There's nothing like statistics to sanitize a real-life tragedy. I wrote recently about rising credit card debt and bankruptcy among senior citizens. A note from a reader put this bleak trend into real-life context:
My father, age 83, has managed to ring up credit card debt on ten to twelve cards totaling close to $100,000. His annual interest is almost $20,000. I am desperate to find a way to keep him from filing for bankruptcy. Should he seek credit counseling or get a consolidation loan?
This worried son didn't provide any more details about his dad's debt than what was included in his brief note. But the exact dollar amounts, how they were accumulated and at what interest rates are secondary to someone buried so deeply in debt that he or she faces bankruptcy.
I have my ideas about handling an elderly relative or loved one's debt, and I responded privately to this query. But given the growing number of senior citizens facing debt -- statistics tell us that more than half of those over the age of 65 who carry credit cards carry balances from month to month -- this topic deserves a very public discussion. We Fools are firm believers that a variety of points of view are exponentially better than just one. So as I did in my response to the concerned son, at the end of this article I solicit input from the community of Fools on our discussion boards.
Let's forget macroeconomic trends and pollsters' modes, medians, and means and consider one 83-year-old man facing a six-figure mountain of debt and the possibility of declaring bankruptcy. Here is what I told his son:
There are times when parents and children swap roles -- an often uncomfortable power handoff such as the one you now face. (Setting up cell phone service and broaching the whole highway driving issue are two other prickly role-reversal scenarios that come to mind.)
Since you know the extent of your father's debt, I'll assume that you two are talking frankly about the situation. First, assure your father that his problem is more common than he may suspect. Rising health-care costs, longer life spans, and low interest on income-bearing investments have put senior citizens on high money alert. Just last week I read a long discussion thread on our boards about the fallout from an elderly relative leaving a mountain of "IOUs" upon his death.
If you haven't already, get to know Dad's debt. What are his balances on each credit card, and what are the interest rates he's currently paying? Our free "Get Out of Debt Guide" has printable tables that make it easy to record and track your lenders. With dad's obligations listed out, you can plan a course of action. Depending on how involved you want to get, you can either present him with options for paying down his debts and let him take it from there, or you can tackle the problem together.
There's a lot you/your dad can do on your own to help ease the sting of high interest and huge debt. Start with negotiating lower interest rates with your father's current lenders. Next roll over debts from higher-interest credit cards to those with lower rates. Review other assets -- such as life insurance, retirement accounts, a home equity line of credit, a reverse mortgage -- and see whether it makes sense to tap those to reduce debt payments and free up some cash for living. Spend some time in our Credit Center where we outline strategies for dealing with debt. And print out the lessons and free workbook from our "Get Out of Debt Guide," which has a ton of information, advice, and hand-holding.
Here are a few other considerations:
- If your father has a spouse, the worst thing that could happen is that she is left with the debt should the unthinkable happen. So check to see whether she is a joint account holder on those cards (or other loans).
- Ditto goes for any co-signers on the card. If you or one of your siblings is a co-signer or authorized user on any of those accounts with balances, you will be responsible for the debt when your father passes away.
- The way most debts of the deceased are settled is through the estate -- selling off the house or other assets to settle outstanding debts. I've seen this horrible situation play out time and time again, where someone passes away intending to leave something of value to their survivors and instead the estate must be liquidated to pay off debts, sometimes forcing a widow to move from her longtime home.
- Before you sign up for any debt counseling or consolidation program, read the fine print. Understand the fees. Don't ever sign over full reign of a paycheck or bank account. And make sure your father agrees only to repayment terms that he can manage. (Here are some signs that the "help" being offered is no good.) You don't want your father to go into a debt repayment program and end up in worse shape than when he began.
- And finally, bankruptcy can be complicated and can be a long-term credit blight, but it's sometimes impossible to avoid. Employ a good bankruptcy attorney and make sure your father understands all of the details and ramifications before taking this course of action.
Growing (old) pains
Of course, during all of this there's a good chance emotions will flare. Money can't buy happiness, but when it's the topic of conversation between those who share DNA, it can provide a down payment on conflict. At age 83, your dad could live for another decade or more, so some lifestyle changes (if that is the reason for his debts) could make the difference between living out his life as a gay retiree or a needy old man. Then again, I've met 20-year-olds who can't break not-so-old spending habits.
If it's true hardship (skyrocketing health-care costs, plummeting pensions) crippling your parent's retirement, tell your elected officials that this is no way to treat a generation of retirees. Unless you think that this isn't going to be a problem when you're ready to retire from the workforce.
What you have here is simply one Fool's opinion based on the bare minimum of facts. There's more than one way to deal with debt. And there's no better source of inspiration and advice than what's served daily by the diverse world of people who congregate on our discussion boards. They are thoughtful with their advice, open in their debate, and generous with details -- often personal and sometimes painful.
Take just a few moments on the Consumer Credit/Credit Cards discussion board (there's a 30-day free trial offer right now -- plenty of time to sample the advice). There you'll find people in the same situation as your father -- and you -- many who have tried credit counseling and others who are die-hard do-it-yourselfers. There's no better advice than that offered from experience.
Your father is lucky to have you by his side and seeking help. I hope that soon you'll come back and share with others the lessons you learned from your dad's debt.
Dayana Yochim has spent seven years writing about consumer finances and still says her knowledge doesn't hold a candle to those on the Consumer Credit discussion board. (Heck, just check out their FAQ.) The Motley Fool disclosure policy is written in larger type than most credit card agreements.