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Advice if Mother with Many Debts Facing Debt Collection

My 76 year old mother who lives off of $1350 per month from SSA is being sued by a debt collector, what can I do to help her?

Hi Bill, My 76 year old mother who lives off of $1350 per month from Social Security is being sued by a debt collector (credit card debt). The judgment amount is for over $14,000 (originally $10,000 debt). She also owes Sears (now turned over to debt collector) over $10,000 for the installation of a central heating/air system. She owes 3 other credit cards a total of around $8,000 although we haven't heard from them in awhile (statute of limitations maybe?). Anyway, she owns her home free and clear (in her name) which is worth around $86,000. She lives in VA where the homestead exemption is only $5,000. Bankruptcy is out (have talked to attorneys) as her payments would be based on that equity and be around $550 per month (impossible). My mother is elderly, feeble with health problems and has only a 9th grade education, and she does NOT want to go to court (I don't think she is up to it anyway). Besides, other than stating predatory lending, there's no defense. She stopped making payments to everyone in late 2005 as she was overwhelmed, etc. The court date is set in June so what are our options? Deed transfer? But what about fraudulent conveyance? What about taxes and Medicaid eligibility in the future? We are considering a reverse mortgage for her. What do you think? Is it better to have liens against the home or to run the equity down in a reverse mortgage? Any other suggestions? We do worry about Medicaid eligibility if that becomes necessary in the near future. We looked into credit counseling, debt settlement, etc. back in 2005 and everyone said her income was too low in terms of her high debt (even if lowered). My siblings and I are desperate. Help and thanks! (I am her daughter, Faith).

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Bill's Answer
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  • Consider bankruptcy when you have high debt, low income and few assets.
  • Consult with an experienced bankruptcy attorney, to understand if bankruptcy is an option.

Thank you for your question, Faith. From your question, I can see that you have done extensive research regarding the various options available to assist your mother in resolving these debts. Based on all of the information you have presented, I recommend that your mother retain an experienced bankruptcy and estate law attorney to assist her in finding the best way to resolve the various financial problems she is experiencing. Given her limited income, and the fact that her home is her only substantial asset, I think that she should be able to find a workable solution to her financial troubles.

Your mother may not be able to file for Chapter 7 bankruptcy due to the value of her home, which significantly exceeds the homestead exemption allowed by the State of Virginia. However, a Chapter 13 bankruptcy may be a workable solution to her financial difficulties. Chapter 13 bankruptcy generally allows homeowners to keep their home and other assets while making payments toward their debts under the supervision of the bankruptcy court. Most Chapter 13 plans last either until all debts included in the plan, or for five year; if a debtor’s income is insufficient to pay all debts within five years, any debt remaining is usually discharged by the court. In your mother’s case, it is possible that, due to her limited income, her Chapter 13 payments would likely be minimal, meaning that she would probably pay only a small percentage of her overall debt. To learn more about the various types of bankruptcy available to consumers, including Chapter 13 bankruptcy, I encourage you to visit the  bankruptcy page.

Given the complexity of your mother’s financial situation, I encourage you to consult with an experienced bankruptcy attorney as soon as possible. A good attorney should be able to tell your mother if bankruptcy is a viable option for her, and what other steps she should take to protect her assets. For example, you may wish to ask the attorney about the possibility of placing your mother’s home in a living trust once the lien created by the large judgment is resolved. As for your concern about the bankruptcy court viewing any transfer of your mother’s home as a fraudulent conveyance, I cannot imagine that any bankruptcy trustee would challenge the transfer of a 76 year old woman’s home. Again, discuss these issues with your attorney so you and your mother can find a workable solution to her financial difficulties.

I wish your mother the best of luck

I hope that the information I have provided helps her Find. Learn. Save.



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