Aging father's big card debt puts his home at risk

If he has equity, lawsuit and judgment could create a lien or force a sale

To Her Credit columnist Sally Herigstad
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, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My father-in-law is 80 years old. He has $70,000 in credit card debt. He owns a home, on which he owes about $300,000. It is worth probably $550,000. His mortgage is $1,800, and he only gets $1,900 a month Social Security benefits and pension. We had no idea how he was surviving all this time. Except using credit cards, obviously.

If he stops paying those creditors, can they force him to sell his home?  If they put a lien on his property, would we just have to pay back his debt when the house is sold in the future and would the total just keep going up and up? I don't know how to help him out. We can't afford to pay his debts. We've already given him about $15,000 to stay afloat, not realizing how desperate it was. A lawyer said he has too much equity to file bankruptcy.

We've tried to convince him to sell his house and move in with us, but he refuses. It's complicated. Any advice would be deeply appreciated. – Sara


Dear Sara,
If he stops making payments on $70,000 in debt, the credit card companies will attempt to collect. They will call and write, which will be stressful for him. If he still doesn’t pay, they’ll step up their efforts, and eventually take him to court and get a judgment against him. Next, they can attach a lien to his house.

With a lien on his house, they can wait for him to sell his house or try to refinance. They’ll be next in line after his existing mortgage to get paid when he does either of those two things.

If the credit card company doesn’t want to wait for him to sell his house, they may force a sale. This doesn’t happen very often. However, $70,000 is a lot of credit card debt, and he does have equity. If your father-in-law just stops paying on his credit cards and tries to stay in his house, he could very well lose his house. By the time the debt grows through interest and fees, and is potentially sold as a distress sale, he could end up with nothing.

In the meantime, if he stops paying on his cards, he won’t be able to use the cards anymore. With only $100 per month left after his mortgage payment, if he can’t use his credit cards, he won’t have any way to pay for groceries and utilities.

I’m a little curious how he got a mortgage for $1,800 per month with an income of $1,900 per month. Perhaps he got the mortgage before he retired? In hindsight, that bit of poor retirement planning set him up for financial disaster.

Here are some options for your father-in-law:

  • He could sell the house, pay off his debts and move in with you. With his home equity and Social Security benefits and no house payments, he’d be fine.
  • He could sell his house, pay off his debts and rent an apartment or house. He may have to share a home with a friend or relative, or find inexpensive housing for seniors.
  • He could consider house sharing where he is. For example, if he has a friend who could live with him and pay half the housing expenses. This could be a winning solution for both of them.
  • He could consider a reverse mortgage to pay off his first mortgage. He may receive enough money to pay at least part of his credit card debt, plus payments from the bank based on a percentage of his home equity.

The bankruptcy lawyer, who is familiar with state laws where your father-in-law lives, advises against filing for bankruptcy. Negotiating the credit card balances, even if he could find enough money to make his creditors an offer, wouldn’t solve his underlying problem of monthly expenses that greatly exceed his income.

A cash-out refinance or home equity loan would also be out of the question as he wouldn’t be able to qualify for a new loan with his current financial condition.

Your father-in-law is fortunate to have children who care about him, and who would even invite him to live with them. Giving him $15,000 was also way beyond what most adult children would or could do for a parent. Best of luck as you help him explore his options and come to terms with the situation he’s in.

See related: Know your rights under the Fair Debt Collection Practices Act, 5 tips for talking to elderly parents about credit card debt

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Updated: 01-23-2018