What are my mother's options with regard to paying off her debt?
The good news is that you are in a position to help your mother. Because you are a trustee, are named on her accounts, and have a power of attorney, you should have the authority to discuss these matters directly with the credit card companies, help your mother develop a plan, and help her follow it.
Of course, you should only do this with your mother’s consent, if she is able to give it. And you should only take action that is in her best interest.
In the current financial climate, many creditors are willing to negotiate a reduced amount or monthly payment on a debt. Debt consolidation through a third party service may be possible, but tread cautiously: Make sure you are not putting your mother or yourself at greater risk. Be sure to read the fine print or get an opinion from another experienced financial advisor before agreeing to a consolidation.
Bankruptcy may indeed be an option for your mother. There are different kinds of bankruptcy, and the rules are complex, but through various exemptions, your mother would probably be allowed to keep her home and other assets necessary for her basic living needs.
Under current law, most individuals must receive credit counseling and debtor education before filing for bankruptcy. The credit counselor discusses, among other things, alternatives to bankruptcy. The debtor education deals with issues such as budgeting and using credit safely. It may be that beginning a bankruptcy proceeding can be helpful, educational and may even help avoid bankruptcy altogether. The sobering news, however, may be that your mother will need to liquidate some of her assets to pay her debts.
A note of caution: Unless you are named on the credit card accounts or otherwise guaranteed your mom’s debts, you aren’t personally liable for the debts. However, if your mother does declare bankruptcy and you co-own assets with her -- for example, the investment accounts -- this could have negative consequences for you.
