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Solutions for debt that’s burdening older Americans

According to an AARP report, recent economic conditions have been especially hard on Americans over 50. One result of the economic downturn is that older people are carrying more credit card debt. In these cases, and in others involving unmanageable debt, bankruptcy may be a viable solution.

Credit card debt comparisons

In a survey of middle-income Americans AARP summarized in its report, it was found that the over-50 segment of the population now carries more credit card debt than people under 50. The average total balance on credit cards was $8,278 for the older group and $6,258 for the younger group. Credit card debt is especially burdensome because interest rates tend to be high and penalties are charged for late and skipped payments.

The kinds of expenses older people are charging tend to be medical, dental and prescription drug costs; basic living costs for housing, groceries and insurance; and assistance for family members. Younger Americans are much likelier to charge nonessentials.

Why so much credit card debt?

Almost one-quarter of those surveyed over 50 years old told the researchers that credit card debt was at least in part due to losing their jobs. For 15 percent of the older people surveyed, job loss was the major reason they ran up the credit card balances. Although older people tend to have a lower unemployment rate, they also tend to be unemployed longer if they do lose their jobs. When they find new work, the pay is often less than they earned at their previous jobs.

Another reason for accumulating credit card debt was that the cards are used as backup funds to pay for emergency expenses, like urgent car and home repairs and medical bills for unexpected illnesses and injuries. Unemployment often entails the loss of health insurance coverage, which in turn drives up out-of-pocket payments for medical expenses. Half of those with credit card debt reported that they had cut back on medical expenses to save money, a move that could be harmful to health.

Unwisely tapping pension funds

In order to make credit card payments and meet other expenses, says The New York Times, many older people with pensions are looking to their pensions as a source of ready cash.

If a retired person needs extra money to pay debts or cover living expenses, it can be tempting to do business with a pension-advance lender, because borrowing from a more conventional source may be difficult. Banks judging creditworthiness don’t generally count pensions as an income source, so a retired person’s income might be insufficient to qualify for a bank loan. Pension lenders eager for business promote their loans as easier to obtain, recovering fees and interest charges as a result.

Escaping the trap

Before falling into the trap of trying to cover expenses with high-cost sources for funds, like credit cards and pension advance loans, it is a good idea to have a serious talk with a bankruptcy attorney. A bankruptcy attorney is well-versed in the different types of assets and debt and how they fit into the bankruptcy picture.

Bankruptcy may be the solution for older people who are losing ground in the battle with debt. In bankruptcy it may be possible for some debts to be completely erased or seriously reduced. Once a bankruptcy has been completed, payments will be more manageable and there can be hope of getting out from under a mountain of debt.