Dear To Her Credit,
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I have an 84-year-old mother who has probably $25,000 in credit card debt, a reverse mortgage on her house which is up to $125,000 (the home is worth $140,000) and she only gets $972 a month in Social Security benefits. She goes to check-cashing places every month to get money for food, gas and monthly bills. All of her check is gone the minute she gets it for credit cards, Blue Cross/Blue Shield insurance, and car and house insurance. I have contacted the credit card places, and they won't lower her bill.
What would you suggest her doing? I don't know how to help her. She doesn't have money to claim bankruptcy and she has health problems to boot. Any suggestions would be appreciated.
For most of us still in our working years, credit card debt of $25,000 would be unpleasant, but not insurmountable. For someone like your mother, it's a disaster. I don't see any way she can pay it out of her current monthly income.
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Even worse than the credit card debt, however, are the check-cashing loans. Once she is taking short-term loans at very high rates, and then having to get another loan next week or next month, it's very hard to break out of the cycle. This has to stop. She is probably going further into debt every month, with fees and interest charges helping her along.
To escape from this downward debt spiral, she needs to raise some cash.
She's probably already considered selling something. If she bought something with the credit cards, it makes sense that she should return it (if possible) or sell it to pay the debt. She may have other things around the house that she no longer uses. You can help her by having a garage sale or selling things online for her. Perhaps you and your brothers and sisters can donate furniture, sports equipment, tools and other items to the sale.
Another way to sell things is to take them to consignment shops. I took a trombone to a music store, and although it took them a while, I got a much better price when it sold than I would have gotten on my own. Consignment shops work well for specialized items, such as good-quality or collectible clothing or musical instruments.
She may even consider selling her car. At 84 and in ill health, it might be time. Not only could she raise money by selling the car, but she could save money on insurance. The occasional taxi or senior shuttle service is much cheaper than gas, car maintenance and insurance premiums.
With a reverse mortgage on her house, she generally cannot move out and rent the house to someone else. However, there's nothing to stop her from renting out a room or a section of the house if her home is big enough. This may work best if she has a friend or relative -- even a young adult grandchild, perhaps -- who can help pay living expenses.
No one expects you and your siblings to step in and pay off a $25,000 credit card debt for your mom. To answer a common question, no, you will not be liable for her credit card debt after her death. However, if you as a family can afford it, you might consider helping her enough to get out of the check-cashing trap and get back on her feet. It could make a huge difference.
You've taken a good first step to dealing with the credit card debt by contacting the banks. However, as you've discovered, it's difficult to get them to lower a bill just by asking. The credit card companies need to be convinced that it's in their best interest to negotiate. If you can round up enough money to help your mom negotiate her debt down, you stand a good chance of being successful.
If your mom has nothing to sell and no other way to raise money, she may be "collection proof" -- meaning the credit card companies cannot collect from her. A credit counselor can sit down with your mom and look at her whole financial picture. I recommend finding a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.