Legal Protections for Seniors in Debt
>> Sunday, March 18, 2012
Senior citizens who find themselves in debt have few prospects to improve their financial circumstances. Many are retired and cannot reenter the workforce to increase their bottom line. Debt accumulation is exacerbated when most was caused by excessive medical bills and a housing market that leaves many owing more than can ever be repaid. Further, seniors have very few debt relief options to explore.
Nevertheless, there are some legal protections for seniors who find themselves in debt. One option is debt settlement, also known as debt reduction. This can protect seniors from collection efforts typically used against younger people who are in debt. Bankruptcy and reverse mortgages are additional options for seniors to consider.
Debt settlement works by negotiating to pay off an account for less than the total amount owed. The creditor has the option to accept one lump sum payment. No payments are made while the person saves money to make the lump sum payment. Some creditors may want to pursue collection in court and could win a judgment against seniors. However, state and federal laws protect the income of seniors from garnishment. Creditors will have a difficult time collecting and may have to wait for the lesser payment.
The fact that creditors cannot garnish fixed income and bank accounts can strengthen a retiree’s negotiating power. Creditors cannot demand seniors increase their earnings.
State and federal laws prohibit creditors from garnishing disability and Social Security income. Some pensions are also protected by these laws. The next step for a creditor is attempting to levy a senior citizen’s bank account. State and federal laws also protects bank accounts where funds are from disability, Social Security and pension benefits. In some states, creditors have a right to place a lien on a senior citizen’s property.
Most senior citizens live on savings or a fixed income and little to no cost-of-living adjustments (COLAs) to keep up with rising costs. High medical expenses and credit card bills may cause some retirees to seek bankruptcy protection as another legal recourse.
There are several contributing factors to seniors seeking bankruptcy protection from the burden of debt. As mentioned, medical expenses not covered by health insurance plans can grow to unmanageable levels. The economic downturn lead to significant losses in retirement accounts.
A limited fixed income causes many retirees to use credit cards to make up the shortfall. Some seniors will use credit cards to pay for daily necessities such as food and medications. Before long, credit cards are maxed out and interest charges make it harder to manage. At this point, bankruptcy is a valid option.
An emerging trend for seniors seeking debt relief is a reverse mortgage loan. This allows seniors to use equity in their home to repay debt or even to cover living expenses. The mortgage is repayable under terms and conditions set forth when the loan is approved.
Some creditors might be persistent in pursuing senior citizens to collect on past due debt. However, leveraging state and federal laws with legal options can bring some relief.
Nevertheless, there are some legal protections for seniors who find themselves in debt. One option is debt settlement, also known as debt reduction. This can protect seniors from collection efforts typically used against younger people who are in debt. Bankruptcy and reverse mortgages are additional options for seniors to consider.
Debt settlement works by negotiating to pay off an account for less than the total amount owed. The creditor has the option to accept one lump sum payment. No payments are made while the person saves money to make the lump sum payment. Some creditors may want to pursue collection in court and could win a judgment against seniors. However, state and federal laws protect the income of seniors from garnishment. Creditors will have a difficult time collecting and may have to wait for the lesser payment.
The fact that creditors cannot garnish fixed income and bank accounts can strengthen a retiree’s negotiating power. Creditors cannot demand seniors increase their earnings.
State and federal laws prohibit creditors from garnishing disability and Social Security income. Some pensions are also protected by these laws. The next step for a creditor is attempting to levy a senior citizen’s bank account. State and federal laws also protects bank accounts where funds are from disability, Social Security and pension benefits. In some states, creditors have a right to place a lien on a senior citizen’s property.
Most senior citizens live on savings or a fixed income and little to no cost-of-living adjustments (COLAs) to keep up with rising costs. High medical expenses and credit card bills may cause some retirees to seek bankruptcy protection as another legal recourse.
There are several contributing factors to seniors seeking bankruptcy protection from the burden of debt. As mentioned, medical expenses not covered by health insurance plans can grow to unmanageable levels. The economic downturn lead to significant losses in retirement accounts.
A limited fixed income causes many retirees to use credit cards to make up the shortfall. Some seniors will use credit cards to pay for daily necessities such as food and medications. Before long, credit cards are maxed out and interest charges make it harder to manage. At this point, bankruptcy is a valid option.
An emerging trend for seniors seeking debt relief is a reverse mortgage loan. This allows seniors to use equity in their home to repay debt or even to cover living expenses. The mortgage is repayable under terms and conditions set forth when the loan is approved.
Some creditors might be persistent in pursuing senior citizens to collect on past due debt. However, leveraging state and federal laws with legal options can bring some relief.
Sheryl Fabia is an in-house writer for Franklin Debt Relief. She writes articles on various financial matters and has them published across the web.
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