I got an email from a 75-year-old reader who said that five years ago his retirement planning ran amok and he ended up with a large amount of credit card debt.
He fell ill and since then he hasn't been able to work. He lives in a rented mobile home on about $900 a month in Social Security, plus some food stamps. He wrote that he is a veteran, and he gets his health care free of charge from the U.S. Department of Veterans Affairs, or VA.
If it weren't for his $200-a-month payments on his credit card debt, he says, "I'd be doing OK."
When he called the credit card company to which he owes the money, he was told that at the rate he was paying -- the minimum monthly amount -- it would take him about 20 years for the debt to be completely paid off. "What can I do?" he asked.
I called the National Foundation for Credit Counseling, a nonprofit group of financial counseling organizations. Jana Castanon, a spokeswoman from one of the member organizations, Apprisen, reviewed this man's situation and urged him to make an appointment with a credit counseling agency. "Counseling is free at any reputable place," she says. "If there is a charge for counseling, run in the other direction," she says.
Without knowing more details, Castanon couldn't give much specific advice, but she said that there are laws in every state that protect people living in retirement who find themselves in similar situations. How a credit counselor would handle a situation like this one would vary, she says, but a counselor would likely begin with an initial review of his budget, including what it costs him for basics such as food, housing, utilities, insurance, etc. "Unsecured debt is at the bottom of the stack of things to be paid," she says.
Then the counselor would talk to his debtors and work out a plan that might include a reduction in interest rates, lowered minimum payments, a reset of his credit report so his debts appear current and a plan to pay off everything within five years.
If his health were poor and his situation were such that even this payment seemed unaffordable, Castanon says the counselor might refer him to an attorney who would evaluate the situation and who might be able to end his payments altogether.
Except in a few cases, such as with student loans and child support, Social Security can't be garnished, but if there is money in the same bank account from sources other than Social Security, it could be at risk. Setting up the account properly is important. If you're in this situation, get help -- just don't quit paying, Castanon advises.
If you are a family member of someone who dies owing money and your name isn't on the account, "You have zero liability to pay that debt," Castanon says.
Nevertheless, "We hear from people all the time who get a call from a creditor who says, 'Your dad would really want this debt paid.' They are still grieving; it's awful," she says.
Her advice in this circumstance: "You have no obligation. Don't pay."