Hello - my elderly father has recently been diagnosed with dementia, which has progressed pretty quick of late. He is no longer able to live alone, and was recently moved to an Assisted Living facility. I am POA now for him, and have been going through his bills. I have discovered he has around $50K in credit card debt. He has no assets and only received Social Security as income, which now goes almost all to pay for Assisted Living.
How should I handle his Credit Card debt? There is no money to pay them. Should I ignore the bills? Notify the companies of his situation and request to close the accounts? Do nothing for now?
I want to ensure I am not responsbile for them as POA (I am 90% sure I am not), and also ensure they cannot touch his Social Security that goes for his payment of Assisted Living.
Many of us on this site have found ourselves dealing with this very situation. My MIL was a real financial terrorist with CC and other significant debt & no assets. If you are going to be the point person for dad here's my suggestion:
1. Go an rent a mail box that is going to be the new address for all things dad. Not one at USPO but one at a UPS store or even better at a mail / packaging business. If you have a college or university in your area these will be nearby. These are small locally owned so you can develop a relationship so they call you when something important comes in, this is why i think these are better. The box will be rented in your name as they need an ID to do but with you & dad as receipients. It keeps your life from commingling.
2 you do a change of address for dad to this new address for everything dad - his banking, retirement items, SS, CC, insurance etc. Also this keeps debt collectors from ever hounding him both by mail to his AL address.You don't want his AL address to ever link to his creditors. Ditto for smiling to you at your home.
3. You start 3 binders on dad: medical, financial & legal. & a new binder for each year. You either 3 hole punch correspondence OR what works for me is getting a couple of boxes of top loading sheet protectors which items get inserted into. At some point in time dad will be applying for Medicaid and being organized will make you not to go so loco to do the 5 year lookback.
and now the fun part.......
4. Once bills come to new address, as his DPOA, you send a certified letter with the (green postcard) return registered receipt ( these combined will cost maybe $8 to do and the best $8 ever spent!!) to each creditor that dad is in a long term care facility with only SS as income, which is federally protected income from creditors, and that this is notification that the debt/bill cannot be repaid & if there is a revolving account the account (or card) is to be cancelled AND all Queries on this debt must be sent in writing to the new address. This is typed with no written signature by you but with signature typed to read "John Smith Jones in his limited capacity as DPOA for James William Smith". You do not put a phone # in either! Each letter gets sent certified with RRR. The RRR to be mailed to you as DPOA at the new address. You fill out the RRR so you write it in as you need it to read. Also these are easily trackable on line @ USPO.COM. Do this for all his debtors & it could be more than just that 50 large in CC. Once you get the form letter done in a file on your computer this will be simple to do as future debt surfaces.....which it likely will....
If dad only has SS then creditors cannot touch his Income. Only the "super creditors" like IRS & government can dun his $.
This will get ugly and you need to be proactive on this. At some point, CC will turn it over to debt collectors. If dad has discover card, they are really aggressive to turn over to a DC and the DC will fast track to get a judgement against dad. Other creditors may turn over to DC too but most are not set up with DC to do this as an automatic business practice. Nothing they can get as dad has no seizable assets. Dad sound like is completly judgement proof. But all is a real butt rash if you don't establish some distancing from your personal life in this. Which the new mailing address & notification mailings provide.
Also the initial DC will sell the debt to another DC and this will continue to downstream for maybe 3 - 4 years. Each new DC will send dad a "pay us now" letter AND you send them a letter mailed certified with RRR from USPO.
5. This is important.....with CC and perhaps with other debt, the original creditor once the debt is written off can issue a 1099-C Cancellation of Debt. This little nugget will be whatever amount was the debt walked plus any fees, interest & other charges written off. The 1099-c does not have to be sent in the year dad stops paying on the debt either. Some creditors will carry debt into future years (we had this for extra fun). Only the original creditors can issue a 1099 too but often DC will imply they can do this too unless you agree to pay them - that is total crap & a bluff by DC.
But if dad gets a 1099-C from the OC, the amount is fully taxable income & owed to the IRS. It can be dealt with but will need specialized tax filing to zero out $ owed. If your dad gets one, come back & do a posting. The 1099 -C cant be ignored as IRS as a super creditor can garnish a portion of dads SS. But dealing with the 1099 -C is way down the road.
Being organized to me is the key to dealing with these issues. Good luck.
Take the credit cards away from your Dad. Eventually the bank will notice there is no longer any activity on those accounts.
-- If you plan on using your dad's money to make monthly payments on his debt start doing so.
-- If your dad is unable to make payments just ignore the situation and let the chips fall where they may. However, if the creditors get ahold of your dad and with your dad having dementia lord only knows what your dad may promise them.
-- Acting as POA you can call his creditors and let them know the situation. But beware. If you call them they will then have YOUR phone number and will continue to hound YOU for payment. You will have to tell them, when you call them, that you do NOT want any phone calls from them to either your dad or to you.
I had a similar situation with my dad and in trying to do the right thing I called his creditors to explain the situation. They were pretty nice for the most part but after I contacted them they began calling MY phone and my phone rang off the hook until I faced them and told them to stop calling my number. They would press me for information regarding my dad's assets, does he have an estate, does he have a will.....all very nosy and intrusive questions. But eventually the calls stopped.
The difference between my situation and your situation is that my dad didn't have long to live so that carried a little more weight with his creditors than if I had told them that my dad just couldn't pay.
Just remember that it's not your debt and regardless of what his creditors say, if you choose to speak with them, you will not be responsible for the debt at any time. The Discover card was my dad's most ruthless creditor and they sent threatening letters talking about taking legal action against my dad and I guess I should have been more concerned but my dad couldn't even get up to use the bathroom much less get an attorney and go to court so I didn't worry about it too much.
It was stressful but once I made all the initial phone calls and then went back later and demanded that they stop calling me to get to my dad the calls eventually trickled to a stop. When my dad died I contacted his creditors once again to let them know. A couple of the creditors requested a death certificate and in the middle of all the stress of his death I forgot to send one certificate but I never heard from anyone ever again. Now, every once in a great while I'll receive a letter addressed "To the Estate of ________" and I just throw it away. There was no estate left after my dad was in the nursing home. In a perfect world I would have paid off all of his creditors using my dad's money but he didn't have any money and his credit meant nothing to me in the end.
Good luck!