How Should You Handle Debt if You Live on Social Security? – NFCC
Editor’s note: This post was originally published in May 2019.
NFCC often receives questions from readers about their money challenges. We answer common questions in our Ask an Expert series to help readers find the information they need.
Q: My 77-year-old mother owes $15,000 in credit card debt and lives on Social Security alone. How can we help him?
My mother lives in a one bedroom apartment with no assets, and has accumulated about $15,000 in credit card debt that she can no longer pay off.
A bankruptcy attorney suggested she stop paying the creditor since she has no money. He also recommended keeping her Social Security in a separate account from the money we children give her, because creditors can’t touch her Social Security income.
My brother and I have a power of attorney for my mother, as she has lost her hearing. She has no phone, so the only contact the creditor has is her mailing address. I don’t want my mom to be taken to court as she has heart failure and I don’t want anything like that to bother her.
Her credit card debt hasn’t gone into collections yet. Should I call the lawyer and hire him? file for bankruptcy? Should I try to negotiate? debt repayment with the creditor? Should I wait for the debt to go into collection? I’m not sure how we’re going to pay for this, but if we have to, we’ll find a way.
Answer: Dear Reader,
What a terrible situation for you all. Given your circumstances, it gives me great pleasure to be able to ease your worries!
The attorney you spoke with sounds like a quality attorney. Why? Because he did not unnecessarily push his services. Rather, he gave you the information you needed to handle this on your own. In other words, he informed you that your mother is “trial-trial.” So you probably don’t need to hire legal representation.
What does it mean to be judgment proof?
To be clear, judgment proof does not mean that your mother cannot be sued for the balance on her card. If she or someone else doesn’t pay the bill, the creditor may well turn it over to the lawyers.
However, if a creditor sues it would be a waste of time and resources. Even if the creditor were to win the case and be awarded a judgment, collecting the money would be difficult if not impossible due to your mother’s circumstances.
As the lawyer explained, your mother currently has no property that a creditor can seize. If she had a job, her creditor might be able to garnish her wages. If she had significant funds in the bank that weren’t derived from Social Security benefits, a creditor could dig into them with a bank levy. However, in this situation, a lawsuit would do nothing positive for the creditor.
How should you communicate with the creditor?
So what should you do now? Well, your mom spent a significant amount on her credit card, and some of it was likely on physical items. I recommend finding out if she or you can return any of the merchandise so the account can be re-credited and the balance reduced. If this is not an option, the bank may have to accept its loss.
In either case, contact the creditor and let them know what’s going on. Since you have power of attorney, you can speak on behalf of your mother. Let the creditor know that your mother does not have the means to repay her debt. Let them close or suspend the use of the card.
I admire you for caring so deeply and wanting to help your mother through this mess. But take heart in knowing that you are neither morally nor legally responsible paying off credit card debt belonging to someone else, including your parents.
Sincerely,
Erica Sandberg
(Author) is (role) at the National Credit Counseling Foundation.
Erica Sandberg is a consumer finance expert and journalist. She is a former NFCC-certified credit counselor who has written for US News & World Report, TIME, Newsweek and more. Sandberg is also the author of Waiting for Money: The Essential Financial Plan for Young and Growing Families.
The views expressed are the personal views of the author and do not represent the views of the National Credit Counseling Foundation, its employees, its members or its clients..
