Defaulting on Credit Card Debt

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Defaulting on Credit Card Debt

Postby dickgray46 » Tue Aug 12, 2014 2:14 pm

My brother had a stroke recently and can not handle his affairs. I have been designated as his Power of Attorney. In going over his financial dealings, I came across two credit card debts that have large balances. The combined balances are more than he generates in retirement income in a year. With his increased medical costs and healthcare living costs since he was released from the hospital, there is no way he can pay off these balances. I understand that his retirement income is protected by law from being garnished should a judgment be issued against him. The credit card companies have outright rejected any compromises. Any suggestions or offers that I should consider in his behalf.

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Postby OldMan » Wed Aug 13, 2014 6:15 am

is contact a lawyer. I'm assuming that the CC companies know that you have a POA for your sibling?
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Postby MemberSince99 » Wed Aug 13, 2014 6:28 am

I agree that it really depends. As long as they can't seize assets (bank account money, house, etc) then why do anything? Let them do what they want and it doesn't really matter. Some people are "judgment proof" and he may be one of them.

I'm not going out and advocating people do this but when it happens to you, it sucks for everyone (most of all the lenders) but he didn't do it on purpose I'm sure so that's just life. We bailed out the lenders and they had no sympathy for the burden on us in a dead economy when you consider how their execs rushed out to lavish resorts awarding themselves huge bonuses on the way, so I just accept this is reality and it happens sometimes.

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Postby djrez4 » Wed Aug 13, 2014 7:41 am

Social Security cannot be garnished. Private pensions can.
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Postby CarefulBuilder14 » Wed Aug 13, 2014 12:03 pm

There is something I don't really understand about judgements on credit card debt, so I'm going to explain them as I understand them and would appreciate it if someone can point out where I'm wrong.

You get an unsecured card and make a purchase with it - say, a computer. You don't pay the card off. Because credit card debt, at least at that stage, is unsecured, the issuer can neither go after a security deposit (because the card wasn't issued with one) nor the computer (because credit card debt is unsecured apart from the security deposit that a secured card has).

The issuer may, after some time, close the account and go to court and sue you for whatever debt remains. If you paid off most of the debt and tried to make a good effort, the probability of a lawsuit is low - the issuer will just report the lack of payment to the credit bureaus and you'll get a lot of bad marks on your credit report (and awful FICOs). A judge may feel a judgement isn't appropriate and dismiss such a case.

On the other hand, if you show very reckless behavior in borrowing or don't make any payments at all when you have assets to do so, a judge may feel a judgement is appropriate. In doing this, the debt goes from unsecured to secured debt, which means that if you go into bankruptcy, the credit card issuer will have a claim on your assets. But can a big judgement on credit card debt force a person to file bankruptcy?

If someone built up $100k in credit card debt and then defaulted on it, and the issuer got a judgement for the full amount (including interest, late fees, etc), could the debtor have a lien on their property?

I guess a lot must depend on state law, but I don't see how a lender can legally turn totally unsecured debt into semi-secured or full recourse debt.
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