Are you up to your eyeballs in debt? Is it stressing you out?
Well, you’re not alone and there are viable options for you to chose from.
In a Baltimore Sun article, “Seniors Grow Old Under Debt” , they reported:
The average debt (including mortgages) for 55-and-older households more than doubled from 1992to 2007, topping out at $70,370. (Source: Employee Benefit Research Institute).
Adults 65 and older are the fastest-growing age group filing for bankruptcy protection. (Source: University of Michigan law professor John A. E. Pottow).
Adults 50 and older owe 17% of the nation’s student loan debt. (Source: Federal Reserve Bank of New York).
Debtors 60 and older represent the fastest-growing segment seeking advice and assistance from the Association of Independent Consumer Credit Counseling Agencies.
Experts cited in the article say health-care bills are the leading cause of debt for those in their 50s and 60s.
But even if you’re not ready to retire, Bankrate.com, an online lending and credit industry site, reported that nearly half of all the women recently surveyed said they had more credit card debt than savings.
If you’ve been laid off during the economic downturn or suffered any type of medical problems, chances are you have NO savings left and lots of debt – often at onerous interest rates.
But, once you’re healthy again and have some money coming in, getting rid of that debt can be a major concern. Even if the bill collectors aren’t calling, having high interest debt is stressful.
So, What Are Your Options?
When you’re ready to get out from underneath your debt load, you’ve got basically 3 ways to go:
- The DIY method (which I can help you with – DIYwMD),
- Employing a Debt or Credit Counseling or Debt Relief organization possibly using debt settlements or consolidation loans and
- Declaring Bankruptcy (there are two types).
I suppose you could keep living with it, staying up nights worrying about which creditor you can pay this week, but I doubt that’s why you landed here.
Start with some research.
Many debtors start looking for help online and find the “non-profit” debt relief ads compelling. Maybe you’ve seen some of these?
Debt and Credit Counseling Services
these companies often bill themselves as “non-profit” in an attempt to seem altruistic. However, instead of making profits they may pay the founders or vendors very large salaries/fees and sometimes the entire family is on the payroll. A senate investigation of non-profit debt and credit counseling services concluded:
“Too many abusive credit counseling agencies continue to take advantage of average Americans trying to dig their way out of debt — charging excessive fees, taking for themselves payments intended for creditors, and acting under the guise of a non-profit charity when they are really for-profit operations,” said Sen. Carl Levin.
The IRS has conducted extensive investigations into these businesses and revoked some of their non-profit statuses. Others have been forced to change their business practices. They also report only 20 – 50% of clients are successful and they take 3-5 years or longer to complete.
The counselors (most do not have any formal training in finances or counseling) will do an evaluation of your financial situation, help you set a budget that includes your debt repayments, and may attempt to get your creditors to reduce your interest rate or principal due.
The good ones provide education and training, a framework and accountability as you progress through the program. Many collect one monthly payment from you and distribute it to your creditors, after deducting their monthly fee.
There are two industry organizations you can use to vet your choices: the National Foundation for Credit Counseling (http://www.nfcc.org/index.cfm) and the Association of Independent Consumer Credit Counseling Agencies (http://www.aiccca.org/).
If you think the structure and accountability are worth the monthly fee for you, read our detailed report: How to Choose a Credit Counseling Service
You may also find an independent debt, credit or money coach or counselor. These are people who specialize in helping individuals make changes in their financial lives.
You may find them giving free introductory classes at local libraries or civic centers. Many work on military bases or through credit unions. Some now work online and by phone if you can’t find a qualified counselor locally. Most take private clients for a reasonable fee.
If your debt problems are too big to manage or settle, you’ll have to consider bankruptcy. While it’s not the end-of-the-world, it is a big decision and will negatively affect your financial life for the following decade or more.
There are two types of personal bankruptcy:
- Chapter 13 and
- Chapter 7.
Each is filed in federal bankruptcy court with fees that run several hundred dollars plus attorney fees.
Chapter 13 allows people with an income to keep property, like a mortgaged house or a car. The court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of your debts.
Chapter 7 or straight bankruptcy involves liquidation of all assets that are not exempt (which may include automobiles, work-related tools, and basic household furnishings). Other property may be sold by a court-appointed trustee or turned over to your creditors.
Before you file for Chapter 7 bankruptcy you must satisfy a means test that requires you to verify that your income does not exceed a certain amount (varies by state). You’re also required to get credit counseling from a government-approved organization before you file for any bankruptcy relief.
After filing for Chapter 7 bankruptcy, you must wait eight years before you can file again under that chapter. The Chapter 13 waiting period is much shorter – it can be as little as two years between filings.
Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both also provide exemptions that allow filers to keep certain assets, although the amount for exemptions vary by state.
Either type of bankruptcy usually does not erase child support, alimony, fines, taxes, or student loan obligations. And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property that a creditor has an unpaid mortgage or security lien on it.
Your friendly federal government offers advice (aren’t they the world’s largest debtor?) at: http://www.consumer.ftc.gov/articles/0150-coping-debt#self-help