Senior with credit debt would be wise to declare bankruptcy

DEAR BRUCE: I am 65 and have always had good credit and paid every bill on time. I had $100,000 in the stock market and lost almost all of it recently. Now I owe $43,000 on credit cards, and all I have is my Social Security income. I refuse to go bankrupt. If I just quit paying the credit cards, is there anything they can do legally besides harass me and give me a bad credit rating? — Frustrated, via e-mail

DEAR FRUSTRATED: There is a lack of information here that makes it hard to give you a complete answer, especially regarding the stock market. If you have any assets, the credit grantors very likely will go after them.

You can protect your home, but they can get liens that cannot be exercised until after your death. It would be cleaner to consider bankruptcy, since it would benefit the credit card companies to know where they are, and you would not have the harassing phone calls. As to future credit, you can forget about that, but at least you have a clean slate and no harassment.

Given the very limited income you have, bankruptcy should be something that you should consider.

DEAR BRUCE: I am the executor of my mom's estate. We are going to be probating her will. We are using the attorney who wrote up the will. In an estate less than $150,000, what is the normal attorney's fee? What is the purpose of probating her will? We have been told that it's for any debtors to come forward and stake their claim on the estate, and this can take up to four months. Is this correct? — Reader, via e-mail

DEAR READER: Four months is not an unusual time to get a will probated. Your duties as an executor are relatively simple. You carry out the wishes of the deceased according to the law and take into account the assets. For example, you could say in your will that "I leave all of my money to each of my children," but if by the time you die, you don't have any money, the executor can hardly conform to those wishes. If there are legal obligations that have been incurred by your mother, those will have to be paid. In many cases, the Probate Court will advertise or otherwise notify potential creditors that an estate is being settled. As to the attorney, his fees will depend largely on what you expect of him. If he is only to handle straight legal matters and you will be doing the running around, the fee should be rather small. If you want him to do everything from "soup to nuts," he could charge an estate such as you have described as much as $4,000 — possibly more. When you meet with your attorney, discuss what the fees will be and make your decision from there.

DEAR BRUCE: I am very happy to say that my home will be paid off by the end of this year, but I'm not happy about losing my tax deduction. My income is on the high side. Is there a way to figure out if it's worth taking out another mortgage to preserve the deductions? Would it be worth it for me? — S.T., via e-mail

DEAR S.T.: I have no quarrel, depending on your age, of borrowing against your home and investing the money, but I would do that working on the idea of the spread — the tax deductibility such as it is would be a bonus. Borrowing money simply for a tax deduction makes very little sense.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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