Her elderly mom can’t afford the high cost of health care
and may have to default on credit cards.

The daughter (our client) has believes in
paying credit card bills on time. To her it is a
sacred duty to protect credit ratings. She worries
that if her elderly mom defaults on the credit
cards it will affect her mom’s credit.

Credit card debt by senior citizens is growing at
a rapid rate. So are defaults by the elderly. Some
say credit card misuse by the elderly is nearing a
epidemic scale.

This past summer at least three families who came
to us for help had credit card debt greater than
$30,000. One was in debt a jaw dropping $90,000!

In this most recent case, my recommendation
shocked the daughter.

Her mom suffers from Alzheimer’s disease, has only
a few hundred dollars in assets and is applying
the Medicaid for help paying the nursing home
bills. While the mom has not been formally
declared bankrupt by a court, she is financially
bankrupt. Her debts far exceed her assets.

So what should this otherwise conscientious
daughter do about the elderly mom’s credit card
bills?

My advice…

Let her senior mom default on the credit cards.
Toss the credit card bills in the trash can. Don’t
even think about paying them a penny.

Sound Draconian? Not really.

For a senior citizen in her mom’s situation to
default on credit cards may not be “American” but
it is practical.

At this stage of her mom’s life a pristine credit
record only has an emotional value. There is no
practical financial value whatsoever. Once her mom
enters a nursing home, the need for future credit
vanishes. A credit rating in no longer important,
relevant or necessary.

Anyway, the Medicaid program doesn’t care about
those debts and will not allow any funds to be
used for debt reduction.

My answer violated her sensibilities. It went
against every thing she believes in. It’s her
opinion that her elderly mom should not default on
the credit cards. Normally, I’d agree.

But when a senior citizen has no assets and needs
money to pay for care, to default on a credit card
is a matter of survival. Creditors have to take a
back seat.

It’s a controversial question that really started me thinking. Like all good questions, this one raises more questions than answers.

On the surface, it seems like a good idea particularly when a sibling (typically a daughter or daughter in law) quits a job to provide the care. Cutting back hours or quitting altogether has a price. You lose the current income and insurance benefits and gain reduced retirement security. Plus, your life gets put aside. It can affect your marriage, your health and your financial security.

One question is “how much is that worth”? Not an easy question to answer. How do you define compensation? Time? Money? Services? All of these? Within a family, each member has a unique set of abilities and capacities. Some are better able to provide financial support, others emotional support or time.

How do you establish a “fair” compensation? To make this idea work requires sibling willing to sit down and hash out a meaningful understanding. Some families are blessed this way. Sadly, most aren’t. Plus, you need individuals who understand the value of planning before a crisis.

Once you answer that value question, the next one is “where will the money come from”?

In families with well-heeled parents, the source is obvious. But what about those families with limited resources? Who picks up the tab?

Following where the question leads runs straight into an unavoidable reality: families with bad family dynamics won’t be able to agree on a compensation scheme. There’s another element at play in the background, too.

Most of us prefer not to deal with a problem until it’s a problem. As Kevin mentions in his MyDecide post “99% of the people I know, myself included, are horrible procrastinators. We get in gear only when there are compelling reasons to do so . . . like a family crisis. But for that, we fill our time with what’s in front of us. ”

Figuring out what the compensation should be and where the money will come from requires exceptional family dynamics and a willingness to plan for the incapacity of aging parents. While the concept has a nice initial ring to it, I have my doubts you’ll see many families that warm to the concept.

What are your thoughts?

Mr. Eldercare