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My parents have roughly $60K in debt from debt they were easily paying off before they got sick and lost all their savings to medical and nursing home bills. I stopped paying every credit card bill so that the little bit of SS money left after priority bills is saved for an emergency. I have just enough money to pay a really good bankruptcy lawyer, and my parents don't technically need good credit. They are done buying cars, houses, etc. They pay their rent, utilities, phone, and insurance premiums faithfully, but the credit card and medical debt minimums are extremely high. At most I could probably put $10 towards each debt each month, but that seems like a waste for both my parents and the entities they owe. My parents never answer numbers they don't recognize, and, well, my dad isnt well enough to answer the phone anyways. I could let debtors and collections call them forever, or file bankruptcy and get it all wiped away for $1600. I'm leaning towards the bankruptcy just to have a clean slate for them and for me as POA (aka, to make my life 100000000% easier). I guess I'm looking for validation. It doesn't hurt their pride or my pride to file bankruptcy because no one could have ever guessed this is what their retirement would look like. They went from rich to poor in one year, and they are really ready to just have a simple, peaceful life and focus on gaining back what independence they have. Maybe bankruptcy is what we need mentally and financially? I'm just paranoid of being taken to court or having collection agencies get mean. Their social security and state retirement pension is judgement free and can only be garnished by the IRS, so I guess I shouldn't be super worried. I also can't just have the debt written off because it would possibly put them into a higher tax bracket if the creditor reports the written off debt to the IRS... Give me your thoughts.

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Well hello there Mr. Olsen. Hope you stick around in your new life. What a wonderful asset your knowledge and experience can add to the site.
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AJ - if I’m not mistaken the #1 reason for bankruptcy in the US is medical debt. One health crisis alone can be deep six figures and it’s not something you can have control over as they get hospitalized and then into rehab and perhaps LTC afterwards and each step has copays. It’s not like you can follow your folks around to ask each health care vendor if their in-network and the stop their appointment/therapy to be instead done by someone in-network.

If your 21, your Folks are what? Late 40’s maybe in their 50’s? Their youngish, right? Unless you were a really late in life baby? Are they somehow able to be on Medicare & Medicaid? Or are they on regular health insurance (BCBS type). I’d be somewhat concerned if their health is still problematic and will stay that way, that they will be ratching up health care debt again unless they can get onto Medicaid or Medicare & Medicaid (so their considered “duals”). They have preexisting so they really can’t shop around much for traditional health insurance unless it’s on Obamacare / ACA and in a state that fully accepted  ACA. They cannot do another bankruptcy till a period of time has past. You don’t want to be back in this very same situation say 3 years from now.

Ideally they file bankruptcy and become “duals” so health care costs are manageable and their income isn’t really seriously affected by going to a MD or getting RXs filled.

Or if they cannot yet qualify for Medicare & Medicaid & your in a bigger city with actual competing health care systems, they get into whichever closed health care system (the advantage type of insurance plans) has the type of specialists that they likely need. Like for us, in New Orleans, there’s basically 4 systems & I always used 1 primarily (Touro) but once my hubs had to deal with melanoma & me with ortho issues, we’re now switching over to another (Ocshner) which has a bigger group of MDs and more satellite clinics. You might want to look at getting your folks into a health care system that is more 1 stop shopping for services & billing as it should be easier to navigate and with lower or no copays.

And please please make sure that you, my dear, have your own health insurance. Our son is in college and so your age bracket & 1 misstep can mean a ER visit that can put you into the predicament your folks found themselves if you don’t have insurance. You may be able to piggyback onto whatever they have till your 26. 

60k isn’t that much debt. If it’s unsecured debt - which Credit cards and medical is - in a more average situation I’d suggest you ride it out and let it all go to collections. Doing whatever to ignore the collectors callers and nagging, as your SS income is untouchable by collections except for IRS and state tax authorities. And file IRS 1040 and 982 every year that you get a 1099-c cancellation of debt income filed to zero out tax liability from the 1099-c $. But for your folks,  it sounds like they cannot easily deal with that type of daily hounding that collections will do and respond as needed and in a timely fashion require legally. So bankruptcy better option. 

The only reason I can think of to not file bankruptcy is if there’s secured debt that is messy to deal with within bankruptcy. Like a home with a mortgage or car with a note. But they rent, right? And have a car? 

And good luck with your GRE! 
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Countrymouse,

I'd probably travel more, but I'm currently in the middle of a research project so I couldn't travel even if I wanted to. I do want to simplify everything before I go to graduate school.
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What would you be doing if you weren't tangled up in this?
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Countrymouse,

Tell me about it... my massive family has their "own problems". It's whatever. I just put my big girl panties on and deal with it. It's not forever. Maybe the next decade, but not forever.
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shakingdustoff,

Bankruptcy wouldn't really hurt them. They have zero assets except for a car, home furnishings, and family heirlooms/jewelry. They can't go to court, they're too disabled and I live too far away to represent them as POA, therefore I think bankruptcy is best to just wipe the debt and not have to deal with 5+ years of creditors and collections and court summons. Also my dad doesn't even remember he has debt with his brain illness so a court summons would be insanely stressful I imagine. Also the stress of dealing with all this has made my health begin to decline - and I'm 21... yeah this debt drama has to go away immediately.
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The IRS typically considers the amount of forgiven debt to be taxable income. However, if the debt is cancelled as the result of a bankruptcy, then the law specifically excludes the forgiven debt from income. Even if the debts were cancelled without a bankruptcy filing, the income could be excluded if your parents are considered insolvent (value of liabilities is greater than value of assets). The only caveat is that they may have to make certain guarantees when their apartment lease is renewed.
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AJ, you ask for thoughts but all I've got is questions.

Mainly. You're 21 years old. Are you on your own in this situation? Why is the responsibility falling on you?
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Thank you for the support!!!
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Are their medical issues over with for now? Looks like the debts are medical and credit card so I would say an emphatic YES to bankruptcy. It will give peace of mind and the calls and harassment by debt collectors will be a thing of the past as soon as you file. It is well worth the fee you will pay the attorney. A member of my family did this after cancer caused more debt than could be handled. It was a relief and the best way to handle the situation. You don't want zombie debt showing up after credit card companies write off bad debt. They sell the debt and it never really goes away. With bankruptcy it does go away and you can breathe again.
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I think at this point bankruptcy is a good idea. A lawyer will be able to help you get thru the debtors. There are FTC rules that debt collectors have to follow. No, they don't but you have rights, I collected for the companies I worked for and had more freedom than collection agencies. Search the FTC and familiarize yourself on your rights.

$10 on a credit card with your parents debt will not satisfy the card company. You have to pay at least the minimum on a card. That minimum doesn't really pay the principle let alone the interest when the debt is large. The interest is taken before the payment is deducted. Its hard for people to get out of debt with the debt ur parents have. Again bankruptcy is a good idea.
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Credit cards will eventually write off the debt and report it to the 3 credit bureaus. The debt will then be sold to a collection agency for pennies on the dollar who will try to collect on it; even offering to settle it for a fraction of what is owed. They would then promise if you agreed to it, to report it to the 3 bureaus as Paid in Full
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I see that your parents are under 65, and given the debt acquired for medical bills, I'm assuming that they had some private insurance which didn't cover all the expenses. How unfortunate that this occurred just as they could be entering retirement.

Life can really throw us some punches, can't it? Your parents are fortunate to have you help them with this, and to understand and weight the benefits of the options.

Some thoughts...

1. Collection agencies are probably going to call one way or another; make sure you read and understand your parents' rights under the Fair Debt Collections Practices Act. And as your father is already doing, don't answer unknown calls.

2. I think the issue of current and future medical care, as well as home environment, possible home care, transportation and similar issues are more important.

3. Your analysis of whether or not to file bankruptcy is a good one. But I would still speak to a bankruptcy attorney to learn all the nuances of what level of debt would be forgiven and which wouldn't.

I don't recall and it's been a long time since I've done any bankruptcy research, but you want to make sure, again from a practicing and experienced bankruptcy attorney, that the unsecured credit debt is extinguished, in full, if possible. If your parents have any secured debt, you'll need to find out how that's treated as well.

4. I think your analysis of the benefits of getting all the bills behind them is good. Whether or not they speak with debt collectors, the phone calls can be irritating, and the fact that there is still debt can weigh on their minds even if they don't discuss it.

5. I also think that putting the debt issues behind them so they can enjoy the rest of their lives, especially given that they apparently went through some rough times recently, is a solid and well rationed ground for filing bankruptcy.

But you really do need to know the benefits and hazards of both secured and unsecured credit, and to confirm that the credit card debt CAN be extinguished, as well as learn how secured debt will be handled. Then you can make a final determination.

And, I don't think $1600 is out of line for a bankruptcy. Is this for a straight bankruptcy?
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