Credit card debt forgiveness is a topic that seniors are very interested in, especially with the fact that many seniors are on fixed incomes…either Social Security or a pension…and don’t have a lot of extra income coming in.
Now, I went through this with my mother so I am going to give you my personal experience on the issue, as well as going over all the ways that you can get your debts forgiven, or at least reduced.
Video Overview of Debt Forgiveness For Seniors
Credit Card Debt Forgiveness and Mom
I have previously related my story and why my life changed after my mother’s heart attack. You can read about it here. But in addition to dealing with Medicare, Medicaid, doctors, nurses and social workers, I also had an unexpected problem to deal with…
She rented so didn’t have a mortgage but she also had about $12,000 in credit card debt that had to be accounted for.
And with the fact that Medicaid was taking all of her income to pay for the nursing home, less $50 a month, there was no way she could pay she could make even the minimum credit card payments, which were around $250 a month.
So I was in a bind, but did come up with a way that my Mom, as well as anyone out there, can seek out credit card debt forgiveness. This is what I did for her.
First, through the local Office of the Aging I was able to find a local college that had a senior law center. They specialize in helping senior citizens in situations like my mother’s.
They wrote a letter to each of my mother’s creditors requesting credit card debt forgiveness. In addition to the letter from the law center, I also included in a package to each debtor a letter from me explaining the situation and a letter from the nursing home, corroborating my mother’s condition.
The only thing I can tell you is that I sent the eight packages out to the likes of VISA, MasterCard, Discover, Wal-Mart, etc…in April of 2012 and haven’t heard anything back (as of December 2012) so I guess that my credit card debt forgiveness plan worked.
Update: in April of 2014 I received paperwork in the mail as Mom’s power-of-attorney that a judgment was being filed against her by one of the credit card companies. I had 30 days to respond to this judgment. I sent a copy of a letter from the business office at the nursing home saying she was on Medicaid and now a long-term resident of the nursing home.
I also attached a copy of her Medicaid award letter and sent it to the attorney representing the credit card company. As I write this, I haven’t received a response, and really am not expecting one. After all, do they really think we care about Mom’s credit score?
How This Applies To You
Here’s how you can profit from my experience. If you are a senior citizen, or a caregiver in a situation as I was, here’s what you should do:
1) Seek out an elder law attorney, preferably one whom will work on a pro-bono basis for seniors (your local Office of the Aging could be invaluable in finding such a resource) and have them write a letter seeking credit card debt forgiveness.
2) With that letter, put together a complete package as I did, explaining the current situation (ie: my mother’s heart attack and the after effects)
My personal guess is that when a creditor, such as Wal-Mart, receives this type of information, they just write the balance off as a bad debt. After all, what else would they do?
Do you really think Wal-Mart was going to send a collections agency after my mother? They have enough P.R. problems…how bad would that have looked after I called in the Channel 2 Troubleshooter to make them look awful on national TV?
So the above may end up working well for seniors and their caregivers looking for credit card debt forgiveness.
But the question becomes…what if you don’t have a medical issue, what do you then? What do you do if you just overextended yourself? Is that a way to seek out credit card debt forgiveness in that respect?
The answer is, well…maybe.
But whatever you end up attempting I am going to admit to you that it is not easy by any means. The reason is that when you signed up for that credit card you are agreeing to pay the bill. That is a legally binding contract and you have an obligation to pay.
This means that the credit card company is under no obligation to change the terms of the agreement or forgive the debt.
But with that said, here are some of the things that you can do.
Negotiate New Terms For The Debt
This will probably be your easiest option and will typically involve reducing your interest rate, payments or some combination of both. It is also known as a “workout arrangement”2.
The best time to try to negotiate this is is as soon as you realize that there is a problem. The credit card companies may not want to reduce your interest rate AFTER you are starting to be late with your payments.
So get on the phone with them immediately, explain the situation and see what you can do
Offer a Lump Sum Payoff
If you have the cash, you can offer the credit card company a buyout in exchange for eliminating the debt.
For example, if you owe $10,000 would they accept a $5,000 payout in exchange for eliminating the debt entirely? This is a tall order but credit card companies have been known to do this as opposed to their customer declaring bankruptcy and having to lose the entire debt.
This is a finite period of time where you do not have to make any payments while you get back on your feet. Everything is negotiable, including the amount of time you are on forbearance and if interest on your account will continue to accrue while your account is on forbearance.
The Downside to Credit Card Debt Forgiveness
As you might imagine, even if you get the VISA’s and MasterCard’s of the world to go along with your credit card debt forgiveness plan, there will be some negative repercussions from doing this. Some you would expect, and others will be completely unexpected.
1) Your credit will take a hit. This is obvious. Even if you are still making payments, renegotiating the terms of this debt will have a negative impact on your credit report.
2) Any credit card debt forgiven could be considered as income by the IRS. Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that portion of forgiven debt as “income” on their federal income tax returns.1
So while you may be getting out of debt, you also may end up with an IRS problem down the road. Something to think about as you enact your credit card debt forgiveness plan.