The Elderly, Consumer Debt, & Financial Abuse

The Elderly, Consumer Debt, & Financial Abuse (August 2016)

By: Michael B. Joseph, Esquire

            Senior citizens, those 65 years old and older are increasingly burdened by alarming levels of consumer debt.  Retirement and fixed income is insufficient to sustain the monthly expenses for many older adults. Some are unable to pay ongoing regular monthly expenses, costs of health care, and make payments on mortgages, auto loans, and credit cards.  Many retirees continue to work part-time.  Those that are unable to work or to find additional income sources may turn to less attractive alternatives:  seek help from family, charities, reverse mortgages, home equity loans or bankruptcy.  Older Americans are more often than ever seeking bankruptcy relief.  Having exhausted their credit limits, and being subject to creditor harassment, they are filing chapter 7 and chapter 13 bankruptcy at an alarming rate.  The elderly are the fastest growing demographic of bankruptcy filers.

However, the elderly may not only be driven into financial distress due to credit cards or medical expenses.  Some are also vulnerable financial abuse by family members, friends and acquaintances.  Bust-Out schemes or fraud is not a new problem but it is a growing area of concern as it relates to the elderly.  A Bust-Out is where without their knowledge credit is taken out in a senior citizen’s name using their personal information.  The fraudsters make sure that for a period of time on-time minimum payments with the intent of raising credit limits and obtaining more credit.  The goal is to maximize credit, and over draw the accounts, and then to stop making any payments, default and leave the senior liable on the debt.  The elderly person may then have to file bankruptcy and seek a discharge.  Many times these schemes are detected by reviewing the credit history of the elderly person and determining their prior purchase activity and any use of credit cards. Also, it is helpful to look what purchases were made and if any cash advances obtained.  Unlikely that a senior would be purchasing multiple X-boxes, smart phones, or 90 inch TV’s.

Another method of taking financial advantage of an older adult is coercing them into taking out a home equity loan or a reverse mortgage on a fully paid for home.  When funds are not needed for ongoing monthly expenses these types of financial transactions should not be an option.  In this instance, the “abuser” assists the person to fill out the applications and gather the documents necessary to obtain the loans.  Once the funds are available, the abuser is able to convince the senior to allow them access and begin spending the money.  If not promptly discovered, the elderly person’s nest-egg and all of the home equity may disappear.

It is important that close family members stay involved with the financial affairs of the elderly.  Pay attention to warning signs of financial problems:  delinquent bills, over drawn bank accounts, multiple credit cards, or apparent fraud by a friend, acquaintance, or relative in the finances of the older adult.  Should a problem be apparent, seek the advice of a lawyer who specializes in Elder Law.  Possible remedies are available to protect the older individual and preserve their financial future and retirement.  This may involve seeking the appointment of a Guardian and if necessary to prevent further financial hardship or creditor harassment- bankruptcy.