the surgery. That caused me to stop working (self-employed). I am now on medicare ($1100/month) & my pension ($55/month). I had to & still have to make monthly payments on the bills from the surgery & current bills. I had an existing line of credit loan I had been paying off until the surgery. I do not have insurance other than medicare. The bank took me to court & the judge stated being on medicare & SS & managing the medical bills was not reason enough to dismiss & ruled that I had to pay off the $10K balance. I cannot figure out how to work this into my already stretched budget. The only asset I have is my house – paid off several years before the surgery (worth about $125K at best). The bank is soon going to turn me over to collections because they want at least $200/month which I cannot afford unless I eat every other day or live without power or water which I don’t want to do. I am not eligible for legal aid – they are only taking divorce cases with children right now. I am thinking bankruptcy may be the best answer however I can’t afford a lawyer to file. Do I have any other way to obsolve this debt? I’d rather pay off the debt but cannot find any possible way to do that & continue to survive financially. Seems all I will be doing with payments that I can afford is paying off interest & the debt will continually be in existance. What do you suggest?

Roger”

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The Answer

Dear Roger,

I understand the judge’s position. The fact you are on social security does not make you exempt from being sued, just having that income garnished.

It seems the real issue here is the big asset you’ve got, the house. I would not be surprised if the creditor placed a lien against the house. That might not be the worst case for you but the lien would most likely earn interest until it was satisfied on the sale of the house. Essentially it would erode your equity a little, bit by bit.

You appear to be asset rich but cash poor. I’m not sure if you would even want to explore something like a reverse mortgage to consider taking some money out of the house to satisfy or settle the judgement.

It’s certainly something worth exploring and I’d suggest you discuss this with a free HUD Housing Counselor before you do anything.

Alternatively you might just want to consider selling your house now, taking a bit of the cash and paying off or settling this debt and then using the cash to help you pay rent someplace. I know that’s not a popular option but I’m worried about the house becoming a financial burden as you get older. How in the world would you be able to afford a new roof or emergency repairs?

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

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