Debt Consolidation
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Debt Relief for Senior Citizens: Strategies and Resources

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The primary sources of income for most seniors are retirement savings and Social Security, but financial longevity has everything to do with expenses. Older folks whose income is being eaten up by debt may be more likely to outlive their money.

It is possible to course correct and seek debt relief for seniors, though. Establishing a realistic budget and making lifestyle tweaks can go a long way, as can debt consolidation for seniors. In extreme cases, bankruptcy could be the best route.

Senior citizens with debt have plenty of resources at their fingertips, from nonprofit credit counseling to free government programs.

Strategies for senior debt relief


Social Security checks comprise 33% of income, on average, for elderly beneficiaries, according to the Social Security Administration. But the average monthly payment is only about $1,544 — that’s the equivalent of a $18,528 annual salary.

Since stretching your money comes down to two main components (income and expenses), senior citizens with debt should give their spending the attention it deserves. This begins with tracking spending to get the most accurate idea of where your money’s going. Debt payments aside, how are you tackling your basic living expenses?

To create an effective budget, begin by listing out all your income and expenses, then make a financial plan of attack that feels right to you. If heavy debt payments tip the scales so that your expenses outweigh your income, it might be wise to explore debt relief organizations for seniors (more on this shortly).

If debt is really pushing your cash flow, picking up part-time work, if that’s possible, is one way to make up the difference.

Delaying when you collect Social Security can also help even the financial playing field. Holding out until you’re 67, which is considered full retirement age, means getting considerably more than if you’d begun taking the benefit at 62.


Revamping your budget may reveal areas of your financial life that need a little fine-tuning. Are you living beyond your means? If, for example, you’re spending $100 a week at restaurants, getting in the habit of meal planning and grocery shopping can easily even things out.


If you’re up against a high car payment, selling or going with an older model, or even foregoing a car altogether and relying on public transportation, may be a more cost-effective approach. The U.S. Department of Energy is one of the sponsors behind the Ride or Drive calculator, which helps people figure out if ride-sharing apps like Uber and Lyft are actually cheaper than owning a car. Eliminating your car payment, insurance bill, gas and maintenance fees in one fell swoop could very well transform your budget.


Often, when seniors hear the term “downsizing,” housing is typically the first thing to come to mind. This can be hard, as certified financial planner Jill Schlesinger tells LendingTree: “It often requires making a huge change to your lifestyle” at a time when you probably just want to sit back and enjoy. What’s more, selling the big house and moving to a one-bedroom condo won’t necessarily be cheaper.

“Most have condo association fees, and the ones that have all the nice bells and whistles and are much better to age in actually cost a lot of money,” says Schlesinger, adding that downsizing may also require moving away from loved ones and caretakers.

Downsizing strategy

Schlesinger suggests starting with smaller lifestyle tweaks. Keeping up on your debt payments may mean taking just one vacation a year instead of three, or dialing back the amount of financial support you extend to adult children. Look at your spending and see where you can free up more money for debt.

Debt consolidation for seniors

There are a number of simple, do-it-yourself ways to consolidate debt, which will ultimately help you get debt-free faster and save money over the long haul. Many seniors do so by leveraging their home.

Reverse mortgage

To qualify for a reverse mortgage, you have to be at least 62 years old, have substantial equity in your home and have the ability to keep up with things like property taxes and insurance premiums during the loan process.

Think of a reverse mortgage as a home equity loan that you don’t have to pay back monthly. Instead, the loan comes due at the time of the last surviving borrower’s death, or when that person sells the home or stops using it as their primary residence. Upon your death, if your heirs don’t have the money to pay off the loan, they can sell the home and use the proceeds to close a reverse mortgage. They won’t have to pay the difference if the loan balance exceeds the home’s worth.

Just be careful before you decide to go with a reverse mortgage, as they can be dangerous products for seniors and are susceptible to abusive practices.

Home equity loan

A home equity loan doles out a lump sum of cash that you then repay in equal installments. The same goes for a home equity line of credit (HELOC): This is a revolving line of credit that you begin repaying after you’re done borrowing. Both let you use the equity you have in your home to unlock cash.

To get your best rate, your mortgage debt generally has to be 85% or less of your home’s value. Meanwhile, your debt-to-income ratio (the percentage of your income that’s currently going toward debt payments) typically can’t exceed 45%.

Personal loan

If you don’t have enough equity to borrow against your home, a personal loan might be the answer. This is when a lender gives you a one-time loan that you have to repay in equal installments over a specified period of time at a fixed interest rate. If the rate is lower than what you’re paying on your current debt, you’ll end up saving money in the long run. You’ll also have the convenience of making just one monthly payment.

Balance transfer credit card

This is when you use a new credit card — one that has a low or 0% introductory interest rate — to pay off your existing debt. For it to make financial sense, you’ll have to pay off the balance transfer card before that promotional period ends to avoid getting slammed with interest.

No matter which debt consolidation option you choose, a good credit score will help you get the most competitive rates and terms. If this is an issue, borrowing privately from a family member or friend may be a viable alternative.

Debt forgiveness for seniors via bankruptcy

Bankruptcy often evokes with stigma and negative connotations, but for seniors buried under debt, it’s sometimes the only option.

While filing for bankruptcy impacts future financing, this may not be as big of a deal for someone in advanced age. Getting a fresh financial start, while being able to keep your home and retirement accounts safe, may be the most appealing option for seniors in debt.

There are two types of bankruptcy to consider. One or the other could pave the way for debt forgiveness for seniors, but at a cost.

Chapter 7 bankruptcy

Chapter 7 liquidates some of your assets in order to make good on your debts. In the majority of cases, your debts will then be discharged — however, alimony, child support and most student loans, among other things, would likely not be forgiven.

Your credit score will suffer in the short term, and the bankruptcy will show up on your credit report for 10 years, but you can still rebuild your credit.

And while some of your assets are up for grabs, your retirement accounts are off limits. It’s also likely that you’ll be able to retain a portion of your home equity.

Chapter 13 bankruptcy

Chapter 13 puts a repayment plan in place that generally lasts three years, after which your remaining debts are discharged. The good news here is that your assets are safe.

This type of bankruptcy also halts foreclosure proceedings. This in itself could help you save a home that’s on the brink of foreclosure. One downside, though, is that the bankruptcy will stay on your credit report for up to seven years.

If you don’t opt for bankruptcy, debts like credit card bills, private loans, and car notes will not be left to your heirs. Instead, your estate will be used to pay these creditors. In this way, your surviving relatives will get less of an inheritance, but they won’t have to formally assume any debt. As for federal student loans, these are actually forgiven upon your death.

Resources of debt relief for seniors

If the above tactics aren’t doing enough to move the needle on debt, all hope isn’t lost. Consider the following ways to find support.

Credit counseling

There are a number of organizations out there to help seniors manage their open accounts. A nonprofit credit counseling agency, which begins the relationship with a comprehensive financial review, is one of the best places to start. From there, it’ll offer customized advice that’s sometimes all that’s needed to get the person on the right track and feeling empowered.

In extreme cases, you may opt into a debt management program. This is when the credit counselor takes it a step further, negotiating lower fees and interest rates on your behalf for a nominal monthly fee, typically $25 to $35. You then make debt payments to the counselor, who pays the debt collectors. A couple of catches: Only unsecured debts apply (including credit cards and personal loans), and to be eligible, you must have a steady stream of reliable income.

When researching credit counselors, focus on nonprofits, which uphold rigorous standards when it comes to protecting consumers. You should also look for organizations that are backed by the National Foundation for Credit Counseling or Financial Counseling Association of America.

Government programs for seniors

If money is tight, seniors with debt may qualify for state-sponsored assistance with paying their Medicare premiums, deductibles, copayments and more. Eligibility for Medicare Savings Programs vary from state to state; connect with your state via regarding specific requirements.

The Administration on Aging (AoA), backed by the U.S. Department of Health and Human Services, is another organization worth investigating. Designed specifically to protect the well-being of older Americans, the AoA offers support and resources around things like:

  • Long-term care assistance
  • Nutrition and wellness
  • Health insurance and medical needs
  • Legal aid to help protect against financial exploitation

The AoA may be especially valuable for seniors who are being harassed by creditors. The good news is that Social Security benefits that are directly deposited into your bank account cannot be garnished by debt collectors.

How to help parents manage senior debt relief options

Having an open and honest conversation with your folks about money isn’t always easy, but getting a sense of how they’re doing financially is no small thing. According to the Center for Retirement Research at Boston College, mild cognitive impairment is widespread among people in their 70s and 80s — and it can majorly cloud financial judgment.

It stands to reason that broaching the topic when your parents are in their 70s isn’t a bad idea. Schlesinger suggests bringing up the topic of money in a gentle way to get a general sense of how they’re doing. You might ask questions like:

  • Have you given any thought to estate planning?
  • Have you updated your wills?
  • Is your financial plan built to last through retirement?

“If your parents are pushing back, don’t fight them,” she says. “If you’re getting a sense that they need some help, you can invite them to meet your financial planner, or they can find one of their own at”

As their age advances and cognition declines, they may be open to giving you power of attorney over their finances. This grants you the legal authority to manage their bank accounts and make financial decisions on their behalf, which is also a solid safeguard against elder fraud.


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