Options For Senior Citizens Owing Debt in Michigan
Owing debt while approaching retirement age can be one of the most challenging things for people aged 65 or older. Soaring inflation, the rising costs of living, and few opportunities for older people to earn a living all play a role in this. In such times, it is no wonder that people aged 65 or older tend to spend more than they can earn.
However, there are debt relief programs that can help senior citizens of Michigan through financial troubles. The state offers a number of programs designed to alleviate debt, including property tax relief, reverse mortgages, and financial counseling services for seniors. Let’s explore what these programs offer.
Of all the US citizens aged 65+ who had debt, around 85% had credit card debt, while 9% had medical debt. [1]
Key Aspects of Michigan's Property Tax Relief
Property tax is one of the primary reasons behind senior citizens being in debt. Meeting these tax requirements on a fixed income can be challenging while making ends meet. This is why paying property tax becomes difficult for them.
That’s where property tax relief programs for seniors come in:
Michigan Homestead Property Tax Credit
If you are a low-income senior citizen, then you can benefit from the Michigan homestead property tax credit. This tax relief lowers the amount of property tax based on your income. You must own or rent your home to meet the state’s income requirement to be eligible for this program.
As a senior citizen, an alternate credit is available if the mortgage is more than 40% of your total household resources. [2] The amount of credit you receive depends on your total income and the property tax. The lower your income, the more credit you can get.
If your household income is $21,000 or less, you can get a 100% relief. This program is designed to reduce the burden of annual property taxes for seniors.
Property Tax Deferral
Property Tax Deferral is another viable option for you as a senior citizen of 62 or more. Meaning you get a temporary relief from paying taxes. You can avail this if you are a Michigan citizen over the age of 62 with a household income of less than $25,000. If you meet the requirements, the summer property taxes can be deferred till February 14th of the following year. Section 211.51
What Sort of Utility Assistance Do You Get In Michigan?
Michigan also provides relief to citizens who struggle with the mounting utility costs. There are two main options, mainly allowing you to afford utility bills and stay afloat during challenging times, especially during the winter months.
The following are the two main utility assistance types in Michigan:
Michigan Home Heating Credit
You can qualify for the Michigan home heating credit program, under which you get help with your energy bills. The credit is available to renters and homeowners aged 62 or older. It can cover a portion of the annual heating costs for the home.
This is a seasonal program to help you manage the increased cost of heating during Michigan’s cold winters. This program saves you from getting into debt by covering a portion of your high energy bills. In 2023, the average credit received by homeowners was $209. [3]
State Emergency Relief (SER)
The State Emergency Relief (SER) program is for every Michigan citizen, regardless of age. It provides assistance if you are facing an immediate energy crisis. This program helps you cover overdue utility bills as well as prevent service disconnection.
Senior citizens can make use of this program because they already have a limited income and are more vulnerable to rising utility costs. The Michigan Gas utilities also have a senior assistance program for citizens who are 65 years or older. [4]
Does Michigan Offer Reverse Mortgages?
Michigan does offer a reverse mortgage option for citizens above 62 years of age. This loan enables you, the homeowners, to convert a portion of your home equity into cash. It does not require you to make monthly payments to the lender.
With a reverse mortgage, the homeowner receives payments either as a lump sum, monthly installments, or a line of credit. This allows you to cover living expenses or pay off other debts. [5] The reverse mortgage loan is repaid when the homeowner sells the home or passes away.
No payments are required on the loan while the homeowner is living in the home. Consulting with a lawyer is a good option if you are thinking of reverse mortgaging. However, there are pitfalls, such as the loan balance growing over time. Also, if you leave the home for a year or more, then you may be required to sell the house to pay off the mortgage.
What Does Financial Education for Seniors Look Like In Michigan?
If you are a senior struggling with debt, then you can also benefit from the services of nonprofit credit counseling agencies. These agencies provide personalized assistance with managing debt and finances. They offer credit counseling and debt management plans specifically designed for seniors.
The following are the leading counselling and management services:
Credit Counseling
Certified financial counselors work with you and assess your debt and economic situation. They provide you with guidance on budgeting and managing debt. These services are often free or low-cost for seniors and are an accessible option for those in need of financial education and support.
Debt Consolidation Loan
A Debt Management Plan (DMP) is another top option. It is a structured program where credit counselors work with creditors to negotiate lower interest rates and reduced payments. You can consolidate multiple debts into one manageable payment through this plan, helping you get back on track financially without the stress of juggling numerous creditors.
The credit counselors can negotiate with creditors on your behalf. Then you make monthly payments to the credit counseling agency. The agency is responsible for disbursing the payments to creditors. [6] This option is beneficial for seniors who have accumulated credit card debt or other unsecured debts.
Options for Filing for Bankruptcy In Michigan
Senior citizens usually do not opt for bankruptcy filing right away. They try to exhaust other options, like taking another mortgage. This often adds to their financial troubles instead of solving them. As a senior citizen, you need to protect your assets, and filing for bankruptcy can be very helpful in this regard.
Bankruptcy can offer a fresh start for seniors who are overwhelmed by debt.
You can file for the following bankruptcy chapters:
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy allows for the discharge of most unsecured debts, such as credit card bills, medical bills, and personal loans. If you qualify for Chapter 7, then you can have your debts wiped out without the obligation to repay them.
Michigan’s bankruptcy laws also provide specific exemptions for senior citizens to protect essential assets like their home, vehicle, and personal property. This is why Chapter 7 is an option for seniors with little or no income who have no realistic way to repay their debt. However, you must pass the means test for evaluation of your income and assets.
Chapter 13 Bankruptcy
You can also opt for the Chapter 13 bankruptcy as a senior. Under this bankruptcy chapter, you repay the debts over a period of three to five years. This option may be more appropriate for seniors who have a regular income but are struggling with debt.
If you or someone you know is a senior struggling because of debt and would like assistance from a Michigan bankruptcy lawyer, contact Frego & Associates today.
FAQs
Seniors who own or rent their home and meet the state’s income requirements are eligible for this credit. Meaning if the rent is more than 40% of your total household income, then you qualify for this credit.
If you are a senior aged 62 or more, and have an income of $25,000 or lower, then you are eligible to apply. Every year, the date for application can differ, but the requirement remains the same. A consultation with an attorney can help you in this regard.
The SER (State Emergency Relief) program helps Michigan citizens, including seniors, cover overdue utility bills and prevent disconnection of services. You can avail this if you are facing an immediate energy crisis, such as the fear of losing heat or electricity during winter.
Credit counseling provides seniors with personalized financial advice to manage debt, often free or at low cost. These debt management guidelines educate you regarding the financial steps you can take to avoid a post-retirement monetary crisis.
Chapter 7 bankruptcy allows seniors to discharge unsecured debts like medical and credit card bills without repaying them. This is also ideal for those who have no way of repaying their debts and would rather dissolve their assets to pay debts.
Chapter 13 bankruptcy involves creating a repayment plan for seniors with a regular income to pay off debts over three to five years. This is ideal for seniors who have a steady income but are struggling with overflowing debt.
Source:
[1] The Facts about Senior Debt. (2024, June 1). https://www.ncoa.org/article/get-the-facts-on-senior-debt/
[2] Homestead Property Tax Credit – SERVICES. (n.d.). https://www.legislature.mi.gov/publications/ServicesforSeniors.html
[3] Michigan Home Heating Credit Program. (n.d.). https://www.twp-northfield.org/newsdetail_T10_R419.php
[4] Low income and senior assistance programs | Michigan Gas Utilities. (n.d.). https://www.michigangasutilities.com/payment-bill/lisap
[5] Mutual of Omaha Reverse Mortgage. (2024, March 26). Michigan Reverse Mortgage Guide – Mutual of Omaha Reverse Mortgage. https://mutualreverse.com/states/michigan-reverse-mortgage/
[6] Becker, M. (2024, February 15). Debt Relief for Senior Citizens: Programs and Resources. LendingTree. https://www.lendingtree.com/debt-consolidation/debt-relief-for-senior-citizens/#Creditcounseling
