I was recently asked "Am I responsible for my parent's debt? What if as a caregiver, I recently discovered that my father has several thousand of dollars of debt. Are parent debts transferable?"
The answer is ‘No!"
This question often comes up in cases like this, but even if you have power of attorney you are not liable for his debt nor can they be transferred to you (unless you cosigned for them or are listed as a joint debtor).
However, depending on the situation, you might feel obligated to figure out a way to help him pay them. Both of you might have a moral code that dictates that these bills get paid somehow.
What Kind of Debt Is It?
Credit card? Home improvements? Medical? Each might carry a different degree of obligation or urgency. It might be easier to deal with a credit card company in some instances than a local plumber who really needs the payment for survival and you might also feel differently about the timing of settling the debt.
Where Did the Debt Come From?
On the other hand is some or all of the debt due to confusion on his part or a slick salesperson. Is he putting clinic, hospital, or dental bills on a credit card instead of working out a payment plan with the institution which usually has a more favorable interest rate. Is some of the debt from automatic charges for some service or product that can be eliminated or reduced. Are the payments being made on time or incurring late fees.
Steps to reduce or eliminate these problems:
- Can the payments be lowered to accommodate his low income.
- If he is a homeowner with low or no mortgage debt, is a reverse mortgage a possibility?
- If there is confusion involved, take away the credit cards and notify creditors.
(this is one reason why we encourage everyone to have a financial power of attorney in place at any age!)
- Try writing a letter to the creditor stating that there are no assets and requesting "debt forgiveness." (It is possible that the latter may work only after the parent is on Medicaid -Title 19.)
- Contact the Consumer Credit Counseling Service (CCCS) in your area for help with tips or the actual negotiations if you need help.
- If there are no assets, bankruptcy is an option, but get an attorney to assist in this area. There are many legal action or legal aid organizations across the country that give low or no cost assistance to the poor and elderly.
- If your parent should be ill and dies before you get his all straightened out, pay off what you have funds for and then write the creditors with the news that he expired and there are no more funds. (When my mother passed away, we had more bills then assets and letters worked just fine-we never heard from the creditors again.)
June Schroeder is a Certified Financial Planner (CFP) with Liberty Financial Group in Wisconsin, and she is also a registered nurse.