Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive
Dear To Her Credit,
My mother is 83 and lives in Georgia. She is on a fixed income and has a house. She also has one Discover credit card with a balance of $14,400. She has excellent credit and has been making her monthly payment of $270 on time every month.
She is now unable to keep that payment amount and has called the credit card company to negotiate a lower affordable amount. They refuse to lower the payment by even a dollar!!
I told her to just quit paying them. What could they do, put a bad mark on her credit? Could they put a lien on her house? I believe the credit card is unsecured. (This is her only credit card debt, so I believe going bankrupt would not be worth the money or effort.) Could you please advise what she should do? Thanks so much! -- Lynn
You are right that going bankrupt over $14,400 would be foolish. When people go bankrupt, they typically must put money upfront to pay legal fees -- money that could keep this one account in good standing for months!
Not paying the bill is just as bad an idea. If she stops making payments, the late fees and higher interest rates can double her debt in no time. She won't be able to get good credit anyplace else if she needs it. She may even have difficulty getting into a nice assisted living facility with lousy credit. They're not all the same, and believe me, you want her in a nice one.
When the bill is a couple of months late, expect your mom to get urgent letters expecting payment. That won't make her day. But that's not as bad as when the phone calls start. Picture your 83-year-old mother getting phone calls from collection agencies. As someone who had always kept up on her bills, she is bound to be upset.
Your mother needs help. The idea of helping parents financially has somewhat gone out of style, with so much reliance now on Social Security and Medicare. But where else can your mom turn? She can't get a job. She probably has little to sell except her house, and the fees on a reverse mortgage are too high to make it worthwhile for this debt. You (and your brothers and sisters, if you have any) need to sit down together and decide how you can help her pay this off or at least stay current on it. If your siblings resist, remind them that if this debt doubles or triples in size, it will take a serious bite out of their inheritance eventually.
As with any credit card debt, make sure she's paying the lowest interest rate. CreditCards.com shows many credit cards with no interest on balance transfers for 12 months. With a little help, she could go a long way toward paying off her bill before her interest rate goes up.
This is also a good time for you and your siblings to make sure your mom's finances are in order. Does she have a durable power of attorney? A living will? Does her income cover her living expenses? Have you discussed whether she will stay with one of you, have home health care, or go into assisted living when the time comes?
It's hard to start getting involved in your parent's finances. I know -- I've been there. But it looks like it's time. Maybe this is the wake-up call that will bring your whole family together to look after Mom and help alleviate her worries. You are blessed to have each other.
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