Bankruptcy

[DAYDREAMER]

A friends father who is 80 and going a bit scenile has gotten himself into a hole. He has lots of credit card debt, and only income is SS. His adult kids thought it was best for him manage his 80k cc debt through the counceling services. The problem is that he only has $24 to live on after the monthly cc bill is payed. Obviously you cannot live on $24/month for food and utilities.

I'm recommending he file for bankruptcy. I told the adult kids (my friends) that in the end, they will be paying his living expenses unless they want him to go without food and heat. Even though he willingly allowed himself to go in debt like this, and did game the system, i dont see any other way to solve this quagmire. Any advice from the ER Pros?

The Daughter now has power of attorney over his finances.

 

[jarts98]

He's pretty much judgment proof. SS can't be garnished. He can't pay the bill and I assume has no assets. The daughter should explain that to the credit card companies and tell them it won't be paid. If they want to sue, fine. Why get a judgment that you can't collect??

 

[jon-nyc]

Does he own his home? What state?

He could be forced to sell it.

If not, then +1 to what jarts said. Don't even spend money on bankruptcy, just stop paying.

 

[aja8888]

My ex-wife did the same thing (ran up $60K in CC debt) although at 15 years younger with only SS income and a paid for house.

She just told the CC companies she couldn't pay and they wrote the debt off over time. No suits, just some letters from collection agencies asking for a portion of the debt.

I don't recommend this course of action, but sometimes there are circumstances and no good alternatives. Check the state laws where he lives.

 

[Corporateburnout]

+1 on bankruptcy.

Surprised his kids did not know earlier about his financial troubles. One would think his spending was above SS only income and should have raised a flag before he racked up 80K in CC debt.

 

[DAYDREAMER]

House ownership was transferred to daughter. The father has no assets to come after. He lives in Washington state. In the past three years, he has gotten mentally unable to make financial decisions. Daughter is now taking charge of situation with her power of attorney.

 

[ERD50]

If he has no assets, I suppose just not paying is the pragmatic thing to do. I don't know, would there be any advantage anywhere along the line to just pay the minimum? It's probably not much, and then legally, he is doing nothing 'wrong' - no threatening letters or anything. The remaining debt will be forgiven when he passes.

Bankruptcy seems a needless trouble/expense - unless there are advantages that I am unaware of.

While I have a conceptual problem with people not paying their debts, this certainly has extenuating circumstances around it, and after all, the credit card company extended this debt to him. It is partially their responsibility to make sure they loan to people who are credit worthy. But they make a lot of their money from people who get behind. So in a way, this is just 'part of the deal' - I'm not going to feel bad about it.

The kids got in too late. But w/o knowing more, we can't really judge what went on, and it is water under the bridge now.

-ERD50

 

[MRG]

+1 on bankruptcy.

Surprised his kids did not know earlier about his financial troubles. One would think his spending was above SS only income and should have raised a flag before he racked up 80K in CC debt.

Elders have been known to hide that information from their adult children. Including the loss of the ability to manage money. It's more common than many realize.
It wasn't until my sister took over paying DF's bills did we realize how much he had been gifting to charity. He had always been charitable, but this had become a very sick obsession.

Sad that happened, either bankruptcy or default seem to be the only realistic options.

 

[2B]

Just not paying is probably the best route. One thing to watch out for is if there is a judgement against the father the CC company can't take the SS but they can take money from bank accounts. They are not supposed to take SS from bank accounts but they have been known to do this. If ot stopped, it will occur monthly. It can be prevented from recurring by talking with the bank and CC company (or collection agency).

 

[DAYDREAMER]

Never really thought about "just stop paying" option. Is the freedom from constant harrassement from creditors worth going through the bankruptcy process? Not sure how he would handle being called a deadbeat and insulted constantly.

One thing to be concerned about, once a person files bankruptcy, do creditors feel safe to loan money because they know you wont be able to file again for 7 years or so? So, he gets his debts wiped clean, and goes back to doing the same thing?

 

[jon-nyc]

House ownership was transferred to daughter. The father has no assets to come after. He lives in Washington state. In the past three years, he has gotten mentally unable to make financial decisions. Daughter is now taking charge of situation with her power of attorney.

The house transfer could be considered a fraudulent conveyance depending on the timing and other things. Best thing for them to do is consult a local bankruptcy attorney to see what makes the most sense.

 

[spncity]

What will stop him from getting more credit cards? What will stop him from taking a loan through a personal line of credit at his longtime bank?

This is just the type of person who could start getting scammed or into sweepstakes, fake check scams, phone fraud.

When you're taking over financial matters, it pays to keep an eye on the mail, get rep payee rights for social security, ban international calls to and from the phone, and check call lists on the invoice to see who is contacting him.

Kindest regards.

 

[jon-nyc]

Whether he goes to bankruptcy or just stops paying, his credit score will soon reflect that and the offers for more credit will cease.

The creditors aren't the chief concern here, it's figuring a path forward for a guy to live on SS alone.

I'm going through the same thing with my inlaws. But they are going to lose their house.

 

[samclem]

When you're taking over financial matters, it pays to keep an eye on the mail, get rep payee rights for social security, ban international calls to and from the phone, and check call lists on the invoice to see who is contacting him.

Added: His DD should put a freeze on her dad's credit reports. That should stop Dad or anyone else who gets his personal information from being able to open new credit under his name. It might not be much of an issue once his credit score becomes terrible, but it's an easy step and offers some additional protection.

 

[scrinch]

I say make whatever monthly payment he can afford using his ss. Don't worry about what the balance is, but show good faith in making some payment. While you could try to blame the cc company for his debts, it sounds like he did participate in the debt process, and still bears some personal responsibility for repayment.

 

[brewer12345]

The house transfer could be considered a fraudulent conveyance depending on the timing and other things. Best thing for them to do is consult a local bankruptcy attorney to see what makes the most sense.

+1.

 

[spncity]

Meant to add - if you are getting power of attorney papers signed and notarized, get more than one original. Some places require original POA paperwork. They say they will send it back, but it seems risky to mail your only original to a credit card company.......

Kindest regards.

 

[Bamaman]

When someone's 80 years old and not in good mental health, who cares what the FICO score is.

Contact all the creditors and tell them the situation. Tell them he has no assets and that litlgation would be a waste of time--and they should charge off the debts. If they persist and get judgments against the gentleman, don't worry about it. If they happen to find an asset they can seize, then it's time to file bankruptcy.

And don't think debts are forgiven after death. Newspaper probate notices are to notify creditors of the death if they're owed money--and that they must file a claim. Hospitals go after estates everyday with their small armies of attorneys.

 

[bclover]

+1 on bankruptcy.

Surprised his kids did not know earlier about his financial troubles. One would think his spending was above SS only income and should have raised a flag before he racked up 80K in CC debt.

I did not know a thing about my dad's finances until the day he died. I tried on a number of occasions to sit down with him and have a powwow. My dad was of the generation that didn't discuss finances with his kids.

He told me a number of times that he was "alright" and that if he needed help he would let me know. One year he purchase a brand new Cadillac, I asked him what the payments were and he simply replied, 'low enough for me to pay them"? it's my money.

what was I supposed to do?.

 

[bclover]

Never really thought about "just stop paying" option. Is the freedom from constant harrassement from creditors worth going through the bankruptcy process? Not sure how he would handle being called a deadbeat and insulted constantly.

One thing to be concerned about, once a person files bankruptcy, do creditors feel safe to loan money because they know you wont be able to file again for 7 years or so? So, he gets his debts wiped clean, and goes back to doing the same thing?

Bankruptcy isn't freedom from debit collectors harassment truthfully, they get paid a % of any money they collect. I've handled a number of elderly relatives finances, some companies are basically ruthless, they simply don't care.
LOL, after my elderly aunt passed away I had one guy threaten to tell the neighbors that my aunt was a dead beat. That had me cracking up. I told him 1) most of her neighbors were 90 and wouldn't care and 2) she was deceased, I highly doubt if she was worried about how her neighbors felt at that point.

 

[Backpacker]

Just not paying is probably the best route. One thing to watch out for is if there is a judgement against the father the CC company can't take the SS but they can take money from bank accounts. They are not supposed to take SS from bank accounts but they have been known to do this. If ot stopped, it will occur monthly. It can be prevented from recurring by talking with the bank and CC company (or collection agency).

Agree with not filing BK - really no point in giving money to an attorney to get protection that already exists. As far as garnishment against SS the bank (if garned) must protect two months worth of SS deposits; however if his account is at the same bank that he owes a debt to they could take the money under right of offset. As 2B said it can happen; there are some wierd little nuances to be aware of.

 

[2B]

Meant to add - if you are getting power of attorney papers signed and notarized, get more than one original. Some places require original POA paperwork. They say they will send it back, but it seems risky to mail your only original to a credit card company.......

Kindest regards.

Never-Ever-Ever send out the original. You can make a copy if necessary and get a medallion guarantee at your/his bank. The POA is needed to take control of any outstanding accounts. They may say they want the original but legally they can function with a medallion guaranteed copy.

 

[imoldernu]

The house transfer could be considered a fraudulent conveyance depending on the timing and other things. Best thing for them to do is consult a local bankruptcy attorney to see what makes the most sense.

+1
A good friend became involved in this kind of transfer ( in his case gifts), with
serious and dire consequences. Cited here on this post:

http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html#post1214332

 

[meierlde]

When someone's 80 years old and not in good mental health, who cares what the FICO score is.

Contact all the creditors and tell them the situation. Tell them he has no assets and that litlgation would be a waste of time--and they should charge off the debts. If they persist and get judgments against the gentleman, don't worry about it. If they happen to find an asset they can seize, then it's time to file bankruptcy.

And don't think debts are forgiven after death. Newspaper probate notices are to notify creditors of the death if they're owed money--and that they must file a claim. Hospitals go after estates everyday with their small armies of attorneys.

However likley in the case cited there won't be much of an estate. Note that funeral and estate administration expenses come first in the order of payment, then essentially unpaid taxes, then property taxes assessed, finally judgements entered in the order entered.
If the gentleman is in the state described, likley you won't get far past #1 in the order.

 

[Mulligan]

I did not know a thing about my dad's finances until the day he died. I tried on a number of occasions to sit down with him and have a powwow. My dad was of the generation that didn't discuss finances with his kids.

He told me a number of times that he was "alright" and that if he needed help he would let me know. One year he purchase a brand new Cadillac, I asked him what the payments were and he simply replied, 'low enough for me to pay them"? it's my money.

what was I supposed to do?.

I know what your saying. My dad is near 80 and have only been able to piece it together indirectly over the past 4 years. I stayed up at his house a week a few years ago to paint the whole interior of house. When painting his pantry I was pulling out cases and cases of canned food. I asked why they had a years supply of food and he said food is so expensive you cant afford to eat unless you get it on sale... So now Im thinking Im painting his house for free and he says food is too expensive maybe he isn't in great shape.
I asked and he said they were hurting as they can barely save a $1000 a month anymore. So I kept poking away over next couple years and realize he has over a million in assets in accounts with everything paid off. But he thinks he is broke because he cant "save" anymore.



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