Debt Forgiveness for Seniors: Get the Help You Need

As the price of everything from groceries to health care rises, seniors are living with more debt than ever before.

Despite this troubling issue, older adults don’t have many options for debt forgiveness. But they generally have a few more options for debt relief than younger Americans. If you’re a senior who needs debt assistance, it’s important to understand your options.

Do you qualify for debt relief?

Credit Summit may be able to help.

Disclaimer: Credit Summit may be affiliated with some of the companies mentioned in this article. Credit Summit may make money from advertisements or when you contact a company through our platform.

Getting Help with Debt as a Senior Citizen

Many senior citizens live on fixed incomes, and Social Security raises tend to be small. Even seniors who stash away healthy retirement savings can struggle with debt. And this doesn’t even consider that older Americans are easy prey for scammers.

While there are a few debt relief options for seniors, there are also several strategies you can implement today to chip away at your loans.

Government Programs for Seniors

Eligible seniors could qualify for state-sponsored financial assistance for paying for Medicare premiums, deductibles, co-payments and more. Connect with your state via the Medicare website ( to learn specific requirements.

The Administration on Aging (AoA), backed by the U.S. Department of Health and Human Services, offers support and resources to seniors including:

  • Long-term care assistance
  • Nutrition and wellness advice
  • Health insurance and other medical assistance
  • Legal aid

The AoA can also be a helpful resource for seniors harassed by creditors.

Can Creditors Take Your Social Security?

Social Security benefits are usually safe if you default on a bill, but some exceptions exist.

While your Social Security income won’t be garnished if you skip payments on a credit card or personal loan, you could have your Social Security garnished if you default on the following debts:

  • Student loans
  • Federal taxes or penalties
  • Child support
  • Spousal support or alimony

In the case of federal tax debt, you can request that part of your monthly Social Security check be withheld until the debt is repaid. Beyond these examples, however, federal law protects Social Security benefits from direct seizure by creditors.

Pro tip: Always talk with an expert before deciding to skip paying any debts.

Are Retirement Accounts Protected from Creditors?

Although some exceptions exist, employer-sponsored retirement accounts are generally protected from creditors under the Employee Retirement Income Security Act (ERISA). Individual retirement accounts (IRAs) and Roth IRAs are not protected from creditors.

Qualified Retirement Accounts

Retirement accounts set up under the Employee Retirement Income Security Act (ERISA) of 1974 are generally protected from seizure by creditors. ERISA covers many employer-sponsored plans, such as:

  • 401(k) plans
  • Pension plans
  • Some 403(b) plans

Even if you have millions of dollars in your retirement accounts and owe money or have filed for bankruptcy, creditors cannot access savings in ERISA-qualified plans other than certain exceptions:

  • If you’ve been found guilty of a crime and go to prison, retirement funds can be garnished to compensate the prison for expenses
  • If your creditor is a former spouse
  • If your creditor is the IRS

Pro tip: If you’re retired, avoid 401(k) loans. ERISA protects your accounts, and you don’t want to convert protected money to an asset that could be garnished.

Nonqualified Retirement Accounts

Individual retirement accounts (IRAs), including Roth IRAs, aren’t protected under ERISA. Bankruptcy is the only way to protect that money. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 protects IRAs up to $1 million, though there are a few exceptions.

Outside of bankruptcy, state laws will determine whether the money in a non-qualified account is protected from creditors.

Strategies to Deal with Different Types of Debt

Debt comes in many different forms and amounts. For some of the main types seniors face, consider using the following strategies to pull yourself out of debt.

Credit Card Debt

The first step to dealing with credit card debt is negotiating with your creditors. At the end of the day, lenders and creditors just want their money, so they can be open to negotiations if it means you’ll repay the debt one way or another. Staying in contact with your lenders about your repayments is essential to avoid getting your debt sent to collections, where they will hound you for payment. While federal laws restrict how debt collectors and collection agencies can contact you and forbid them from threatening you, it’s better to avoid the situation altogether if possible.

Other strategies include paying more than the minimum amount on the debt and trimming your budget so you have more money to allocate toward repayment.

READ MORE: How to get out of credit card debt without ruining your credit

Credit Card Hardship Programs

Some credit card companies will offer some relief in the event of a hardship. COVID-19 relief is the most recent example, but many are willing to work with you if you experience a life-altering event. While there aren’t many specific hardship programs, your credit card company is usually willing to consider many factors.

Factors they consider may include:

  • Your current income and ability to pay
  • How much you owe
  • How long you’ve been a customer
  • Your past payment history
  • Whether you’re carrying a balance that’s lower than your credit limit
  • Your current delinquency status
  • Whether you’ve already tried a hardship program in the past.

Life events that may help you qualify for a hardship program include:

  • A pay cut
  • Job loss
  • A medical crisis or long-term illness
  • Divorce or separation
  • Damage due to a natural disaster

READ MORE: Best options for credit card debt relief

Medical Debt

Health care is expensive, and your costs will likely rise as you get older. However, because insurance programs are so complicated, you have a bit more leeway with medical debt repayment. Unpaid medical bills won’t appear on your credit report until it’s a year past due. That should give you time to negotiate with providers, creditors and insurers.

You should take an inventory of your bills to ensure what you owe is accurate. Then contact your provider to set up a monthly payment plan that works for you.

Seniors on fixed incomes also may qualify for an income-driven hardship plan. Some hospitals make accommodations for patients with low incomes or high debt levels. There might be other financial assistance programs for you, so contact your medical care provider.

Pro tip: Look into medical credit cards, especially ones that offer 0% APR for several months. If you pay your balance before the introductory rate expires, they can save you a lot of money.

READ MORE: Best balance transfer credit cards

Auto Loan Debt

If you’re struggling with vehicle debt, steer clear of title loans, a predatory loan that can result in losing your car altogether. Instead, consider trading down to a less expensive car to make payments more manageable. Buying used is a great strategy compared to buying new and can often serve you just as well.

Borrowers should also consider refinancing the vehicle or negotiating with their lender to decrease payments.

READ MORE: How to refinance your auto loan with bad credit

Mortgage Debt

If you’re struggling with mortgage debt, there are a few options. One strategy is selling your house and downsizing to a smaller one with lower monthly payments. For seniors, a condo might be a great choice if mortgage payments are starting to pile up and home maintenance is becoming an added expense.

Seniors 62 and older could also try a reverse mortgage. In a reverse mortgage, a homeowner with considerable equity in their home can borrow against the value of that home and receive monthly payments, a lump sum, or a line of credit. This can allow seniors to put their cash toward debt payments or other essential expenses.

If you need money to consolidate other debts, consider a second mortgage. Because these are secured loans, the interest rate will be significantly lower than personal loan rates.

Another strategy is to refinance your mortgage for better loan terms or a lower interest rate. Ultimately, do whatever needs to be done to avoid foreclosure on your home.

READ MORE: How to refinance a paid-off home

Student Loans

Though it may seem shocking, it’s possible to retire with student loan debt. According to AARP, of the $1.6 trillion in total student debt at the end of 2020, borrowers 50 and older owed about 22%, or $336.1 billion — more than a five-fold increase from 2004.

Pro tip: It’s possible that seniors could get payments lowered if the debt is a federal or PLUS loan. Income-based repayment plans are likely the best strategies for making manageable monthly payments, something you can easily work out with your loan service provider.

Deferment or forbearance may be possible if you qualify. 

Student loan forgiveness and consolidation options are other routes borrowers can explore. One popular forgiveness strategy is through the Public Service Loan Forgiveness Program (PSLF) where borrowers employed by a U.S. government entity can have their balance forgiven after 120 qualifying monthly payments.

Consolidation meanwhile can make it easier to repay your student loans by reducing your monthly payments and/or a lower monthly payment amount. Learn more about student loan forgiveness and consolidation here.

If you’re 65+ and still saddled with student loan debt, watch this to learn more about your options.

Debt Relief Options for Senior Citizens

If it comes down to it and you need to consider some debt relief options to return to financial stability, consider these avenues:

Debt Consolidation Loans

This is a type of loan where the borrower takes out a separate, larger loan to pay off all their outstanding debt. Not only does this typically result in a lower interest rate, but it can simplify your repayment by grouping all of your debt onto a single loan. This means you’ll only have to worry about one monthly payment instead of a collection of smaller loans.

READ MORE: Best debt consolidation loans

Home Equity Line of Credit

Home equity loans and home equity lines of credit (HELOCs) are two ways to borrow against your home. If you own a home, this can be one of the best ways to receive a loan as interest rates are usually lower than any other type of loan.

The main difference between the two types of home loans is that a home equity loan results in a one-time cash outlay to the borrower. Meanwhile, a HELOC allows you to borrow as much as you want to.

READ MORE: How to get a home equity loan or HELOC

Debt Settlement

This could be an excellent debt relief option if you can negotiate a debt settlement deal with your creditor. This strategy involves offering a payment — either a lump sum or over a term — to a creditor. In exchange for a portion of your debt is forgiven, sometimes around half of the original loan.

A debt settlement company can help you get the best possible settlement. They will charge a fee ranging from 15% to 27% of the total enrolled debt, but the savings offset the fee: Most debt settlement clients pay about 80% of the total debt after fees.

READ MORE: Best debt settlement companies

Personal Loans

Seniors looking for debt relief can also consider taking a personal loan from a bank or credit union. Most of these will be unsecured loans with flexible terms and interest rates. Borrowers will need a credit score of at least 600-660 to qualify.

Alternatively, you can explore a secured loan where you put assets down as collateral, but this should be avoided unless it is your only way to get the loan.

READ MORE: Best personal loans

Credit Counseling

Nonprofit credit counselors can help you set up a Debt Management Plan (DMP) specific to your financial scenario. These counselors will create a DMP in agreement with your creditors that rolls multiple loans together into a single debt, typically with a lower interest rate. This way, your debt is much more manageable to repay.

READ MORE: Debt settlement vs. debt management

Filing for Bankruptcy

Filing bankruptcy can be valuable for retirees because they’ve had more time to invest in their assets and likely won’t need to worry as much about having good credit scores compared to younger people, particularly because certain retirement accounts will be protected.

There are two main types of bankruptcy, Chapter 7 and Chapter 13, with the differences explained below.

Primary Types of Bankruptcy

The main difference between the two revolves around how you repay your debt. Whichever option you choose, your unsecured debts (such as medical and credit card bills) are discharged, meaning you won’t have to pay them.

Chapter 7 Bankruptcy 

Chapter 7 bankruptcy involves surrendering all your non-exempt property to pay off your debt. This process allows debtors to rid themselves of debt quickly, usually in about three-five months. There are eligibility requirements, mainly because you have to have below-median income for your state or pass a test to determine whether you can reasonably be expected to pay your debt with your disposable income.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy involves creating a court-mandated repayment plan lasting three-five years to cover the borrowers’ debt. To qualify, you must have a regular income, unsecured debts totaling $419,275 or less, and secured debts totaling $1,257,850 or less. One major advantage to Chapter 13 is that debtors keep their property while they make payments toward their most important assets, like their mortgage or car loan.

Regarding unsecured debt with Chapter 13, you must continue payments through your repayment plan. However, after the agreed-upon repayment term has ended, the remaining unsecured debt may be discharged. 

Whether you choose Chapter 7 or Chapter 13, an automatic stay that protects you from creditors will go into effect as soon as your case is filed. This means creditors and debt collectors must stop contacting you until your bankruptcy case has been resolved.

Seniors should keep in mind that certain types of debt won’t be wiped out by either bankruptcy route, including:

  • Mortgages
  • Tax debt
  • Child support or alimony
  • Student loans

READ MORE: How to get rid of high-interest debt

Watch Out for Scams

Many scammers see senior citizens as easy prey. If you get a text, phone call or email saying that you owe someone money or that an expense was authorized, don’t fall for it. Even if it is from a lender you recognize, look up the lender’s contact information yourself and call directly. If someone offers you “free” money or a “free” roof or air conditioner inspection, hang up. If something sounds too good to be true, it probably is.

If you think you’ve been scammed, contact the Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB) and your state attorney general’s office.

READ MORE: Need help now? Ways to make quick cash

The Bottom Line

Debt forgiveness options for seniors are limited, but becoming debt-free is not impossible. Seniors in debt should consider budgeting, utilizing financial assistance programs, and working out a deal with their creditors before turning toward more significant debt relief options like consolidation loans or even bankruptcy. As long as you prioritize the most important debt first and employ several of the strategies mentioned here, you should put yourself back on the road toward financial stability.


What’s the Difference Between Secured and Unsecured Debts?

Secured debts are loans with property (like a house) used as collateral to support the loan. This means if you are unable to pay the loan, the lender could seize the property as a form of payment. Unsecured debts have no collateral attached to them but tend to have higher interest rates.

Do I Need an Attorney for Bankruptcy?

While you technically don’t need to, it is generally advised to work with a bankruptcy attorney when filing for Chapter 7 or Chapter 13 bankruptcy.

Can Social Security Benefits be Garnished?

For the most part, no, they cannot. However, if you have unpaid federal taxes, child support, spousal support, or student loans, your Social Security could be garnished if you have no other forms of income to repay it.

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