Inheriting Mom and Dad’s Credit Card Debt
It can seem like a nightmare scenario that unfortunately seems to be getting more and more common as time goes on. Your mom and dad are getting old and are struggling to get by on social security and what little savings they have left, so they turn to credit cards and predatory lenders to try to make ends meet. As they age, you acquire power of attorney over their financial situation and you shocked to learn what terrible financial shape they are in. What can you do to rescue them, and yourself, from this financial disaster?
Recent studies have shown that elderly credit card debt is getting to be a huge problem. It use to be that credit card debt this bad was the domain of new card holders who didn’t know how to use their cards correctly or adults who were too out of control to stop themselves. But over the last 20 years, elderly people who have had to use their cards to live on have been racking up debt they just can’t pay and eventually, the debt becomes the problem of the surviving children.
As much as it may pain them to do so, depending on what assets they have and if they own their own home, it might be better off to declare bankruptcy and settle in court with the card companies that your parents owed money to. Of course, if their financial situation is a bit different and they are in danger of losing their house, their car or other hugely important parts of their lives, you might have to make the best payments you can and pay the debt down bit by bit.
Another option is seeking out a debt consolidator that you can trust and seeing what kind of deal the credit card companies are willing to make. When faced with the decision of losing the entire balance of the credit card and agreeing to a settlement where they receive something, most card companies will vote for the latter.
A final option, and a last resort, might be what is called a reverse mortgage. With a reverse mortgage, you don’t pay any of the outstanding balance back until you move or sell the house. The balance would also come due when the person passes away. This can be a tough choice because it basically saddles the debt with the children of the surviving parents and it leaves them little choice other than selling the home that they likely grew up in. Most parents don’t want to leave their kids a financial boondoggle like this once they pass away, but if you don’t have any other options, it can be a welcome alternative to bankruptcy.
Regardless of what you decide, you should seek the advice of a qualified lawyer who specializes in this kind of law. A consultation usually is either free or is fairly inexpensive. Make sure you lay out your entire situation and be completely honest on all fronts and see what he or she has to say. No one wants to have their golden years marred by unpayable credit card debt, but if your parents have been desperately trying to make ends meet and using credit cards to bridge the gap, you might not have any choice.