Most people that write about debt and seniors want to provide accurate information. Sadly, many do not. Some articles on the internet do more harm than good. A good example is an April 4, 2022 article on the website Care.com, “Debt forgiveness for seniors: 5 strategies to consider.”
The article starts fine, laying out the reasons for seniors with debt. Then the article turns to “Debt forgiveness options for older adults.”
The first option discussed is “File for bankruptcy.” Immediately the author’s lack of knowledge or confusion is evidenced. Chapter 7 and chapter 11 are stated as the most common type of bankruptcy.
This was an error, as the second most common type of bankruptcy is chapter 13. There are probably at least a thousand or more chapter 13 bankruptcies filed for every chapter 11.
The discussion and explanation of bankruptcy continue to decline. Nowhere in this article is it ever pointed out the most essential fact seniors with debt problems need to know. Their income, Social Security, and virtually all pensions, disability, and VA benefits are protected by federal and state laws and can’t be garnished or taken from them. Because of this, they don’t need to pay the old debts they can’t afford. Because their income is safe, bankruptcy is unnecessary for the vast majority of lower-income seniors who have financial problems.
Option two suggests enrollment in a debt consolidation program. Sadly, many debt management and debt settlement companies don’t explain to seniors that their income is safe. It doesn’t need to be used to pay the debt they can’t afford.
Instead, even nonprofit debt management companies often enroll poor seniors in programs requiring monthly payments for an old debt.
Nonprofit debt management companies have prearranged agreements with credit card companies on whose behalf they collect to keep a certain percentage of the money they receive from seniors as a “donation.”
This conflict of interest is seldom disclosed to a senior with protected income who enrolls n their programs. Furthermore, seniors are not told that under a federal law called the Fair Debt Collection Practices Act, there is a means to stop unwanted contact with debt collectors.
The advice offered in option three is extremely harmful to many seniors. This option discusses reverse mortgages to pay old debt. A reverse mortgage for many seniors is a godsend. However, using the proceeds from a reverse mortgage to pay an old debt is rarely a good idea- especially for lower-income seniors. They need the equity from their home to supplement their meager retirement income. Remember, the seniors having financial problems are, by and large, lower-income seniors.
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The fourth option discusses a medical financial hardship letter. Sure, this isn’t a bad idea. But again, it would have been helpful to explain to the seniors that since their income is protected, they don’t need to pay the debt, period.
The fifth option the author proposes is to negotiate debt forgiveness. Easy to say, challenging to do, and maybe impossible.
It explains that debt collectors will often negotiate a lesser payment. Sadly, if a senior doesn’t understand their rights, they are at a disadvantage in being able to negotiate debt reduction or forgiveness. Even if they can afford to do so, a debt collector would never tell a senior that federal and state laws protected their income. They are under no obligation to explain to a senior their financial rights. That information should come from an article like this. But unfortunately, it doesn’t. Instead, seniors are left with the conclusion that there are no options but to pay the debt or hope for some reduction.
Imagine a senior trying to cross a raging river to the peaceful shore on the other side. So-called knowledgeable people on the bank tell the seniors they need to plunge into the cold water and swim across. Or try to use a rickety old boat that is leaking. Seniors are scared. Many are too weak and don’t know how to swim or row a leaky old boat. They are told this when close by is a beautiful solid bridge they can safely cross.
Why aren’t they told about the bridge? Because everyone on the bank is telling seniors, they need to swim across the river. These experts repeat what someone else is saying. The internet is full of too many people advising on a topic they really know nothing about.
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