For seniors and low-income residents, debt can become an avalanche

It’s a common scenario, and one that has increased during COVID: Seniors and retirees, with newfound leisure, many expenses, and uncertainties about what they can afford on shrunken incomes, max out their credit cards when cash is tight – which sets off an avalanche of debt.

The problem has become more widespread as COVID lingers, legal and financial experts report. It’s not confined to any age or demographic, but it hits seniors and people with low incomes hardest, putting them in a financial vise, especially when credit card balances rack up fees and interest at breakneck rates.

Add medical expenses, layoffs, and a tightrope walk between government benefits and stimulus and unemployment checks, and personal financial management becomes a nightmare.  For many, it’s one of the new realities of COVID.  

“It’s a big problem, and it’s been a priority for many years,” said Cheryl Steinberg, director of the Senior Law Project at New Hampshire Legal Assistance. To her point, mounting debt was identified in a statewide legal needs assessment back in 2010. 

“It doesn’t impact more in terms of lawsuits and cases” now, perhaps because of delays and shutdowns in the court system, Steinberg said. As time goes on, mounting debt becomes more difficult to pay, and a swelling headache.

A survey this summer by the New Hampshire Supreme Court Access to Justice Commission found that after concerns about COVID, consumer debt was first on the list of worries for low-income residents statewide.

The Lakes Region has poverty and unemployment rates higher than the state’s average, and a population of residents age 60 and older that is expected to balloon to over 30 percent by 2030, according to U.S. census predictions.

Debt collection cases filed recently in Belknap County include a 71-year-old veteran in Alton Bay who was a scam victim and became saddled with overwhelming credit card debt; and a 64-year-old Gilford woman whose income decreased due to the pandemic and had a lawsuit filed against her for unpaid credit card bills, Steinberg said.   

For seniors, credit card debt “is emotionally distressing. They feel guilty about it,” Steinberg said. “Older adults go into retirement and have trouble making ends meet and they put things on charge cards and are unable to make the payments. They have trouble adjusting to not as much income,” Steinberg said. “They’re not spending on extravagant things.”

In the past, when harassment and threatening by aggressive collectors was more common, some older residents were told, “The sheriff’s coming to your door and they’re going to arrest you if you don’t make a payment. Collectors have threatened to kill pets,” Steinberg said.

Today, phone messages and written demands for payment by collection agencies are the norm, and put many in panic mode. Elders and others with little or no awareness of their legal rights or recourse are often haunted by the thought, ‘Oh my God, I have to pay this!’ right away or else, Steinberg said.

The Senior Law Project helps clients age 60 and up, typically those with meager incomes or in clear financial danger, deal with lawsuits from creditors, and file for bankruptcy if that’s the best and least-stressful way out. But financial management and debt counseling is best first option.

Certain sources of income are protected from collection, including Social Security, unemployment benefits and veteran’s benefits. The first $362 of weekly wages or pension payments is also immune to attachment, according to Steinberg.

During COVID, creditors’ lawsuits have dropped while courts have operated on a very limited basis.

But medical debt remains a towering elephant in the room, or a stack of unpaid statements on the kitchen table for people with low or fixed incomes. It’s a significant driver of bankruptcy, said Sarah Mattson Dustin, executive director of New Hampshire Legal Assistance.

In a 2015 National Council on Aging survey, lawyers that counsel older adults said medical debt was the most significant barrier to economic well-being for over half their clients, who felt their medical debt was unmanageable. A 2016 study in Health Affairs found that millennials were more likely than older consumers to carry medical debt, especially at age 27, the year they lost coverage under their parents health insurance.

New Hampshire Legal Assistance and other legal non-profits such as Pro Bono and LARC, the Legal Advice and Referral Center, provide information about legal rights and help low-income Granite Staters with debt problems when there are potential legal solutions, but they do not provide financial management or debt counseling, Dustin said.

The good news is that medical debt, including bills from hospitals or doctor’s offices, is subject to the income protections that apply to credit card debt – which means you can’t be forced to pay money you need for basic living expenses, Steinberg said.

“If you have a provider you owe all kinds of money to, they’re under no obligation to serve you” in the future, Steinberg said.  But patients can usually arrange long-term repayment plans – and practitioners will continue to see you if you show good faith in paying the debt off in installments.