Mortgage and Credit Card Debt Increasingly a Problem for Retirees

According to a recent survey, more older Americans are in financial danger than ever. The survey, recently from the Federal Reserve, found that older individuals are increasingly carrying credit card and mortgage debt into retirement.

The survey revealed that 41 percent of individuals between the ages of 65 and 74 and a whopping 54 percent of those entering retirement had a mortgage on their residences in 2010. As though having mortgage debt at retirement age was not bad enough, the survey found that the average amount of debt was considerable. The results indicated that the average soon-to-be retiree owed $97,000 on their mortgage. More shockingly, those who had already retired still owed an average of $70,000.

The reason for this trend is the recent housing bubble. In the last decade, lenders aggressively marketed second mortgages and home equity loans to the public, encouraging people to use their home as a cash machine. Many people took on additional debt in their later working years, and, as a result, entered retirement burdened by debt.

In addition to mortgage debt, the survey found that older individuals still carried significant amounts of credit card debt. It was found that 41 percent of soon-to-be retirees, and 32 percent of new retirees, had credit card debt. The median amount, as of 2012, was $2,200. Although this is a significant decrease from 2008, the survey revealed that older individuals are increasingly relying on credit cards to finance their day-to-day expenses.

Bankruptcy Can Be a Solution

As a result of their mortgage and credit card debt, many older individuals who are on a fixed income can find themselves financially stressed. Fortunately, many people in this situation can benefit from filing bankruptcy. Bankruptcy can eliminate the obligation to repay credit card debt, giving the filer a fresh financial start.

Bankruptcy can also help those struggling with mortgage debt. Although this type of debt usually cannot be discharged, bankruptcy can discharge most unsecured debts such as credit cards and medical bills, freeing up the filer’s financial resources. Once rid of other debt, many filers find it easier to keep up with their mortgages.

If the filer has gotten behind on payments and is facing foreclosure, bankruptcy can also help. Once bankruptcy is filed, the automatic stay freezes the foreclosure process, at least temporarily. If Chapter 13 bankruptcy is filed, the filer can stay in his or her home as the delinquent mortgage payments are paid off over three to five years. Once bankruptcy has been completed, the filer is current on his or her mortgage and is free of most unsecured debts.

Before filing for bankruptcy, it is important to consult an experienced bankruptcy attorney. As bankruptcy is not a one-size-fits-all solution, an attorney can explain all of the debt relief options available to you and recommend one that would be right for you.