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Live and Learn: Deep debt late in life

Anyone at any age can get in over their head with credit card debt, but timing makes a difference. The younger you are, the more time you have to dig yourself out, and vice versa.

Susan and Richard Ramirez learned that painful lesson themselves when they racked up so much credit card debt in their late 50s and early 60s that they could not pay even the minimum that the credit card companies required.

"The last bit where I just stopped dead and literally couldn't go to work was when I got the statement — on all our credit cards, the interest rates had gone up to 29 percent," Susan Ramirez recalled. "We did not have the money to even make the minimum payments on the credit cards and the other bills. We have just flat out run out of money."

Younger consumers are the ones most prone to credit card delinquency. According to data from TransUnion, the delinquency rate among consumers under 30 was 2.34 percent in the third quarter of 2015, the highest of any age group. Consumers over age 60 had the lowest delinquency rate, at 0.67 percent.

But the Ramirezes were on a different timetable from many older people. This is a second marriage for Susan, who owned a home with her first husband. "I just basically started over at 42 with zero," she recalled.

When Susan and Richard married, their prospects were bright: she had a steady job with the state of California, and Richard was in sales, earning regular bonuses. Between her state retirement assets and his 401(k), they believed they had what they needed to own a home together, a dream they shared, so in their 50s, they bought one.

"Buying this house was something like a dream come true, alas. Like all across America, I was going to be a homeowner now," Richard recalled.

Richard and Susan Ramirez.
Connie Leung | CNBC
Richard and Susan Ramirez.

Unfortunately, the Ramirezes were wrong about the cost of homeownership. Their new home needed work and they were eager to fix it up, and they were now living in a high-cost county. As a result, their housing costs rose by about $1,000 per month to roughly $3,000.

Even that did not bother them at first, since credit card offers were piling in and the real estate market in California was red hot. Susan Ramirez figured they could rack up credit card debt and pay it off by refinancing their home at a higher value.

"The credit cards kept coming," she recalled. "I'd think, 'Oh good, we'll just use this for a little bit — we want to put carpet down in our house.'"

But then the Ramirezes hit a rough spot. There was the matter of the financial crisis, which sent California real estate prices tumbling. Then, Richard lost his job after his company was sold, and in 2009 Susan was put on a 20 percent furlough for a year. But the bills did not stop coming in, and ultimately the couple racked up $85,000 in credit card debt even as retirement age loomed.

(For perspective, the average credit card debt for a household carrying debt was $16,140 as of October 2015, according to Nerdwallet.)

The Ramirezes' situation was far from unique. The Consumer Financial Protection Bureau reported in 2014 that "older consumers are carrying more debt, including mortgage, credit card, and even student loan debt, into their retirement years than in previous decades." Mortgage debt, the bureau said, was a prime driver of this.

Fortunately for Susan and Richard Ramirez, once they realized the depths of their financial problem, they were able to begin a prolonged effort to pay down their debt and reduce their cost of living. They sold their house for $320,000, less than the $350,000 they owed on it, but the bank forgave the difference. And little by little, they chipped away at their debt.

They now rent a smaller home farther away from Susan's adult son, but she said their housing costs have dropped to $1,700 per month.

Today, "we don't have any credit card debt," she said. With "my retirement from the state plus the retirement that we built up separately plus Social Security, we are fine."

And a little wiser, too.