When you don’t have a steady source of income, it’s hard to deal with debt, and it can make your retirement plans fall apart. Costs for medical care usually go up after retirement; also, it becomes a little difficult to manage medical expenses as your earnings seem to be going down. Therefore, it becomes quite difficult if debt keeps building up.

More Americans than ever before are carrying their debt into retirement. Whether it is secured or unsecured debt, it is difficult to pay off after retirement. Living with debt is stressful and reduces seniors’ quality of life as they try to make ends meet.  But all hope is not lost; here are eight options for seniors seeking debt relief.

8 Debt relief options for seniors

1.  Downsize your expenses

To downsize your expenses, you first need to know where your money is going. Tracking payments over a month might reveal a lot. Examine your list of expenses to differentiate between “wants” from “needs.” Now you can plan a reasonable budget by considering your mortgage or rent, other loans/debt payments, gas, grocery, medicine, etc. 

 List all your expenses and find out how much money you are left with after meeting your necessities. You need to save as much as possible to quickly get rid of debt problems.

2.  Enroll in a debt settlement program

Debt settlement programs are legal ways to pay off your bills so that you don’t have to file bankruptcy. You can take help from a law firm to talk to your creditors on your behalf and try to lower your payoff amount, late fees, and fines. You make an agreed-upon payment to the law firm every month. As soon as a creditor agrees to reduce the payoff amount, the firm can pay it as a lump sum from the accumulated money, and you get rid of that credit card bill. Thus, you get rid of unsecured debts, one by one.

3.  File for bankruptcy

The word “bankruptcy” can sound negative. Still, bankruptcy might be the only choice for a senior with a lot of debt. When you file for bankruptcy, your credit score might get hurt and make it hard to qualify for loans in the future; but if you are older, this might not be a big deal.

Social Security and many retirement accounts are protected assets when people file for bankruptcy; so you won’t have to worry about them while filing bankruptcy.

You can either file for a Chapter 7 or a Chapter 13 bankruptcy. A Chapter 7 bankruptcy will liquidate your assets; it is a good option if you do not own a house and have little to no income. A Chapter 13 lets you keep your assets and give a window of three to five years to repay your debts.

4.  Take out a reverse mortgage loan

A reverse mortgage is a home loan that a 62-year-old homeowner with significant home equity can take out against the value of his or her property. You can receive funds in the form of a lump sum, a fixed monthly payment, or a line of credit.

Unlike a forward mortgage, a reverse mortgage doesn’t require the homeowner to pay back any borrowed money. When the borrower dies, moves out permanently, or decides to sell the house, the entire debt becomes due and payable.

Because of federal rules, creditors must ensure that the loan doesn’t exceed the home’s worth. The borrower or their heir can’t be held responsible for paying for any difference amount when the house is sold off.

5.  Take help of Government Programs

As a senior citizen, you can take advantage of state-sponsored assistance programs. For example, the AoA or Administration on Aging provides long-term care assistance, health insurance, and even legal aid to protect against financial exploitation. Meal on Wheels can provide daily meals, and the meal cost ranges from total price to zero.

6.  Get a part-time job

Although this might not seem like the ideal retired lifestyle, you can do a part-time job if your health permits you. If you are 55 or older, the Senior Community Service Employment Program (SCSEP) can help you look for a new job.

After looking at your employment history, physical health, and need for supportive services, you can be placed into a part-time job. Otherwise, you may find part-time jobs outside this program. They may include working at a coffee shop or as a consultant, a customer service representative, or even an ESL teacher.

7.  Cash-out life insurance policies

Suppose your kids are finished with college and don’t need further financial backing. In that case, you may find some value in a life insurance policy that you don’t need anymore. You can take out a loan against a cash value policy or even surrender it.

Just keep in mind that this is a costly way as you might have to pay up to 30% of the settlement value as processing fees. Also, this only works with whole life or permanent life insurance policies and does not work with term life policies.

8.  Doing nothing can be an option too

After retirement, your sources of income like social security and pension fund are inaccessible to creditors. Even if you are sued for a debt, they can’t collect anything from you.

If you own your home, they cannot legally force you to sell it, making you “judgment proof,” meaning you have no assets for the creditor to seize.


It entirely depends on your financial position what option you will choose. The ability to reduce your expenses, which may already be minimal, and willingness to work after retirement also play a role in your decision. If you don’t want to file for bankruptcy, a debt settlement might be the way to go.


Lyle Solomon has extensive legal experience as well as in-depth knowledge and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998, and currently works for the Oak View Law Group in California as a principal attorney.

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