Seniors and the disabled have few special options for debt relief, although they are eligible for more hardship and disability exceptions if they file for personal bankruptcy. Student loans and other bankruptcy-exempt debts if a judge deems that an individual is permanently disabled and unable to service their debts. Seniors are also likely to be eligible for certain kinds of medical debt relief such, as charity care.
Many seniors are living off savings or fixed income, so they have limited opportunities for increasing their income in order to pay down debt. Paradoxically, this strengthens their negotiating position when managing debts, as creditors can't realistically demand that the senior improve their earning power. Also, they are less likely to need to preserve their credit rating, as they have a lower lifespan and likely don't need to take out large personal loans, mortgages or auto loans.
Selling or Borrowing Against Assets
Selling annuities, liquidating retirement plans and stock trading accounts can all be sensible debt management strategies for seniors. These assets will be liquidated in a bankruptcy, so it is better to try to preserve at least some of them before taking on more extreme measures. For most IRA and 401(k) plans, there are special hardship provisions allowing additional withdrawals for severe debt problems. Taking on a reverse mortgage on a house can also be highly effective for seniors who own their own home and still have substantial debts.
Seniors and the disabled are in a better position to apply for charity care than most other categories of people. They should apply for any financial aid offered by the hospital where they may have debts. Federal, state and local Health and Human Services Departments should also be contacted to provide assistance with medical bills. Most hospitals require that applications for financial aid be made within six to 12 months of treatment. Families with income below 200 percent of the Federal poverty level should also be eligible for Charity Care subisides according to the U.S. Department of Health and Human Services.
Lawsuits And Bankruptcy
Social Security income and disability payments can't be garnished by creditor lawsuits, but bank accounts can be frozen or seized. Bankruptcy is a difficult option for seniors or the disabled to make as they are unlikely to be able to rebuild their financial situation afterward. In most cases during personal bankruptcy, individuals are able to keep their mortgage. If it is possible to declare bankruptcy and live with the assistance of family members, it may be a sensible choice, but if it completely wipes out savings, any kind of settlement will likely be more advantageous.