Credit Card Debt

I recently completed a Reverse loan for a couple who were overly in debt by living off of their credit cards.   Unfortunately with seniors, this isn’t unusual because they quite often don’t have enough money to pay for their bills each month and when there is an emergency, they have to use a credit card to pay for it.

My clients had been doing this for quite some time and finally ended up having $150,000 in debt.   Yeah, that’s a huge number.   Needless to say, they were having difficulties paying each card every month and only sent in the minimum payment, while they continued to use the cards because they had no other sources of money.  

They consulted a Bankruptcy attorney who told them they couldn’t do a B.K. because of the value of their home and he suggested (I’m completely surprised by this), that they do a Reverse loan instead; that it would be the wisest decision they could make for their financial future.

They had looked into using a Reverse loan a year ago but had never moved forward because they were scared about what they had heard regarding the loan.   Far too frequently, the fear of losing their house to a lender or not having anything left of their estate to pass to their heirs, prevents seniors from making any effort to investigate how the loan works.

(Which is a shame, considering that everything they have heard is simply not true.   The bank never takes over the ownership of the property and the heirs will  still inherit it at the end and may do whatever they please with it.   Plus its insured by the federal government as well as being highly regulated by various laws to protect the senior).

Typically they will ask their friends for advice or sometimes their attorney or other professional.   The response they generally receive is not to do the loan because they bank will take the property at the end of it and it’s too expensive.  In other words, these professionals are just as ignorant about it as the seniors are.

And then I like to respond with “Expensive?  Compared to what”?   But I’m digressing here, so I will return to my original topic.

My clients with the huge amount of debt, finally completed their loan.   It wasn’t without a number of delays caused by their own “foot-dragging” (They still weren’t convinced that doing a Reverse loan was a good decision) but when the loan closed and funded, they were enormously relieved and very, very happy.

I advised them not to use the funds to pay off the credit cards but just to continue making payments as they had been attempting to do.  But they were going to use some of the money for home repairs and other things that would improve the value of the home.   And fortunately, they did not have an existing mortgage that would have to have been paid off with the funds from a Reverse loan, which in the end…gave them a very large line of credit.

$450,000….That certainly can make a difference in a person’s life, wouldn’t you agree?

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