How to handle elderly, sick parent's credit card debt

Medical expenses take priority when funds are limited

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 To Her Credit,
I am hoping to get some sound advice. I have a power of attorney for my dad who is 72 and recently had a stroke. He was in the hospital and rehab for months, but is now at home.

My dad apparently was not keeping up with all the finances even before the stroke, because when I took over he had many overdue items. I also discovered he owes a lot in credit card debt. He has a home, but it is only worth about what he owes. He lives on Social Security benefits, and he has a 401(k) plan. He is on dialysis and recently was released home requiring 24/7 care as he is not able to care for himself.

I have been able to get everything caught up and in good shape, with the exception of his credit card debt. Several of his cards are going to collections. It is just sad. Even though he lived beyond his means taking care of my sister and her kids, he kept things floating for a long time.

He will soon need skilled nursing care, as his needs will not be able to be met at home. How should I handle the credit debt? It is quite large, and I am afraid to wipe out a good portion of his 401(k) plan in case he needs it for medical care.  – Annie


Dear Annie,
I don’t recommend you drain your dad’s 401(k) retirement plan to pay the credit card debts. Money in retirement plans is generally protected from creditors, because they are intended for retirement and end-of-life expenses. Yes, he owes the money and you feel a moral obligation to see that it is paid. However, at this stage of life your dad can’t work and replace the money in his 401(k) plan, and his medical needs and daily care are a higher priority than paying credit card debt.

When people, especially seniors, have no income or assets with which to pay their bills, they are often called “judgment proof.” That means if creditors went to court to get a judgment against him, there’s nothing for them to get. Your father seems to fit this description. A creditor could potentially place a lien on his house. The mortgage company has first dibs on any proceeds from the house, though, so the other creditors would still be out of luck.

If there’s enough money left over from your dad’s monthly Social Security benefits to make payments on his credit cards, you can do that. If he could pay something less than the minimum, you may want to try negotiating lower payments with the credit card companies for your dad.

You don’t need to worry about the credit card company garnishing your father’s Social Security payments. Social Security payments are specifically exempt from being seized by creditors. Before 2011, it was up to Social Security recipients to make sure their benefits were not seized. However, the law now requires banks to identify exempt direct deposit federal payments with an electronic “tag” and protect them from being frozen or garnished.

If your father cannot afford to make any credit card payments from his monthly income or nonretirement assets, you should notify his credit card companies of the situation. Chances are, they will write off the debt and stop sending bills and letters and calling you. That should help your stress level. It’s also the right thing to do for the credit card company. They are better off knowing continued collection efforts will be useless, so they can stop using their resources on it and adjust their books accordingly.

Age 72 is not that old, and I hope your dad recovers from his stroke and has many good years remaining. It’s still a good idea, if you haven’t done so already, to get all your father’s financial affairs in order. Make sure he has a current will, and that a personal representative or executor is named. Consult an attorney in your state if you have any questions about his estate and related issues. Consider prepaying for burial expenses before his money is gone.

The more you do now, the less you’ll have to worry about later, as you take care of your dad during difficult times.  

See related: Protecting the elderly from credit card collectors, Judgment-proof debtors have an imperfect shield

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Updated: 01-17-2018