Debt Relief Options for Senior Citizens

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Senior indebtedness is a major problem in the United States. But there are options for seniors in debt.

According to Kim Cole, community engagement manager of Navicore Solutions, a non-profit credit counseling agency based in Freehold, N.J., up to 60 percent of her agency’s clientele are in the 55- to 65-year-old range. The biggest problem with senior-held debt, she noted, is that the borrower’s age makes it harder for them to get out of it.

Between the rising cost of healthcare, adult children moving back home and the challenge (or impossibility) of increasing their income, seniors face major obstacles to becoming debt free, Cole said. However, there are options to make the journey easier. Seniors just have to be willing to ask for help, which Cole said has been historically difficult for the Baby Boomer generation to do.

What does American seniors’ debt look like?

According to the Federal Reserve Bank of New York, as of the fourth quarter in 2018, Americans age 50+ held about $6 trillion in debt. Seniors are continuing to borrow, with the Consumer Financial Protection Bureau (CFPB) reporting the following loan originations for Americans age 65+ in June 2018 alone:

Loan TypeOrigination Amount
Auto Loans$6.35 billion
Credit Cards$6.88 billion
Mortgage$15.1 billion
Student Loans$188.2 million

Debt relief programs for seniors

First and foremost, if you’re a senior receiving collection phone calls or letters, you need to know your rights. According to the CFPB, the benefits that you receive from Social Security, the Veterans Administration and the Supplemental Security Income program — if received via direct deposit or government-issued prepaid card — are usually protected from debt collection efforts. However, child support, spousal support, federal taxes and federal student loan debt are notable exceptions to this protection.

That said, if you’re shouldering burdensome debt, you do have a few options to consider:

  • Assistance programs
  • Credit counseling/debt management plan
  • Reverse mortgage
  • Bankruptcy

Assistance programs

The U.S. Administration on Aging (AoA) offers the Pension Counseling and Information Program to help you track down and obtain pension benefits that may be due to you. In addition, the AoA offers a nutrition program that feeds over 900,000 meals a day to older adults in need.

You may also be able to get help covering your Medicare-related costs through a variety of government programs. While these benefits don’t directly pay your creditors (and certainly don’t constitute an exhaustive list of what’s available), they could help your cash flow, enabling you to pay more toward your debt (or take on less of it).

Credit counseling and debt management plan

Credit counselors with nonprofit counseling agencies can offer customized financial programs for people struggling with money matters, generally at no or low cost. Those programs may include enrollment in a debt management plan.

According to Mike Marsden, executive director of San Diego-based non-profit credit counseling agency Debtwave Credit Counseling, a debt management plan can help you shed your credit card debt in three to five years. The plan potentially reduces interest rates, closes credit card accounts and requires you to make a single payment to the credit counseling agency. The agency then pays your creditors, he said.

Reverse mortgage

A reverse mortgage can be an appropriate debt-relief solution, particularly if you have no heirs, said Cole. A reverse mortgage lets you trade some of your home equity for cash, in return for giving up some of the future profit that can be made from selling the home.

You can use it to pay off other debts such as credit card balances, but there are caveats. One challenge, said Cole, is for you to avoid racking up more debt after it’s paid off.

In order to qualify for a reverse mortgage, you must be age 62 or older and either own your home outright or owe very little on your mortgage. (If you still have a high mortgage balance, you may not get the loan.) Cole also warned that once you take out a reverse mortgage, the equity in your home is tapped and you typically can’t refinance to help with future debt burdens.

Cole further cautioned that a reverse mortgage needs to be a family decision, because you’ll be borrowing against your legacy. A reverse mortgage is, in fact, a loan that likely will be repaid by selling your house.

There are other important nuances to consider, says the CFPB, such as the housing needs of others living in the home. If they’re not co-borrowers on the loan, they may have to vacate the property if you die or spend more than a year in a medical rehabilitation facility.


Seniors often look at bankruptcy as an embarrassment. And while it should be seen as a last resort, bankruptcy becomes appropriate when you have exhausted all other options to make payments to creditors. Cole suggested that you should consider bankruptcy if keeping up with monthly debt payments would cause you to neglect your needs.

When to turn over your finances

You should turn over your finances to a loved one when you forget to pay bills, feel intimidated by money management or no longer understand what’s happening with your finances. Loved ones should pay close attention to changes in your behavior such as making irregular purchases or picking up new spending habits.

It’s a good idea to set up a power of attorney (POA) to assist with financial matters when you have difficulty handling them on your own. Choose your POA carefully, naming someone that you can truly trust. The designation can be canceled or changed if needed.

Debt upon death

Your estate is responsible for your debts after you pass away. If you have no assets, the debt goes away.

However, according to AARP, which advocates for older Americans, secured debts such as a mortgage must be paid by your loved ones. Otherwise, the assets that back your loans, like your home, must be sold.

AARP also says that joint applicants and co-signers will be liable for your credit card bills and private student loan balances after you die. It further cautions that if you reside in a community property state, your spouse may be responsible for paying off your debt if there’s enough property available to do it.

There’s some good news, though. As long as you properly name beneficiaries, creditors have no claims to assets such as life insurance proceeds, retirement accounts or payable-upon-death bank and brokerage accounts.

Final thoughts

Seniors, often reliant on a single income, may feel like they’re running on a treadmill, completely unable to make progress toward paying off their debt, said Marsden. However, there are a variety of avenues available that can help you get off of that treadmill. The first important step is asking for assistance.

Laura Gariepy provides custom content solutions to business owners so that their audience is inspired to do business with them. She blogs at Every Day by the Lake about personal finance, business, careers, and of course, creating content. When she isn’t writing, she’s hanging out with her fiancé, her mother-in-law, and her cats, sitting happily by her lake.

The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.