What if Mom does not have funds for credit card debt after paying for a facility?


My mom is on a fixed income. She has credit card debt as well. She will have to be placed in a facility this next month and that will cost most of what she brings in monthly, with maybe $100 left over each month. I am concerned (slightly) about her other monthly bills, mostly the credit card payments that she will not have funds to pay. Any advice on how to prepare for the creditors phone calls once she won't have money to pay those bills?

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The harsh reality is that mom is going to default on any & all debt she has once she goes into a facility & is required to do a co-pay of her monthly income to the facility. Mom will not ever again have any more $ to pay on any CC, insurance premiums, house costs (if she still has a home) or anything else over whatever is her personal needs allowance as per her state program (Medicaid). If its private pay, she may not have much left over after she private pays her income each month for her stay. Yes its a harsh reality.

I'd approach this as more an issue of how to best deal for you with all this personally as you - as mom's DPOA and point person - are going to get the calls, letters, etc. Minimum payment or restructuring debt is a waste of time and just prolong the inevitable imho. The options are kinda & sadly limited:
- you can assume her debt and pay it off
- mom declares bankruptcy, but mom probably can't be competent and cognitive to
go to court to do this.
- mom walks on the debt. If mom is in a facility and likely staying there and mom has no assets, well at this point in her life may be the best approach. If you do this, I'd suggest you send certified letters with a return registered receipt on mom's behalf to each debtor stating that mom is now a resident with dementia in a LTC facility and any & all her income is required to be paid to the facility. That her income is SS and as such is federally protected from seizure by creditors. BUT before these letters, I'd go and rent a post office box so that the letters have a new address for all things mom to be used from this point on. UPS stores rent postal boxes but also if you have a university area around you they have shipping stores that also rent mail boxes. These are mom & pop type of business and can probably get a relationship going with you to call you when mail comes in or something seems important. The letters are done by you as "Mary Jane Jones Smith in my limited capacity as DPOA for Jane Jones".
No phone # on the letter & not your personal address either. The debt collection laws are pretty precise and you have to respond to any debtor letter in 30 days - again the same letter goes out and certified with RRR. It will take maybe a year or two for the debt collection cycle to run it's course.

Now if mom walks on the debt, the CC and any other original debtor owed more than $ 600.00 can write it off and send mom a 1099 - C Cancellation of Debt for the tax year it was finally written off. If mom gets these, do a post on this site and someone on this site can give you some suggestions as to what to do with 1099-C's & its tax implications.

The situation you find your mom in is very very common. One of the things about an elder who is a widow or widower now going on medicaid for care, is that they flat will not have any excess $ to be able to pay for their old lifestyle anymore. The requirement by medicaid for them to do a co-pay or their SOC (Share of Cost) of all their monthly income often comes as a total blindside surprise for family. If they have a home, or still owe a mortgage on the home, or still paying on a funeral or life insurance policy, this can be quite the panic situation for family to decide how to fund and if feasible. Sometimes family wait a couple of months to apply for Medicaid to be able to restructure a couple of month income to be able to pay the last bit of their funeral policy or life insurance before the required co-pay kicks in. Good luck, none of this is an easy decision especially for family who have always been able to balance their checkbook, have taken debt & credit worthiness seriously and now find themselves walking on debt.
Helpful Answer (4)

Get on the phone with the credit card company. Have her nearby to give the card co. verbal permission to speak with you. Tell them your dilemma....ask them if they would restructure the debt with a lower interest rate and lower monthly payment. It's worth a try. (Better than just walking away from the card and having your phone ring all the time.)
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No she won't be able too. The facility (and this is the only affordable one that is good for mom) will take her whole monthly pension. I have an application in the Veteran Aide right now and am hoping she will be able to get assistance from them but that takes 60 plus days to process.
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Can she at least make the minimum payment?
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