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Should My Mother Stop Paying Her Credit Card Debt Now that She Is in a Nursing Home and on Medicaid?

  • July 28th, 2016
Q
My mother, who is now in a nursing home, has outstanding debt on her credit cards. Her only source of income is Social Security and a pension. Medicaid requires that this income go to the nursing home. What should she do about the credit cards? Should she stop paying them off?
A

Yes, stop paying the credit cards and let the credit card companies know why. Your mother is what is sometimes referred to as "judgment proof," meaning that even if the credit card companies successfully sued your mother, they couldn’t collect on their claim. You can’t get water from a stone. The credit card companies should write off the debt. They will likely send your mother 1099s since the debt forgiveness is considered taxable income to your mother. But my guess is that your mother’s income is so low that she will have little or no taxes to pay. 

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Last Modified: 07/28/2016

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