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What Happens to Dad's Debts When He Moves to a Nursing Home and Has No Money?

  • September 8th, 2014
Q
My father will go on Medicaid long-term care assistance soon. He will receive only $95 a month in income; the state will take everything else for the nursing home. What is he to do with all his medical hospital and credit card bills? Does he need to file for bankruptcy? Does he do nothing since he has nothing to take. He has no assets and nothing of importance or value.
A

Probably your father doesn’t have to do anything, but you’ll have to let the creditors know the situation. It sounds like your father is “judgment proof,” meaning that even if he were sued and the creditors won, they wouldn’t get any money. However, you need to be aware of two potential problems.

First, the creditors may waive the debts and then send your father a 1099 reporting the debt foregiveness of income. This could result in taxable income for your father. This is more complicated, but still your father should be judgment proof from any claim by the IRS. Second, all of this advice depends on your father not having given funds to you or anyone else. If he has, the creditors might come after the recipients, claiming the gifts were a fraudulent conveyance.

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Last Modified: 09/08/2014

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