Son sticks mom with $30,000 debt

A retired elderly woman who was generous and co signed for her adult son is now legally responsible for his debt including credit card bills that are  more then than she can afford to pay. What can she do and what are her options?

QUESTION: I am a private investigator for an organization that investigates financial crimes against the elderly. I have been working with a 77 year elderly  woman who was financially abused by her adult son.

Her son asked her to co sign on two credit cards and for a Nissan SUV, which she did. She believed her own son would honor his word and pay the bills on time. She had no idea he had  several civil actions against him in Philadelphia Pennsylvania alone, his home was recently foreclosed on, and he has liens and judgments levied against him that exceed over a hundred thousand dollars of unpaid bills! He charged up the credit cards plus one more he opened without her knowledge or permission, and then he declared bankruptcy, leaving his mother with the debts.

My client was left with a $9,000 debt from the two co signed credit cards, an $14,000 bill from automobile loan and a $7,000 balance on the fraudulent credit card. So far, we have had the $7,000 credit card balance that was opened without her knowledge dismissed due to fraud, and we have negotiated the automobile bill down by half and transferred it to another card.

That leaves us her with just over $23,000 in  debt to deal with

A Philadelphia bankruptcy attorney looked at her case and said if she filed for Chapter 13 bankruptcy, her court ordered payments would be at least $500 per month, plus she would have to pay attorney’s fees and have the bankruptcy on her record. He also could not guarantee that she would not be forced to sell her home, which she has a good amount of equity in.

This woman is living on supplemental Social Security income and her bank accounts are running low.

Is there anything you recommend? I truly appreciate any help that you can provide.

ANSWER: I am so impressed that a 77 year old woman whohas a host of medical problems is now looking for work so she can pay her bills. I don’t know where her son learned his irresponsible behavior, but it certainly wasn’t from her.

You’ve done a good job so far of getting the $7,000 on the fraudulent card dismissed and negotiating the automobile loan payment down. As you discovered, filing for bankruptcy isn’t always cost effective, especially with a relatively small debt of $23,000. The costs and effort involved are too great in proportion to the benefits, and according to the bankruptcy attorney who looked at the facts, she would probably have to pay back the debts anyway.

She may have a good case for negotiating down debts however negotiating debt does negatively affect a person’s credit score, and there’s no guarantee of success. With her low income, however, it’s certainly worth a try.

What your client needs now is income. Here are my top three recommendations for where to get it:

Her son got her into this mess. He can help get her out. The fact that he just filed for bankruptcy is good news for your client  most or all of his many other debts are gone. He can afford to focus his energies on helping Mom.

Maybe her son not a bad person. He’s not the first young man to become overextended in this recession. When people can’t pay their bills, they start shuffling money from one place to another, never believing they won’t be able to make good. Does he know how desperate her situation is? Letting him know and giving him a chance to repay his mother would be the best thing for him and his own self respect at this point.

She has equity in her home, but with her low income and high debt levels, she’s not going to have much luck getting a home equity line of credit. A reverse mortgage might be the solution. And instead of adding a bill to her budget, she can have a steady stream of income to make her life more comfortable and secure.

The biggest downside of a reverse mortgage is that it can be expensive to set up. It generally costs a little more than getting a home loan of the same size. It’s a far better option, however, than losing her home because she can’t pay her bills.

A good credit counselor, from a nonprofit credit counseling agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies, can help your client go through her options and decide what to do. The counselor may even be able to help her negotiate her  debt balance and interest rates.

This woman is fortunate that you are helping her. I hope her financial situation, not to mention her relationship with her son, will be on the road to recovery soon.

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