Can creditors sue if the only source of income is Social Security?

Has your grandmother dementia? Then this could be argued as a defence, that she was not of sound mind when using the credit cards.

If she is on social security, and this is her only source of income, then I doubt it very much if they can touch her income. Dementia plus solely dependent on social security, your grandmother has a strong case.

Why not ask around to see if some lawyers are willing to do a pro bono case for your grandmother? (pro bono, you don't have to pay.)

Do you have durable POA for your grandmother? She sounds to me like she is no longer capable of handling her business in a businesslike manner.

Yes, I actually found a durable power of attorney signing me as an agent in her paperwork dated back for 2007. Granted, it needs to be updates with a few addresses, but it's still a legal & notarized document.

These answers make the most sense so far, and I suppose I can ask a lawyer about it.

If she's demented she can't sign a new one, so use the old one. Creditors can sue anybody they want to sue, but if she doesn't have any money it's not worth their while. Just start by calling the credit card companies. Shut a couple of the cards down. What is she buying? You can stop that.

I'm glad that you found the POA. I would write all of the credit card companies explaining the situation, who you are as her POA and enclose a copy of the POA for they are going to want to see that. Also, I would take a copy of the POA to the bank.

No. If a creditor other than the federal government tries to garnish your Social Security benefits, inform them that such an action violates Section 207 of the Social Security Act (42 U.S.C. 407).

Section 207 bars garnishment of your benefits. It can also be used as a defense if your benefits are incorrectly garnished. Our responsibility for protecting benefits against garnishment, assignments and other legal processes usually ends when the beneficiary is paid. However, once paid, benefits continue to be protected under section 207 of Act as long as they are identifiable as Social Security benefits.
This is from the government site. Hope it helps. Write a letter to the credit card companies stating your grandmother has dementia, and only has social security and does not have the income to pay and is judgement proof and also state that they are not allowed to call. (or change her number)

There are places that offer "second chance checking" see if there is a "Greentree Bank" in your area, google "second chance checking" they will allow you to open an account.

I have the same problem with my mom. She has so many credit card bills it isn't funny. I now have POA and have been trying to resolve this. She has dementia so she can't handle he bills I also have Rep. Payee of he SS check. I am glad to know the credit card company can't get her ss check but I know they can put a levy on your SS check if you owe gov. She owed back federal taxes and they are now taking 13% of her check till it is payed off. I didn't know she owed these tax until got a letter a few months ago saying they are putting a levy on her check. I guess there is nothing I can do about it now.

For those who asked about "What is my grandmother buying?" This has just been years of debt adding up. It's not within a year. This was like 10 years ago and now she just doesn't have the money to pay the bills anymore. It's nothing recent which makes it even more difficult. Imagine being a kid, thinking everything is okay while meanwhile your parent was paying bills with credit cards and paying credit cards with credit cards, and now that you're old enough to realize what's going on, it's like getting smacked with a brick wall and trying to dig your way through it with a spoon.


2nd chance checking accounts are not an option. She foreclosed on a house THIS year. That's worse than bankruptcy.

Currently, I am not aware if she owes the government. Also, she gets her social security directly deposited so I do not think I can be appointed a 2nd person on the check, if you know what I mean... Eventually, I will consider this an option JUST in case.

Ah..it's difficult trying to get my legal issues in order, but all this new found paperwork should help.. I'm PoA agent, AND Estate Executor. [Which is even MORE important to figure out this credit mess before hand!] Is the estate expected to pay back credit card bills after the cards have already been charged off (closed out)?

What if the estate doesn't have enough to pay them all? (I think the creditors will be SOL is that happened! Hahahahahha)

Auntkiki, Contact the IRS about an offer in compromise. Basically, if a person does not have enough assets to pay a Federal tax obligation, IRS considers a person's assets, income and expenses and determines what they are willing to accept as a pay off.

If the credit cards issued a true discharge of debt they generally report this as a loss to the IRS, and it usually goes against the person as income for the year the credit card reports this. If all you did was close the accounts so she could not use them, then the estate will still owe the debt. However, they generally line up to be paid , the one who is owed the most, generally collects first and then so on. I do believe the estate can declare bankruptcy, and generally credit card debt is unsecured. It cannot always be collected if the estate is broke. Do not let them hassle you as POA and tell you that the debt is now yours to pay. It is not, the only case it would be is if you were a co-holder on one of the credit cards.

All of these are good answers, but if you have had POA for awhile, it may go against you if you knew your grandmother was charging things while she had dementia and you didn't try to stop it (not saying you didn't, this is just hypothetical). Also, if she has major debts and creditors galore, when she passes, the first three creditors get paid in this order: the funeral director, the attorneys who handle the estate, and the IRS. The rest of the creditors may have to just take a loss.

I've been in your shoes (still am, actually). I'm all too familiar with the "robbing Peter to pay Paul" trap that some elderly find themselves in with credit cards.
First, make certain that all of the credit card debt is unsecured (though it sounds like your grandmother has no property at risk if the foreclosed house was her only asset).
Then, remind yourself that the companies that gave her the credit cards were taking advantage of the craziness in financial de-regulation that allowed companies to essentially make money by extending credit to people who couldn't pay them back. Your grandmother was just a pawn. Not too many years ago, she likely would never have been able to charge up any significant amount. People living solely on a very limited income would not have qualified for credit cards.
If your grandmother has stopped paying on them (if she hasn't, I would), the credit card companies probably have already "sold" the debt to another company (again, more financial shenanigans!). They'll keep sending "offers" to collect less than the amount owed (which, due to fees and interest, is probably many, many times what was actually actually charged on the card). Most won't sue, just threaten. Some may, though. I've accompanied a family member to court over exactly this. They didn't have any money to speak of and needed every penny (and then some) of their SS check just to make ends meet each month. While it's never the best situation to enter a court room without representation, it worked out well for us. There are loads of these companies that buy up debt with often nothing more than a spread sheet print-out to prove they own it. I did a little google research beforehand. The judges seem to be fed up with these cases clogging their courtrooms. The judge in our case lectured the attorney about having no evidence to support that his client was legally entitled to collect on the debt. It never went further than that. The company could have appealed, but instead, a few months later, we received notice that they'd forgiven the debt. Prior to entering the courtroom though, the lawyer asked to meet with us privately. He offered a rock-bottom offer to settle the debt. I had come prepared with a spread sheet showing my relative's income and expenses and told him that there's just nothing there to collect.
It's a smarmy business. The advice I'd give from my experience is, change your grandmother's phone number (they call relentlessly), carefully watch for court summons in the mail (you don't want her to be found in contempt if one of them does sue - that's real stuff), and help her get control of her finances. I now pay all the bills and he's saved about $70 a month in avoiding the bounced check fees alone!
Good luck!

Reindeer, I've learned from someone else's experience that as PoA OR executor of an estate, you personally, are never in charge of a person's former debt. That's lucky enough to know. I feel that the creditors are just going to take a loss. There's nothing anybody can do. The accounts are closed for non-payment, not because we closed them out ourselves, hence why I said they were "charged off", even thought they still hassle my grandma over what she owes.

It is probably not the credit card companies contacting her. They sell the debt & those people try to collect. If they can't, it gets sold again & a new round of calls starts. My ex had some debt and periodically the calls would start even tho we had not seen each other in almost 25 years. The last guy that called was about 3 years ago. They got my husband who let them know they had better never call my phone number again.

The problem with collection agencies calling is that they cannot prove how much my grandmother owes. So, if it ends up being one of them who sues ON BEHALF of a creditor, they can't prove what she owes and when. (Or so I've heard. Whether this is true or not, I'm not sure.)

If she doesn't have any property, then there is nothing the cc companies can do as cc is usually unsecured debt.

However, there is something to be on the look-out for when it's charged-off:
1099-C aka Cancellation of Debt. This will come from whomever was the original creditor (like Bank of America or Chase or whatever bank group held the credit card) who wrote off or charged-off the debt (and not the collection agency). This gets issued in January and you cannot ignore it. Oh & to make this even more fun, the 1099-C does not have to be issued the year the debt was written off. It could have been debt from years and years ago. So 10K DIscover card charge off could go to 15K with interest & fees and you get a 15K 1099 in reportable income.

What the 1099 -C does is becomes INCOME for the tax year the 1099-C was sent. And this can be sticky to deal with both in that you owe taxes on income and if you get Medicaid, then the "income" (which is really phantom income) can take you over the Medicaid limit for income. What you have to do is file taxes and do an impoverishment for the year against the debt so there are no taxes due. You kinda have to have a CPA or other tax professional do this as it is sticky.

The 1099-C's get routinely done for people who do a foreclosure, or short-sale or walk away from a mortgage. The outstanding $ due on the mortgage but not paid is forgiven as debt BUT the amount becomes taxable income. Imho that was what the intention of the law was - for dealing with foreclosure crisis. But the CC companies can do 1099-C's if they are a bank (so AMEX doesn't do them). If you just ignore the 1099-C, the IRS will get involved as you did not pay taxes or file an impoverishment in excess of the "income".

I have not done taxes in several years, but it used to be if the person who had the debt written off was insolvent, the debt was not taxable to the extent of the insolvency. In other words, if there are no assets, only debt, none of the write-off would be taxable. If a 1099 is issued, you would need to check the law in effect for that tax period. If you get a 1099, be sure you put a statement with the tax return computing the amount of insolvency. If you do not, you will probably receive a CP2000 notice showing the unreported income and the increase in tax. You can at that time present the information.
I know nothing about how it affects Medicaid.

You all lost me when you started talking about taxes. So, a 1099-C is a tax form sent showing the taxes owed on a debt? They were all charged off in 2012, so hopefully, it'll show up in the mail sometime in this new year.
OR - is it something I have to request?


Also, my grandmother doesn't have Medicaid. Just Medicare. What's the difference?

A form 1099-C is used to report Cancellation of Indebtedness. It has to be sent to your grandmother. You should not have to request it.

OMG - 1099 C may or may not be sent. Kinda depends on the creditor. You do NOT ask for them as they have to be done by whomever forgave the debt. IRS rules require 1099's to be sent out in January for the prior year. So if you are getting them, you should have them by the end of this month.

1099 C are imho a really sleeping nightmare as not dealing with it can trigger IRS and that (the IRS) in turn can affect Medicaid. Medicaid is a needs-based program in order to qualify which basically means for NH Medicaid that they have 2K in non-exempt assets and 2K monthly income...so if the IRS gets a 1099-C that shows income of 15K in forgiven debt, that is 15K in reportable income and takes you above the 2K income level for Medicaid. So you have to file taxes and do an impoverishment form to zero out your "income".

1099-C from CC debt are real zombie's to deal with as they could be from any old debt over $ 600 that wasn't paid off in full and from years and years ago.

This has nothing to do with Medicare.

What is an impoverishment form? I worked as a Revenue Agent (audited tax returns) for 27 years and have never heard of such a form. As I previously said, and have since checked and made sure the law has not changed, if a person is insolvent the forgiveness of indebtedness income is not taxable to the extent of the insolvency. File a statement with the tax return showing the amount of indebtedness income, then show the fair market value of your grandmother's assets, any excess in assets over the debt forgiveness income is the amount that is taxable. That amount will be carried forward to the front of the form 1040 with a note to refer to the statement.
If you do not get an expected 1099 (or any other expected statement) by the 31st of January of the year following the year income is received, you can call IRS and report you did not get a statement.
Should IRS get a statement you did not report as income, you will receive a CP-2000 notice showing IRS's tax computation and what they think is not on your return. All you have to do is contact them about the discrepancy and work it out. Now, if one were to ignore the notice (yes there are people who ignore notices from and appointments with IRS), the tax will be assessed and collection activity will be started.
I do not know where you live, but if there is a local IRS office, they have people there who will help you with all of this. You might also find someone at a voluntary tax preparation site that can help you with this. There are several kinds available including some for the elderly.

What does imho mean? Also, I looked up impoverishment form and it doesn't seem to exist, so I have no idea what you people are talking about.

However, it sounds like a 1099-c form is for the purpose of showing interest incurred on a debt, but because the debt is not being paid it shows as income? That makes no sense to say, "Okay,so you're not spending the money on us, it must be income!"

I'm just going to ask a tax guy (and a lawyer). Thank you everyone.

I'll let you know what I find out. However, I'm in between my own stuff at the moment, so I had to put a lot of things with my grandmother on hold. Not by choice, but I'm doing the best that I can.

I was told the impoverishment form was for Medicaid. Because this income would
show up on her taxes it then would be considered by Medicaid and might knock her
off being eligible for Medicaid. I believe the form is from Medicaid not the IRS. Maybe I didn't understand, but I know it has to do with keeping them eligible for Medicaid.

imho means- In My Humble Opinion

I have some familiarity with the 1099c. My father got several of them when CC companies "forgave" his debt. I was advised to claim them as income on this taxes. That's what I did and, because he has very little income, he didn't owe any taxes. However, I'm nervous about some CCs still out there that have much higher balances. The best advice is what you've given yourself, go see a tax accountant. A couple of hundred spent there may be wisely invested.

Reindeer, I looked into it a bit. The only thing I was able to find was something call the "Spousal Impoverish Protection Law" and a form regarding that. My grandma has no spouse, however, she also doesn't have Medicaid at this time. Just Medicare.

Does this make a difference for this year's taxes, I'm not sure.

OK, hang with me......a 1099 - C can be done when a creditor forgives a debt over $ 600.00. The creditor can be a bank who issued you a credit card that got charged off OR a mortgage that was forgiven because of a foreclosure or short sale on the house OR the doctor who wrote off 5K in fees.The creditor issues it in January and technically the forgiven debt is considered "income" as the 1099-C is also sent to the IRS and then the IRS expects taxes to be paid on the income and then also the "income" gets reported into the system. So lets say you had 2 credit cards for 15K with Discover & 10K with Citi and had the debt written off by Discover and Citi, then you could get a 1099-C for whatever the 15K and 10K have morphed to with fees and penalties. So it could just be 25K but more likely it will be higher because of fees and penalties.

That there is now "income" based on the 1099-C is the sticky tricky part for those on Medicaid. Remember Medicaid is a needs-based program to qualify and so if you somehow now have "income" via the 1099-C, you could get disqualified because of your new"income". What is so totally crazy in this is that this is phantom income and it could be from a debt that was written off years ago. It's totally phantom income from zombie debt. Zombies are so "In", aren't they?

It also matters if say your folks have limited income (not on Medicaid and still living at home and only get SS) and they had credit card debt written off as they could find they have to pay taxes on the supposed "income" and they haven't done taxes in forever because they don't have any reportable income.

If you or your parents get them, then what you kinda need to do is file taxes and do an IRS Form 982 - Insolvency Exclusion so that your exclusions totally off-set whatever "income" you have. You need a tax professional to do this who has experience with dealing with 1099- C and Form 982 because it is a totally loco form to figure out. There's this whole worksheet which makes no sense as it's designed for foreclosure written off debt and not for dealing with your financial terrorist of a MIL who had 30K in credit card debt forgiven. It is not imho (in my humble opinion) a do-it-yourself project or done via on-line tax filing, H & R Block has folks who can do it but they are usually the ones at the Block for Business offices that have year round office staff and it might run a couple of hundred but well worth it as you don't want to deal with IRS or having them disqualified for Medicaid till it all get's sorted out.

Personally I think it's criminal that they can issue a 1099-C from debt that is from years and years ago.

As long as the bankruptcy didn't involve you owing money to your bank, you can have a checking account after filing for bankruptcy (& so can she, following a foreclosure) just switch banks.