As a Tampa Bay elder law attorney, one of the frequent types of calls I receive are calls from senior citizens who are worried about their credit card or health care bills. Sometimes, for a senior, it is a struggle to pay their rent and other bills, and there just is not enough money to cover the credit card debt or outstanding medical bills. Then, the creditors start calling and bothering you – sometimes being very aggressive or threatening.
According to the Kaiser Family Foundation, close to half of seniors over the age of 65 have incomes within 200 percent of the poverty limit. One in seven is below the poverty limit. And, one of the top complaints of seniors is being harassed by debt collectors.
Here are seven things that you, as a senior citizen, need to know about your debt and debt collectors:
- Your income is protected. Many seniors fail to understand that their social security, retirement accounts, pensions, etc., are all protected from being garnished under Federal law. In accordance with Section 207 of the Social Security Act, social security benefits are exempt from creditor garnishment and the benefits retain the exemption after being deposited into the beneficiary’s account. Therefore, if you need to use your money to pay your rent, or buy your medications, then you should do that and be comforted in the fact that creditors cannot garnish your wages and take part of your income for debts.
- Your assets are also protected – up to a limit. Federal law protects the money in your bank account where your social security is deposited up to twice the amount of your monthly Social Security. So, if your social security is $2,000, you can have up to $4,000 in your account, and the creditors cannot garnish it. Banks must disregard any garnishment attempted by the creditor. However, be aware that this is not the case if you owe money to the government (such as income taxes, federal student loans, child support, or alimony. In most situations, the government can garnish up to 15% of your benefits to pay your debt.
- You can stop harassment by debt collectors. Many seniors cannot afford to file for bankruptcy which will automatically stop the phone calls from debt collectors. However, there is another way to stop the phone calls. The Federal Fair Debt Collection Practices Act states that when you send a “cease and desist” letter in writing, a collector must stop all communication by mail or phone. You should include your name, address, and account number for the creditor, and tell them that you are writing them, pursuant to the FFDCPA, and notifying them to immediately cease all communications regarding the account. You can also tell them that the notice includes, but is not limited to, all written and telephonic communications. You can explain to them that you are a senior citizen and that your income is exempt under federal and state law. You should also let the creditor know that you will be keeping a written log of any future contact (and that it will be recorded) so that, if they fail to honor your cease and desist letter, they will be liable under Federal law and that you will file a complaint with the Federal Trade Commission.
- Things to know about medical debt .Sometimes, seniors are concerned about their medical bills and worry that their doctors will not continue to treat them if they do not pay their bills in full. Again, your income is protected, however, almost all doctors will continue to treat a patient who owes a balance if you try to make small payments (even if it is $10/month) toward the past due bill. Additionally, nonprofit hospitals must provide services even if they are not paid, and many hospitals have programs to waive debt for those unable to pay.
- You may want to steer clear from debt settlement companies. Why? Because your income is protected by federal law, so why saddle yourself with unaffordable payments to a debt collection company? If you are already making payments to one of these companies, you can stop the payments. If they are taking automatic payments out of your account, you can call them and tell them to stop the automatic withdrawals. If they refuse, you may need to close your bank account and open another at a different bank.
- What if you have a home where you can no longer afford the mortgage payments? Well, if you have equity, you could look into doing a reverse mortgage (discussed in more detail here – http://ohalllaw.com/2011/04/need-long-term-care-use-your-home-equity/ ). Or, if you have equity, you could consider selling the home and moving into something that is smaller and more affordable. However, what if you are upside down on the mortgage? You know you can stop making payments and let the home go back to the lender, right? You may be able to stay in the house for a year or more during the foreclosure. Even if you are not upside down, you can stop payments and try to sell the house while going through foreclosure. There are lots of options.
- What about IRS debt? Low income seniors can be placed on “uncollectible status” by the IRS. You can contact the IRS yourself and ask them how you would go about filing for “uncollectible status,” and, many times, this can be done over the phone. Or, you may have received a notice from the IRS stating that you owe taxes on written-off old debt. If you cannot afford the taxes, you can file a form 982 to ask that the tax be waived.
- Whatever you do, if you have retirement accounts such as 401k’s or IRA’s, do not liquidate them to pay down debt. In Florida, qualified retirement accounts are protected in Florida and debtors cannot garnish from them. You should be using your distributions from your retirement accounts to pay your rent/mortgage, and for groceries and medications.
Many seniors endure financial hardship because they do not realize that there are options available to them. Federal and state law protects seniors’ income so that they have the ability to pay for housing, medicine and food. If you have questions about your rights as a senior, call the Law Offices of Laurie E. Ohall, P.A.