My father died recently. Should we try to settle his credit card debt for a lower amount prior to selling his house?

1 answer | Last updated: Oct 02, 2016
A fellow caregiver asked...

My father died recently. He had several credit cards with significant balances, but none were also in the name of my mother. She cannot afford the payments. We wanted to apply for a reverse mortgage to help pay for her long-term care, but now worry that the proceeds will be taken by the credit card companies. If we sell the house outright, will the proceeds be attached by the credit card companies? My mother lives in TX, which I understand is a community property state. I worry that her long term care funds will be taken by credit card companies for which she knew nothing about. Should we try to settle the credit cards for a lower amount prior to selling the house?

Expert Answers

You are correct that Texas is a community property state. This means, basically, that property acquired during the course of a marriage is owned equally by both spouses. Assuming the house was community property, half the house was owned by your father.

Your deceased father had substantial credit card debts. I have no knowledge of credit card debt law in Texas, nor am I familiar with Texas credit card collection law or practice. However, I can say that it's likely that credit card companies could go against your father's one-half interest in the house, which could include going against one-half the money obtained from a reverse mortgage, or from a sale of the house.

I see three options for you. First, discuss this situation with a Texas lawyer who specializes in debts matters, including debt collection. The lawyer might well know how your mother can best handle this situation, including how best to negotiate with credit card companies to reduce the debt. Personally, this is what I'd do if I were in your or your mother's situation.

Secondly, you could negotiate directly with the credit card companies. While this would save you a lawyer's fee, it also might result in a far worse settlement for your mother than you would have achieved with a lawyer's help.

Third, ignore the credit card debt and hope for the best. This seems far too risky to me.

Good luck