The cost of living is rising at a rapid pace and retirement savings aren’t just enough especially for senior citizens who are still drowning in debt. It’s a fact that debt can put some serious mental burden on retirees. It can be anything from lingering credit card bills to personal loans, medical loans or even mortgages. Senior citizens usually expect to spend their life as a retiree in a carefree way but when they have piled up debt to deal with, it can be really overwhelming for them. Fortunately, there’s debt settlement and multiple other debt relief options for such people who want to gain financial control even after retirement.
The Debt Landscape For Senior Citizens
As per recent research, the number of retirees carrying debt has significantly increased mainly due to the financial and economic situation of the world. Multiple factors are behind the growing number including;
- Increasing medical expenses
- Dependence on credit cards
- Supporting elder children and grandchildren
- Not enough retirement savings
- Unexpected life events like the death of a spouse or divorces
All these factors are to blame when it comes to senior citizens struggling with debt and it can severely affect their quality of life which is the last thing they want. In order to alleviate the stress, debt settlement is one of the best measures one can take for financial security.
Understanding Debt Settlement In Detail
Debt settlement is a one popular debt relief option as it reduces your debt. In a settlement, the borrower has to negotiate with the lender to forgive a certain percentage of the debt and in exchange the borrower has to pay a lump sum of the total amount. In simpler words, debt settlement will cut down your outstanding balance but it doesn’t mean you won’t have to pay anything. A lump sum payment or a payment schedule is still required to fully satisfy the debt. It’s a negotiation, so there’s no guarantee whether a lender will agree to the terms or not. However, debt settlement is definitely worth a try when you don’t have any other option left.
Pros And Cons Of Debt Settlement
Just like debt consolidation and debt management, debt settlement comes with its pros and cons.
Pros
- Reduces the total amount of debt that you owe
- It helps in avoiding bankruptcy
- No more debt pressure to deal with as a senior citizen
- It’s a faster way out as compared to other options
Cons
- It’ll impact your credit score and will stay on your report for 7 years
- There can be tax implications by the IRS especially if the forgiven debt crosses $600.
- Settlement companies will charge a fee
- There’s absolutely no guarantee whether the lender will accept the settlement or not.
Guide To Follow For A Successful Debt Settlement As A Retiree
Following a proper guide for debt settlement is of utmost importance because again, the main part of the process is to somehow convince your creditor and if you do that, consider your debt settled! Here’s a step by step process if you want to do debt settlement yourself;
1-Assess Your Financial Situation
As a retiree, you probably don’t have a source of income and it’s just your retirement savings that you are left with. In such a situation, you can’t risk your savings and spend them all on clearing your debt. So what you need to do is to identify whether or not you can have some backup left after clearing your debt with your savings. If not then you at least need to prepare a lump sum amount to negotiate a settlement with your creditor. Moreover, consider your assets too. If you have any assets that can help you pay off your debt then use them and if not then the next step is to contact your lender.
2-Approach Your Lender
Creditors usually don’t accept initial settlement offers because they want to recover as much loan from you as possible. However, as a senior citizen, you probably have your own reasons and explanations to why you can’t afford the debt anymore. Before the debt goes into collections, you should contact your lender and explain to him your financial situation and the fact that you have reached your retirement now so you can’t pay off the debt in full.
3-Make A Reasonable And Realistic Offer
If you want the negotiation to be successful, it’s important that you make a reasonable and realistic offer to your creditor that doesn’t completely rip him off of his money. Start with a 30% lump sum and expect the creditor to reject your initial offer. After some negotiation, you both can come to a percentage that benefits you and your lender both. Usually lenders consider 50% or more so you have to prepare that lump sum before putting in any offer.
4-Honor The Agreement Plan
Once your lender agrees to your terms, you then have to make the payment on time, as per the agreement. Any more delays in your payment can worsen your credit situation which is something you’d never want as a retiree. Moreover, it can increase your overall debt and your interest too so the sooner you pay off the lump sum, the better it is.
5- Get It All In Documentation
One of the most important aspects of a debt settlement is that you request the lender to write it all down and keep proper documentation of the agreement terms. From the total amount you owed to the lump sum decided and the timeline provided, you should have it all documented to protect yourself from any future legal or financial troubles.
Getting Professional Help Is Highly Recommended
When you reach the age of retirement, you don’t want to get into any more financial or legal troubles and for a smooth and seamless debt settlement, it’s important that you don’t go alone. Instead, it’s best if you work with a certified and qualified professional settlement agency like Mountains Debt Relief. To negotiate successfully with your lender, you need professional people who know all the protocols of the process. Again, debt settlement really is the best option when you are stuck with debt but it’s not as easy as it sounds. It’s not like you go up to your lender and ask him to forgive a percentage of your loan and he does that right away. In fact, the process is quite complicated, sometimes it even comes with taxes and you never know what the outcome of the settlement will be. In a nutshell, hiring professional and experienced people for the settlement to go through is critical especially if you are a retiree.
Emotional and Psychological Considerations
Debt settlement is a tiring process that can cause anxiety and stress and that’s clearly not good for a senior citizen. It’s important that during the process you don’t just seek professional help but you also should seek emotional help from your friends or family. If you don’t want the debt to affect your mental health then emotional support during such times is very important. Always remember that seeking emotional support is never a sign of weakness, in fact, it’s a strength!
Final Word
Debt management during your retirement years is overwhelming but not impossible. If you take the right path forward and don’t let your emotions get the best of you then you sure can get out of debt quickly. It’s just that you need patience, consistency and on top of that, you need professional help. If everything required in the process is fulfilled, we assure you that debt settlement would be the best decisions of your life. It will help you regain your financial control and enjoy your retirement years just the way you dreamed!
FAQs
Q1. Will Debt Settlement Affect Your Pension Income Or Social Security?
No, debt settlement can’t impact your pension and social security as they are protected from creditors so that they don’t garnish your income. However, this protection isn’t for all kinds of debt. For example, it doesn’t apply for student loans or taxes.
Q2. Can I Settle My Debt On My Own Without Any Company?
Yes, you can settle your debt on your own without any third party involvement but you should only take this step if you’ve got good relations with your lender and when you are sure that he will understand your situation. If not and if you know you can’t handle a stressful negotiation then it’s best if you seek professional settlement services.
Q3.Will Debt Settlement Ruin My Credit?
Yes, debt settlement will bring down your credit score and it will stay on your credit report for 7 years. However, for a senior citizen, the credit doesn’t matter much especially because you don’t have to make any big purchases. Keeping this in view, it definitely is a good trade off when you want to become debt-free.