How Should You Handle Debt if You Live on Social Security?

Editor’s Note: This post was originally published in May 2019. 

The NFCC often receives questions from readers about their money challenges. We answer common questions in our Ask an Expert series to help readers find the information they need.

Question: My 77-year old mother owes $15,000 in credit card debt and lives solely on Social Security. How can we help her?

My mom lives in a one-bedroom apartment and has no assets, and she has racked up about $15,000 on a credit card she can no longer pay. 

A bankruptcy lawyer suggested she stop paying the creditor, as she doesn’t have any money. He also recommended keeping her Social Security in a separate account from the money us kids give her, because creditors can’t touch her Social Security income. 

My brother and I have power of attorney over my mom, as she has lost her hearing. She has no phone, so the only contact the creditor has is her mailing address. I don’t want my mom to get taken to court, as she has congestive heart failure, and I don’t want anything like this upsetting her. 

Her credit card debt hasn’t gone into collections yet. Should I call the lawyer and hire him to file bankruptcy? Should I try negotiating debt settlement with the creditor? Should I wait for the debt to go to collections? I’m not sure how we will pay for this, but if we have to, we will find a way.

Answer: Dear Reader,

What a dreadful situation for all of you. Given your circumstances, it gives me great pleasure to be able to alleviate your worries!

The lawyer you spoke with sounds like a quality one. Why? Because he didn’t unnecessarily push his services. Rather, he gave you the information you needed to handle this on your own. In other words, he informed you that your mother is “judgment-proof.” So you probably don’t need to hire legal representation.

What does it mean to be judgement proof?

To be clear, judgment-proof doesn’t mean that your mother can’t be sued for the balance on her card. If she or someone else doesn’t pay the bill, the creditor might very well turn it over to lawyers. 

However, if a creditor sues her, it would be a waste of time and resources. Even if the creditor won the case and was granted a judgment, collecting the money would be difficult if not impossible because of your mother’s circumstances.

As the lawyer explained, your mother currently has no property that a creditor can seize. If she had a job, her creditor might be able to garnish her wages. If she had significant funds in the bank that were not derived from Social Security benefits, a creditor could dig into those with a bank levy. However, in this situation, a lawsuit would do nothing positive for the creditor.

How should you communicate with the creditor?

So what should you do now? Well, your mom spent a considerable sum on the credit card, and some of it was likely for physical items. I recommend finding out if she or you can return any of the merchandise so the account can be re-credited and the balance reduced. If this is not an option,  the bank may have to accept its loss.

In either case, contact the creditor and let them know what’s going on. Because you have power of attorney, you can speak on your mother’s behalf. Let the creditor know that your mother doesn’t have the means to repay her debt. Have them close or suspend use of the card.

I admire you for caring so deeply and wanting to help your mom through this mess. But take heart in knowing that you are neither morally nor legally responsible for paying off credit card debt that belongs to someone else, including your parents.

Sincerely,
Erica Sandberg

(Author) is (role) at the National Foundation for Credit Counseling.

Erica Sandberg is a consumer finance expert and journalist. She’s a former NFCC-certified credit counselor who has written for U.S. News & World Report, TIME, Newsweek and more. Sandberg is also the author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” 

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.