The two mortgages on their home were a couple of months delinquent.
Their bank account had just been levied by the state taxing authority.
They hadn’t filed tax returns since 2009.
From the outside, it didn’t seem like anything had changed. Yet their financial world was imploding.
What had happened?
Their phone is to blame
Turns out, they had entered into a debt repayment plan over the phone.
The caller got their attention while they were comfortable at home, over the phone. They signed up, over the phone.
They couldn’t tell me even who the caller represented, But, the voice on the other end of the phone promised to keep creditors from calling them anymore.
With the clients’ permission, this creditor was automatically taking money out of their account monthly.
And when the tax levy hit, there wasn’t enough money to keep a roof over their heads.
These elders were victims of their telephone and their good intentions.
Only the powerless call
It’s a nearly universal truth that the only creditors who call you about your debts are the least important creditors among those you owe.
Credit card companies can’t force you to pay their debt without suing you, getting a judge to agree you owe the money and giving you a chance to defend. It’s cheaper and more effective to frighten or shame you into paying.
And even better if they can get you to give them regular access to your bank account. What could be better?
What seemed to have happened here was a debt collector called up and offered a solution, one that would stop harassing phone calls and pay the credit card debt automatically.
But, the “solution” would only pay the credit card debt.
That is, the only debt that would be paid is the debt that could be discharged in bankruptcy. The mortgage debt that kept a roof over their head became second to the debt management program. No attention was paid to the back income taxes.
It was exactly the wrong order of payment. The least had become the first among creditors.
Elders more vulnerable
The tactics of debt collectors aren’t confined to the elderly, but they sure work better if the person who owes the money is frail, alone, or unsophisticated. That described the couple in my office.
The good news for my couple was that their children had somehow gotten wind of the trouble and came with their parents to see if bankruptcy could help. And bankruptcy will help.
In the bigger picture, adult children need to be sensitive to how well elderly parents are managing their money.
- Is there credit card debt that is eating into the budget?
- Who is automatically debiting the elders’ bank account?
- If they still drive, is their auto insurance sufficient to protect their home?
The telephone is the instrument by which legitimate but self interested creditors can get to the elderly and convince them to warp their financial priorities.
Whether the pitch uses annoyance, fear or shame, the result is the same: the elder pays the wrong creditor.
If these could be your parents, screw up your courage and find out what is happening, on the phone and at the bank.
It can be a difficult conversation for elders clinging to independence. But you have to have that conversation if you’re to help them, before their roof falls in.
Image courtesy of notKlaatu and openclipart.