Debt Consolidation
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Debt Relief for Senior Citizens: Programs and Resources

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Content was accurate at the time of publication.

Debt has become a major issue for senior citizens. According to the U.S. Government Accountability Office, both the number of older households with debt and the amount of debt they carry has increased significantly over the past few decades, putting an enormous strain on households often living on a fixed income.

Fortunately, there are ways to get some debt relief for senior citizens.


When it comes to elderly debt relief, creating a budget to pay off debt is a fantastic place to start for two reasons.

First, a good budget will help you see where money is being spent, which is likely the main source of any debt that has accumulated. There may be certain types of spending that are easy to reduce, which will help ensure that no more debt is taken on.

Second, you can determine how much money is available to put toward your debt, which is a good starting point for creating a repayment plan that actually works. Or you may find out that there isn’t enough money available, in which case you can start looking at other potential solutions.

No matter what, a good budget gives you a clear picture of your current financial situation, which will help you make better decisions about how to handle it.


Downsizing your home has a number of potential benefits. In the process of preparing to move to a smaller home, you may be able to sell some of the items in your current home and that money could be used to pay down some of your debt.

A smaller home also comes with smaller expenses, from a smaller mortgage or rent payment, to lower utilities and less maintenance. Reduced expenses can help prevent debt from continuing to accumulate and free up room in your budget to put more towards the debt you already have.

Credit counseling

Sometimes the debt is too much for you to take on yourself. In that case, credit counseling can be a fantastic way to get the help of a trusted professional.

A credit counselor can help you create a budget, review your credit report and create a debt management plan. You will almost always be able to start with a free consultation, though there may be a cost for certain services as part of your plan.

This is one area where you’ll want to keep a close eye out for scams, especially those targeting the elderly. The National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA) are both nonprofit organizations that can help you find a reputable credit counselor to help with your needs.

Debt consolidation

Debt consolidation involves combining multiple debts into one new loan. It doesn’t eliminate your debt, but it could reduce monthly payments, shorten the repayment period, come with a lower interest rate or simply make your debt easier to manage.

There are a number of different ways to consolidate your debt, with pros and cons to each.

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Debt management plans

A debt management plan is something that you would set up with a credit counselor. You would make a single payment to them, which they then use to make payments towards your various creditors.

This can create some relief in the form of simplicity. Rather than managing multiple payments to multiple different lenders, all you have to make is one single payment to your credit counselor.

Your credit counselor may also be able to negotiate lower interest rates on your loans, which would save you money. Or they may be able to extend the repayment period, which would lower your monthly payment and ease the burden on a fixed income.

Debt consolidation loans

A debt consolidation loan typically refers to a personal loan that you use to pay off other loans. If you have good credit, you may be able to secure a lower interest rate than your current debt, which can save you money and help you pay it off faster. Personal loans are also unsecured, which means you wouldn’t be at risk of losing your house or other property if you can’t make payments.

If you don’t have good credit, however, you may not be able to lower your interest rate or even qualify for a personal loan at all. These loans also have upfront fees, which could outweigh any savings on interest.

Balance transfer credit cards

If you’re struggling with credit card debt, a balance transfer credit card with 0% APR could provide some immediate relief in the form of a lower interest rate. These types of cards can offer 0% interest for up to 21 months, giving you some breathing room to make a repayment plan and then make payments that go 100% toward paying down the debt.

Like a consolidation loan, many of the best balance transfer cards are only available to people with good to excellent credit. Some also charge a balance transfer fee and possibly an annual fee as well, and may charge high interest rates on new purchases and on the remaining balance once that 0% promotional period ends.

Home equity

If you have significant equity in your home, meaning that your home is worth more than the debt that you owe on it, there are several different ways you can use that equity to help pay bills or pay off other debt.

The options below can all be a great way to lower your interest rate or otherwise tap into the value of your home to help pay for your needs. But there’s also the risk that you could lose your home if you aren’t able to make your payments, so you should think carefully before jumping into any of these options.

  • Reverse mortgage: Reverse mortgages can be especially beneficial for the elderly because you can borrow more as you age. With a reverse mortgage, you can receive either a lump sum or monthly payments from the lender, and then the loan must be paid back once you no longer live in the house.
  • Home equity loan: A home equity loan is a second mortgage taken out against your home. It offers a fixed interest rate, which can be especially helpful when budgeting on a fixed income.
  • Home equity line of credit (HELOC): A HELOC works a lot like a credit card in that it’s simply credit that’s available to use as needed and can be paid down and then reused again. The big difference is that the loan is secured by your home. HELOC rates are often variable and depend on your credit score.
  • Cash-out refinance: With a cash-out refinance, you are taking out a new, bigger mortgage to replace your current mortgage. The difference between the two is paid to you in cash, which you can use for any purpose, including repaying other debts. The interest rate is typically lower than other home equity options, but you can typically only borrow up to 80% of your home value.

Debt settlement

Debt settlement involves working with your creditors to negotiate the terms of your debt, such as the balance, interest rate and/or fees. This can be done on your own, or you can pay a company to do this on your behalf.

While this strategy can save you money and provide relief, there are some big drawbacks as well. To start, there are a lot of debt consolidation scams involving debt settlement companies, and you could end up paying a lot of money just to ruin your credit in the process. And even when it’s done well, settlements will stay on your credit report for up to seven years, which can make it harder to access credit moving forward.


If you’ve exhausted all your other options, bankruptcy may end up being the right choice. It should be a last resort because of the damage it can do to your credit, but in the right situations it can provide a lot of debt relief.

Bankruptcy is a major and complex decision, so it’s almost always a good idea to consult with an attorney before moving forward.

Chapter 7 bankruptcy

In Chapter 7 bankruptcy, your eligible assets are sold in order to pay back as much of your debt as possible, and then the rest of your debt is discharged. This means that you may have to sell your car, jewelry, and other household items, but it also means that your debt can be reset all the way to $0.

There are exemptions that can allow you to keep certain assets, such as your home. There are also certain debts that can’t be discharged, such as student loans and secured loans like a mortgage or auto loan. And Chapter 7 bankruptcy will stay on your credit report for 10 years.

You have to pass a means test in order to be eligible for Chapter 7 bankruptcy. If you don’t pass, you might consider Chapter 13 bankruptcy instead.

Chapter 13 bankruptcy

In Chapter 13 bankruptcy, you work with the court to create a three-to-five year repayment plan towards your debt. As long as you make those payments, your remaining debt will typically be forgiven at the end of that period.

Like Chapter 7 bankruptcy, there are certain debts that can’t be discharged, such as home loans and federal student loans. Chapter 13 bankruptcy stays on your credit report for seven years after filing.

Despite those downsides, there are certain situations in which bankruptcy is the best debt relief for senior citizens. Just be sure to consult with an attorney to ensure that it’s the right decision.

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