DEAR BRUCE: My parents, both 80, have lived for years on their credit card, running up the balance and paying it off every month. This works great when you have ample income to cover it. For whatever reasons, they have no investment income left and are living on retirement and Social Security now. While they live in their own home, they have two reverse mortgages on it and I think they exceed the current value of the home, so selling it is not an option. They have reached the point where not only are they running up the credit card every month, they have maxed out two substantial lines of credit on other cards as well. The interest alone runs them $700 per month. While they have no mortgage or car payments, they have substantial medical expenses (prescriptions). They cannot meet the interest obligation every month.
I estimate their credit to be about $20,000. Dad is talking bankruptcy. I am not in a position to assist them in any meaningful way. Is this a good alternative for them? Or should they seek credit counseling/debt consolidation? They are in the position of not being able to stop using the credit card because it takes up literally all of their income each month. I hope I’ve given you enough information to put forth an opinion. — Jennifer, via e-mail
DEAR JENNIFER: Technically, your mom and dad are bankrupt. Having financial obligations and no resources to cover them. The house isn’t an asset given the fact that it has reverse mortgages and very likely the house is upside-down. This has no adverse effect on them as long as they continue to pay the taxes and insurance, this will allow them to live there until they pass away. Their Social Security income is not attackable so they can depend upon that. As far as the credit cards, sooner or later they will not be able to make a minimum payment and then the whole house of cards will collapse.
I don’t see credit counseling or debt consolidation having any value. The only positive thing they can do is write to the credit-card companies and explain that their assets have been completely exhausted, their only income is Social Security and they would like to close out the accounts, but they are not in any position to reduce the outstanding balances. After investigation, chances are the credit-card companies will write the debts off.
DEAR BRUCE: My mother carried the note on my house, which was forgiven upon her death. I paid monthly interest, which stopped when she passed away in 2009. Because I no longer owe anything on my house and it is fully paid for, how do I get the deed? — Meredith
DEAR MEREDITH: You mentioned that your mom carried a note, was there a mortgage? You say you stopped paying the interest when she passed away. Was there something in her will or the mortgage document allowing you to do this? Are there other family members who would have an interest in the estate? Who is holding the deed? Was this a do-it-yourself proposition with your mom or was an attorney involved? With respect to that in my opinion, you should hire an attorney to sort this out. The more time passes the more difficult that may be. Did your mother in fact leave a will? How was the estate settled, etc.? All of this has to be untangled. It may be simple, maybe not depending on how all these things initially were set up. I would urge you to contact an attorney and get it sorted out.
DEAR BRUCE: I am in my early 60s and was a stay-at-home mom all of my life. I loved being the “homemaker” so I have no work experience. I would like to get a part-time job and had started looking for work, but now I have some health issues that are now keeping me from working. I have limited funds in my retirement coffers, no pension since I was the “homemaker” and we started investing about 12 years ago — between 9/11 and the recent recession we were hit hard. Is there some way to recoup this loss, fast? In trying to get a loan, an obligation (co-signed on one of my kids’mortgages) that I co-signed for years ago keeps popping up, which precludes me from getting the loan. Can I be taken off of this obligation after all these years? The loan has been kept up to date and they have never been late with a payment so as far as my credit history goes, that is not blemished. — Reader, via e-mail
DEAR READER: Unfortunately, you invested in a very bad time and you lost. There is no way to recapture these losses fast. The market goes at its own pace and you can’t rush the process. There’s no way to recapture that other than the losses can be apportioned against gains over a period of years. The good news is, since this co-signed mortgage has been going on for 10 years and the payment record is probably strong during that period of time, there should be enough equity in the house where the lender will allow your signature to be taken off the loan. I would check into it and see what can be done from that aspect then hopefully you can get some additional financial help to get you through this tough time.
Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: firstname.lastname@example.org. Questions of general interest will be answered in future columns.