A mother who has been supplementing Social Security by taking credit card cash advances needs a financial intervention — and a budget
Dear Let’s Talk Credit,
I just found out my 88-year-old mother has close to $40,000 in credit card debt and has been taking cash advances from one card to pay another. Her only income is Social Security and she can no longer afford to keep up these payments. She owns a home worth maybe $30,000 with a home equity loan of $49,000 on it. What happens if she just stops paying these credit cards, but continues paying on her home equity loan? — David
Cash advances are a costly way to make ends meet, and cannot go on. With Social Security benefits as her only income and a home that likely is upside down in the mortgage, your mother would probably be considered judgment proof. What that means is your mother’s Social Security benefits cannot be garnished for credit card debt and her home has no equity, so attaching a lien would not make sense for her creditors. In other words, the creditors could go to court and get a judgment against her, but it wouldn’t be worth their time.
At that time it would also be a good idea to go over her financial situation and determine if her income is sufficient to cover all her expenses, excluding the credit card debt. My concern is that she has been extending her income using her credit cards. A simple, workable spending plan that your mother can follow would help her to know her expenses and exactly how much she has to spend each month.
If, after reviewing her finances, your mother decides she cannot afford to pay off the credit cards, she or you could phone her card issuers and explain the situation. You might also want to tell your mother that she may receive phone calls and correspondence from creditors and collection agencies requesting payment of her debt, so she should become familiar with her rights under the Fair Debt Collection Practices Act.
Another option is for her to consult with an experienced bankruptcy attorney to learn about her legal options concerning the credit card debt.
Let’s keep talking!