By Eric Olsen
You would never play American football and apply soccer rules. This is simply common sense. The rules are different. The laws, rules, and guidelines for retired seniors with debt problems are different than for a younger person. Unfortunately, there are many articles on the internet that give the same cookie-cutter advice to seniors with financial problems as that given to young persons.
Why are the rules for seniors with debt problems different? Lawmakers passed laws that protect seniors’ income and assets differently than younger persons. Society doesn’t want seniors to go without basic needs. Seniors’ income often decreases when they retire. It is difficult for them to replace resources, money, or assets that they spend or sell. When it’s gone, it’s gone. As a result, the answers for seniors with debt problems are different. Sometimes the advice given is in the financial interest of the advice-giver and not the senior needing help. That’s why seniors need to know the rules, laws, guidelines, and advice that apply to them:
- Social Security, pensions, disability, and VA benefits are protected by federal and state laws. This income can’t be garnished or taken by debt collectors. It’s safe and protected for your needs.
- Because your income is protected, you don’t need to borrow money, refinance, sell assets, borrow from your kids, go back to work, or liquidate precious retirement savings to pay old debt you can’t afford to pay.
- You want to preserve your retirement income, savings, and assets for your future needs. It can be a big mistake to waste your nest egg paying old debt that leads you into poverty.
- You don’t need to feel guilty if you can’t pay your old debt. You are not a bad person. Life’s circumstances often make repayment impossible. Lenders still make huge profits because of their high-interest rates.
- Seniors don’t have the same need for good credit as a younger person. It’s still possible to keep a credit card with a smaller balance by keeping current on that card, even if you default on other debt.
- There is a federal law called the Fair Debt Collection Practices Act. It provides that when you send a “cease and desist letter,” a debt collector can no longer legally call or send you demand letters.
- Seniors often are not sued because the creditor knows they are “judgment proof.” If you are sued and owe the money, you don’t have to fight a lawsuit or go to court. You are judgment proof, and they can’t collect.
- Debt settlement and nonprofit debt management companies help people who owe past-due debt. They are the biggest offenders in giving incomplete advice to seniors. These companies never tell seniors that their income is protected. They make money when seniors enroll in their programs.
- Every state has exemption laws that protect a person’s property like a home, car, and household goods. Even if you own property that is in excess of a state’s property exemption laws, a consumer judgment creditor will never attempt to take that property.
- Because your income and assets are safe, you probably don’t need to file bankruptcy.
- You don’t have to worry about your Social Security being garnished for back taxes or a past-due student loan. Lower-income seniors can apply for “Currently Not Collectible” status with the IRS and pay nothing, or at most, a small monthly amount. If you have a student loan, you can apply for an income-based repayment plan and often pay nothing each month.
- You don’t have to keep paying for an RV or car you can’t afford. You can stop paying and let it go back. The contract you signed provided for that possibility. You might owe the lender for the deficiency amount, but you probably won’t be sued – and if you are, you’re judgment-proof.
If you are lower-income senior and receive advice that doesn’t include a discussion of these rules, laws, and guidelines, you are being given the same cookie-cutter advice that is given to younger persons. There is help available. There are nonprofit organizations that help lower-income seniors facing these problems.
Eric Olsen is an attorney and the Executive Director and founder of HELPS, a 501c nonprofit law firm that assists lower-income seniors and disabled persons in all 50 states with debt they can’t afford to pay. Eric has been an attorney for over 40 years assisting persons dealing with financial problems.