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Credit Card Debt

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#1
Hello. First I am asking this for my father. We live in Kentucky. He was just diagnosed with stage 4 lung cancer. He has maybe a year left to live. Maybe a little longer if he responds well to treatment. He has 22,000 dollars in credit card debt. He owns a mobile home and an automobile. Will the credit card companies take these when he passes? He does have some life insurance but it isn't much. I think 10,000. I'm assuming they'll take that straight away. Is bankruptcy an option?
 


LdiJ

Senior Member
#2
Hello. First I am asking this for my father. We live in Kentucky. He was just diagnosed with stage 4 lung cancer. He has maybe a year left to live. Maybe a little longer if he responds well to treatment. He has 22,000 dollars in credit card debt. He owns a mobile home and an automobile. Will the credit card companies take these when he passes? He does have some life insurance but it isn't much. I think 10,000. I'm assuming they'll take that straight away. Is bankruptcy an option?
His creditors cannot take his life insurance. That passes to his beneficiaries outside of his estate. The credit card companies also cannot just take his mobile home and his car. The executor of his estate would be responsible to liquidate his assets and pay off his debt if there was any money available to do so after funeral expenses.

His family does not have to probate his estate. They can walk away from it.
 
#3
So his family would be responsible for his debts? You see I live with him and have for awhile. It's my home. I will be in charge of everything after he passes. So will I be forced to sell my home/his home after he dies to pay off his debts? Also... if so, would it be advisable for him to put the mobile home in my name before he passes. To avoid losing it. I owe student loans still but I know they can't take your home for that.
 

FlyingRon

Senior Member
#4
Unless they have specifically signed on to be responsible (which they may have had to do to get him admitted), they have no responsibility.

It is almost certainly NOT advisable to willy-nilly dump assets. Such actions can end up with him being declared ineligible for medicaid benefits.
 

HRZ

Senior Member
#5
Just be sure the named benificiary to his insurance is not his estate, if it is get him to,change it tomorrow to some loved one (s) And it's possible he can add you to title/deed now as transfer on death to ( OP) his trailer .
 
#6
I'm the named beneficiary. So I just need him to add me to title/deed now to transfer to me in event of his death? In that case the credit card companies can't take it? The car as well?
 

LdiJ

Senior Member
#7
I'm the named beneficiary. So I just need him to add me to title/deed now to transfer to me in event of his death? In that case the credit card companies can't take it? The car as well?
They cannot take anything that passes outside of his estate.
 
#8
They cannot take anything that passes outside of his estate.
I'm sorry but I don't quite understand. You'll have to explain this to me like I'm a 6 year old if you have the patience to do so. Can you tell me what you mean by "outside of his estate"? What constitutes his estate?
 

HRZ

Senior Member
#9
SHort answer..iF dad adds you to deed such that it all passes to you at his death , then it passes directly to you ..and not via his estate .

HIs estate is responsible for his debts...and if his estate is empty so be it
 

FlyingRon

Senior Member
#10
SHort answer..iF dad adds you to deed such that it all passes to you at his death , then it passes directly to you ..and not via his estate .
I should clarify that "adding you to the deed" isn't sufficient. HRZ's post has a second part "such that it all passes to you at his death."

There are two ways to accomplish this in Kentucky. One way is to add you as a JOINT tenant. This effectively gives you an equal instance in the property immediately, but when he dies, you get the whole thing. The downsides to this is that he loses control of half the property as soon as he does this and it's not revocable on his part. In addition, while half the property steps up in basis when he dies, he gifted part remains with the original basis.

The other way is a TRANSFER ON DEATH dead. This allows him to retain ownership and control while he is alive but transfers it automatically to you when he dies. The good news here is he retains ownership and control until he dies and you get a full basis step up.

It's still possible that the creditors can get a judgment against him while he's still alive and owning (at least a partial) share of the property and lien it for what they are owed. Neither of the above will change that.
 

HRZ

Senior Member
#11
If dad makes changes BEFORE creditors get judgements it might reduce room to debate he made a fraudulent conveyance

I disagree on one detail above ...IF dad were to chose to add you as JTWROS. And. .a big and he also lives there until he passes that's an incomplete gift in tax jargon until his time comes...and property gets step up....TOD may work better ...but if dad changes his mind on a bad day he can cut you out .

Either way , Dad should get it done soon....If a creditor gets a lien on home ahead of new deed..the creditor is ahead !
 
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