More and more seniors are filing bankruptcy nowadays due to various socio-economic reasons like expensive medical expenses, social security payments, and huge unsecured debts. .
If you look at the numbers, you’ll find that the average age of 1 in 8 bankruptcy filers, during the period between 2013 and 2016, was 65 years. As per Robert Lawless, a senior professor at Illinois’ College of Law, almost 21% of bankruptcy filers belonged to the age group of mid-fifties and early sixties during the said period. .
High medical costs and debt problems are the biggest reasons behind filing bankruptcy. But there are few gross money mistakes, which are compelling senior citizens to file bankruptcy. Here are a few of them.
1. Not using the debt relief programs:
Seniors often file bankruptcy without exploring the other debt relief options when they lag behind their payments. That’s wrong basically because it has several negative side-effects. For instance, senior citizens would lose their non-exempt assets. Plus, their credit score would go down by about 200 points. That’s a lot. And, it takes time to improve their credit score.
Debt relief programs like debt settlement and debt consolidation can help to improve financial life by resolving all sorts of debt issues. These programs involve intense negotiation with creditors for grabbing better repayment plans. In debt settlement, seniors get a reduced payoff amount. In debt consolidation, seniors get an interest rate reduction. The catch is, these programs are effective for only unsecured debts.
In case of secured debts like mortgage, seniors can opt for a reverse mortgage, refinancing, and loan modification.
2. Borrowing payday loans to repay bills:
Some senior citizens (who are working) borrow payday loans to repay their outstanding bills. These are short-term loans with high-interest rates and have dangerous consequences when they are left unpaid. It’s extremely difficult for senior citizens to pay off these loans and that too within a short term. These short-term loans increase the debt amount and cripple the financial life of senior citizens. As a result, seniors file bankruptcy out of compulsion.
3. Taking out student loans:
This is yet another money mistake often made by seniors. Some senior citizens take out student loans for providing financial support to their children. It’s a wrong financial move. When senior citizens are already in financial problems, they shouldn’t take additional debt burden on their shoulders. It’s wrong to offer financial support to children when they can get several years to pay off student loans. Parents have a natural tendency to provide financial support to adult children. But do they have enough financial stability to offer support to adult children? That’s the main question.
According to studies, 20% of senior citizens (average 65 years) file bankruptcy for providing financial support to others. It’s high time senior citizens stop taking up additional debt burden when they are financially fragile. Delinquent debts not only push retired people toward bankruptcy but also damage their credit.
4. Not consulting an attorney:
Debt attorneys have profound legal knowledge and expertise. They can help retirees/senior citizens tackle debts and collection agencies smartly. They can also help senior citizens to complete the bankruptcy process smoothly. Unfortunately, many senior citizens hesitate to consult attorneys owing to the fear of paying fees. That’s another wrong financial move.
Debt attorneys know the laws and understand the psychology of creditors. They know how to control abusive debt collectors and pay off debts while saving money at the same time. Those who are worried about fees can call 800-530-OVLG and know their options. This is a no-obligation free counseling session wherein a financial coach analyzes an individual’s debt situation and suggests quick solutions to problems.
Conclusion
If you have senior citizens in your house, then make sure they don’t commit the aforementioned financial mistakes as bankruptcy is not a good option for them.
Some seniors liquidate assets and retirement savings accounts when they need money. This is the worst financial mistake that a senior citizen can commit. What senior citizens forget is that it takes a lot of time to build retirement savings funds. This is their last asset on which they can bank upon. Plus, there may not be enough funds in the retirement savings accounts to clear all kinds of debts.
