Monthly Archives: June 2014

Bankruptcy, Or Reverse Mortgage?

Increasing numbers of senior citizens are considering bankruptcy REVERSEmortgageHOUSE

due to financial distress.

Many of them have co-signed student loans for kids, or even grand-children.

Lots of people I see did not reduce their spending when they retired and

income went down, but used credit cards to make up the difference.

As we baby boomers age, there are more and more senior citizens.

(But, 70 is the new 40, spread the word)

Although more and more of us keep working after age 65, living expenses, especially food, are rising faster than income.

My friend Tara Twomey has written a paper:  Crossing Paths: The Intersection of Reverse Mortgages and Bankruptcy.

I will pull a few quotes:

The most recent look at older Americans and credit card debt shows that those age 50 and older now carry more credit card debt ($8,278), on average, than their younger counterparts ($6,258).26 Half of the 50 and older age group carry medical expenses on their credit cards and thirty-four percent use credit cards to pay for basic living expenses such as housing, groceries, utilities or insurance because they have insufficient funds to cover these expenses.27 Others “use credit cards as a high-interest ‘plastic safety net’ to cope with contingencies such as emergency car and home repairs or unexpected medical bills.28 More broadly, the average debt held by seniors increased 122.6% between 1992 and 2010 to just over $75,000 (inflation-adjusted). 

Of course, along with this, as a nation we save insufficiently, so most do not have enough savings to live off of in retirement.

You can never borrow your way out of debt, so, as always, I advise nailing down that monthly budget first.

How much is coming in?  How much per month will it cost you to live?

Don’t forget car repairs, if medical/dental expenses will be going up.

A reverse mortgage pays off any lien on your house, and gives you money, but no payments.

The balance is due when you die, or if the house is empty for a period, usually a year.

It accrues interest, so the balance goes up.  But it allows you to use your home equity now, while you are alive.

If you file bankruptcy, how much home you can keep may depend on state law.

In Michigan, you can exempt more if you are over 65, currently $51,650.

The federal exemptions are well below that, $22,975.

In Michigan, a home owned by husband and wife is exempt from joint creditors, the tenancy by entireties exemption, unlimited under state law.

This post over 400 words already, so we will continue next week on bankruptcy and reverse mortgages.

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