mother stuck w/fathers estate and credit card bills

What is the name of your state?
california

my mother got stuck w/my fathers credit card debts after he died 2 years ago. she never signed anything and credit card companies changed the bills to her name saying shes responsible for the debts. is this true? how can she make offer to payoff (reduced)?
shes not in good financial shape but i want to get rid of this burdon on her.

[Ladynred]

In most other states but CA I'd say they can't legally just switch acounts to her name, but in a community property state they may be able to get away with it.

In most cases the estate is responsible to pay the bills of the deceased, but community property states are a whole 'nother can of worms.

The best way to approach a settlement is to do it all in writing, and send all letters certified mail. Don't pay anything unless you have a signed agreement in your hands first. Start low, like 25%, and leave room to negotiate.

If shes not in good financial shape, it may not be worth it to them to sue her. Is she possibly judgment proof ? What does she have in assets or income ? That's what they would look for and pounce on.

mom has some real estate but the debts out weigh the assets 3 to 1. this is why i want to weed out these cards.
just to give you an idea of my fathers stupity, when he died in 1999 he left approx. 40 credit cards with between $9,000.00-$10,000.00 on ea one. i have since payed a few off and want to eliminate all of the accts so her retirement is somewhat enjoyable.
thank you ladynred

[Ladynred]

OMG !! What an awful load !

Your mother's best bet really would be bankruptcy, that will eliminate ALL of it. Since she probably won't have to worry too much about getting credit (which isn't all that hard anyway) after a BK, why not go that route ? It will be much quicker and less painful too.

The homestead exemption in CA is pretty generous, especially if she's over 65:

"Real or personal property you occupy including mobile home, boat, stock cooperative, community apartment, planned development or condo to $50,000 if single and not disabled; $75,000 for families if no other member has a homestead (if only one spouse files, may exempt one-half of amount if home held as community property and all of amount if home held as tenants in common), $100,000 if 65 or older, or physically or mentally disabled; $100,000 if 55 or older, single and earn under $15,000 or married and earn under $20,000 and creditors seek to force the sale of your home; sale proceeds exempt for 6 months after received (husband and wife may not double)."

So, her home is probably safe, she won't lose it. The rest of the exemptions are here:

[url]http://www.thebankruptcysite.com/exemptions/california.htm[/url]

I know BK is still distasteful to many, especially older folks, but with that kind of debt hanging over her, this would be the best way out from under. It would all be gone and over with in 4-6 months and she can relax.

thank you ladynred. your info was very helpful in guiding me to make the right decision. b/k is not really an option if she wants to keep apartment blg and build a retirement.
i approached am express (2accts) and fleet (2accts) totaling a little over $27,000 and came to an agreement of 9025.00 (approx 33%) pay off on his debt w/them. it took approx. 25 days to close deal after me offering 25%. im down to 32 cards now and will update you. thanks again ladynred

[nailtech]

You are aware that she will most likely pay taxes on the money she "SAVED" with the CC arent you???

what taxes would there be? a credit loss might be in order but i doubt it she can still file b/k at anytime but it feels better trying to bring it together. i instructed all the companies to credit any penalties and interest w/no further charges from the date of my fathers death to date of my request(which was done by all but 2) if its inheratence tax then the state owes her a grip.

I think what the poster meant by owing taxes is...once you agree to a "settlement" of what is owed...the differance is then taxed to you via a 1099. Basically meaning that you had use of this money/or what ever the CC was used to purchase tax free and now they will tax you on the outstanding amount. Meaning you owed say $10,000 they agree on accepting $5000 to settle, you then owe tax on the other $5,000. This subject has been discussed on MSN's Your Money message board as well as the Tax Corner message board.

[JETX]

Let me try to summarize all these posts:
1) California is a community property state, so the debts of one spouse are considered joint, marital debts.
2) Upon the death of the card holder, that persons estate should pay any outstanding debts. Your post makes no mention of the estate and/or probate. From your later post implying ownership of an apt building, I would assume their was an estate and probate (unless it was her pre-marital property).
3) If the assets of the estate have been exhausted and there are still decedent debts, then the unpaid creditors can pursue their claim against the surviving spouse (as community debt). If they decide to get a judgment against her, they can then use that judgment to seize or levy any non-exempt assets that she has.
4) If you are able to negotiate a reduced settlement, be sure to get it in writing, including a full release and satisfaction of debt statement. If you don't, the debt will just continue to be pursued (maybe by another firm that purchases the debt).
5) Also, if you are able to get a reduced settlement AND if it is for $600 or more AND if the creditor is a federal government agency, financial institution, or credit union, they are required to file a 1099-C on the 'canceled debt'. Simply, this means that the amount of the cancellation will be reported as 'income' (since it was received by the debtor and not repaid). If this is done, the debtor MUST report this 'income' on their tax return or be subject to audit (if caught).
See: [url]http://www.carreonandassociates.com/Cancelled%20debts%20&%20the%20IRS.htm[/url]

if i take in consideration all the net dollar amount it stilll comes out to a positive figure in her favor.
original debt 27000.00
- paymet 9025.00
________
charge off 17975.00
tax(approx)x 28%
________
approx tax 5033.00
+ payment 9025.00
________
14,058.00 (gross) for a 27,000.00 debt
ohh also to add, my father who died used alot(50%+) of the credit card charges as payment for medical and prescriptions.
im seeing a tax atty to check out the whole picture cause it looks as though there could be a tremendous tax advantage that i have overlooked.
an aduit has to be done anyway to staighten out all. mom takes alot of medication (7500.00 per month)and really mentally not stable to handle finances. the same credit companies would call her (sometimes twice a week) and talk her into writing a check for a payment not due.

[JETX]

Gee, who would have thought it.....
If you pay 28% of something, it will be less than 100% of the same thing!!
Wow!!

Our post was NOT intended to be 'comparison shopping', only to alert you to the fact that you might also have some tax issues regarding the negotiated 'discount'. A lot of writers to this forum are both surprised and shocked to find out about the 1099-C issue.... and some flat never can understand it.

no im not comparison shopping. im just trying to understand what has to be done so she can make an income that she is able to retire on. legally and not just writing it all off and starting over.(b/k). shes 74 and the property has been in the family since 1897.