A dear friend of mine lost her husband. He was very successful…until he wasnt’ as successful t. They ran up a lot of debt together through the business and personally. She has tried to work out discounts on their credit cards. No one will talk to her.There is a speech they give her and that isn’t helping. The bills are in the hands of collection agencies.
She found out the her husband owed taxes for four years…sort of forgot to file. She has paid that back already.
Please don’t judge her. We agree that this is stupid. She should have “known”. But she didn’t know.
Any suggestions would be a mitzvah.
(and Mr. Ellebud is quite healthy… This isn’t about us…thank God._
Sadly, this is more common that many realize. I have a friend whose H was a very successful MD. He eventually retired but they continued to live the same very nice lifestyle but gradually had to keep downsizing their home and finally had to go from a home they owned to one they rented. He didn’t pay taxes either for some years prior to his death. The widow had to sort through everything and it was challenging for her.
She did get a promotion from work and was able to get widow’s benefits from Social Security (1/2 of her H’s SS benefit). That and her salary helped her gradually dig out of the financial hole, but it was very challenging for some time.
Are the credit cards JOINT credit cards or solely in the H’s name? If they are joint, she will have to deal with them but if they are solely in H’s name, she may not. Once the bills are with collection agencies, I believe it gets more difficult as you can no longer try compromising with the credit card companies.
Sorry to hear of your friends struggles. Dealing with the death of a spouse is hard enough without trying to put back the pieces financially of being old and broke.
Is the business a thing of the past now?
Any equity in a home at all?
How old is she? Any social security yet? If not, how far out is it?
Can she still work?
Has she gotten in touch with a debt consolidation service, either nonprofit nor not? Several years ago someone I knew had financial problems and the debt consolidation service was able to negotiate on their behalf, cutting away a good chunk of consumer debt. That’s good she paid the IRS off because those fees and penalties can be huge. Has she considered filing for bankruptcy?
Can she get a personal or consolidation loan from a credit union and pay off all the credit cards at once? Then, she’ll have a lower interest rate on the money and a more solid payoff plan.
It may be worthwhile to have a FREE consultation with a reputable bankruptcy attorney on the pros and cons of declaring bankruptcy. Many debts will be released, but some won’t. Most attorneys will give a free initial consultation. She may wish to contact legal aid–they help a lot of people who have low/no resources and can help point her in the right direction.
Might there even be some state or local agency that helps people navigate things after a spouse or parent dies? They could offer advice and steer her in the right direction. Regular grief counseling sessions at a church or community center must have resources since I’m sure she’s not alone in being in financial difficulty after the death of a spouse.
I feel so bad for her. I can’t imagine what she’s going through. I have no suggestions other than the ones that have already been offered (and the “declaring bankruptcy” one sounds particularly appealing) but @bevhills, please keep us posted on how she manages.
I said to Mr. Ellebud that if I asked the CC community for help you wonderful people would come through. And you have. Thank you. A million times…thank you. LLL (longer letter later)
You can negotiate with collection agencies. They do not expect to collect 100%. She should also try to negotiate with all creditors. They would rather get .3 on a dollar rather than getting nothing.
My kids have run up phone/data bills. I would call the provider to tell them I would pay a much smaller amount on the spot or they could try to collect from my jobless, no asset kid. They were happy to take my money and settle.
Does she have a home with any equity? Before she declares bankruptcy, see if she could refinance or take out a home equity loan to pay off her debts. Of course, this assumes she has a job to pay off her equity loan.
If she has income (from a job), she could also take out a personal loan to consolidate her credit card debts, instead of paying 20+% interest she could be pay 6-8% and put more into principle payment. Another thing she could do is to open a new credit card that offers 1 year 0% interest, then she could transfer balance with high interest to the new credit card.
If she has no income from work then the only option would be to declare bankruptcy.
This is sad. At the same time, I think this happens more often than not.
Half the bills are from the business. The other cards are 50/50. She sold their home and made some money. She has purchased a home in another state. The bankruptcy attorney is an excellent idea. We have a dear friend who is one and he will talk to her pro bono. (Actually not…we will have the pleasure of taking them out to dinner…and not that is not sarcasm…we are good friends.)
And yes, I understand that this happens more than we would like…
She may not have to pay all the bills – but an estate attorney is the one with that expertise more than a bankruptcy attorney. She may end up with one eventually, but she should stop paying bills until she has had that conversation (you can’t get the money back once you pay…)
OP, I’m assuming she’s in CA? Creditors can sue in CA up to 4 years from the last payment made, but it varies by state. After that, all they can do is call. Her credit would remain bad, but after 7 years, delinquent accounts drop off her credit record.
Also, she should keep in mind that forgiveness of debt is considered taxable income, so if you’re talking big numbers and she settles the debt for a substantial discount, she could end up with a tax bill she can’t pay. For instance, if she owed $100K and the debt collectors offer a settlement of 30 cents on the dollar, she’d end up with $70K taxable income on the forgiveness of debt, so she’d need to have the money to pay the tax too. If she can’t, I’d rather owe a creditor than the government if I were her because they’ll never stop pursuing it.
Of course bankruptcy would wipe out her debts with creditors, but I wouldn’t settle with any creditors before deciding if she’s going to file for bankruptcy because I don’t believe tax debts are wiped out with a bankruptcy. I don’t know how common it is for creditors to sue, but I do know someone who got into a similar situation after the downturn and was never sued. I’m assuming they decided there wasn’t enough money there to make it worth the effort, but I don’t know.
As mentioned by other posters, I would recommend an estate or bankruptcy attorney. I’ve been going through something similar. My sister died unexpectedly a year ago without a will, life insurance, 401K or beneficiaries. She had debt (not the level your friend is facing), medical bills and a former boyfriend listed as beneficiary on one of her accounts. It’s been a nightmare emotionally and financially to unravel. Our estate attorney has been a godsend. Couldn’t have done it without him.
Some states let you keep your entire home equity. Florida and Texas are two, I believe, and there are a couple of others. Other states place limits on what part of your home is protected from creditors.
I think the bankruptcy attorney advice is applicable. I’m getting an impression from your post that she had enough assets to deal with the tax bills, but may not have enough or feel compelled to deal with the other debts. That’s something that is likely to complicate bankruptcy, and she needs competent guidance. Buying a home in another state might be an indication that she’s already received some.