Retired, widowed, overcome by credit card debt

Elderly need to keep close tabs on budget

By Todd Ossenfort

The Credit Guy

The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues. Ask a question 'The Credit Guy' archives

Dear Credit Guy,
In 2003, I went bankrupt. My wife died in 2006. I can't pay my credit card balances. I have only Social Security income. I'm 82 years old, no job, reverse mortgage. Help! What next? -- Irv

Dear Irv,
First, let me offer my condolences on the loss of your wife. From your very brief letter, I am going to focus on what I believe is a cash flow problem. You appear to have more expenses than your income can possibly cover. I make this assessment based on your statements that you filed bankruptcy in 2003, have accumulated credit card balances since then and also have a reverse mortgage.

Finances in general can be a complicated issue, but for you and for many people in your situation, it is merely a matter of bringing your expenses in line with your income. If you envision a simple balance sheet, the debit and credit columns need to be equal. In order to accomplish a balance of income and expenses, you must remove items from one column or add items to the other. In other words, you must decrease expenses or increase income. I'll be the first to admit, it's easy to write this advice in a column, but it's often more difficult to implement.

In your circumstance, your income is fixed with your only revenue coming from Social Security. You did increase your income somewhat with the reverse mortgage, but it is apparently still not enough. Therefore, the only way to balance things is to decrease expenses.

You need to gather all your financial documents, including your bills and income statements, and realistically look at your financial situation. First, determine the total costs for remaining in your home. How much are you paying in taxes and insurance on your property? What do your utilities cost per month? Do you have any other expenses related to your home?

Next, write down all your other monthly expenses excluding your credit card debt. Don't forget your monthly medical expenses such as medications, any home health care, etc. Establish whether you have enough income to cover all your expenses without paying your credit card accounts, and without using your accounts to supplement your income.

Once you know exactly where you stand financially, you will have some tough decisions to make. For example, if you can meet your monthly expenses, but have no money for your credit card bills, you might consider contacting your creditors and letting them know you have no ability to pay. Your Social Security wages cannot be garnished for unsecured credit card debt. Another option might be to consider bankruptcy again, if you qualify. You cannot be discharged by Chapter 7 if you were discharged from a Chapter 7 within the past eight years. You cannot be discharged by Chapter 13 if you were discharged from a Chapter 13 within the past six years.

If your income does not cover your monthly expenses even without the credit card payments, then you may have to make changes in the areas where you are spending the most money. For example, it might make the most sense for you to move and sell your home if you can live less expensively somewhere else.

The bottom line, Irv, is that something has to change. You cannot continue to spend more than you bring in. Life is too short to be worried about your finances, especially at your age. If you need some help deciding your best course of action, you can get unbiased advice from a qualified credit counselor in your area.    

Take care of your credit!

See related: Elderly mother can't pay $14,400 in credit card debt, 5 tips for talking to elderly parents about credit card debt

Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.

The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week. Send your question to The Credit Guy.

Published: April 6, 2009

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