I get a call like this fairly regularly, usually triggered by something like the adult child finding out that mom has not been taking her meds because 35% of her Social Security checks are going toward minimal payments on credit cards. It seems that elderly people are sometimes just so programmed to pay their bills, they put their creditors in front of their own health, and don’t realize that they are unlikely to get out of debt in their lifetime.

There’s really not much that creditors can do if the person stops paying. A person whose sole source of income is Social Security and has no real estate or other assets of value is what we consider “judgment proof”, i.e. the worst that creditors can do is to sue them and get a judgment, but can’t really do anything with the judgment.

People in this predicament need to know first and foremost that they already have some pretty strong rights against their creditors outside of bankruptcy, and really don’t need bankruptcy relief as does a wage earner who is vulnerable to garnishment.

So a lot of times I just tell them to stop paying their bills. The most important thing that they need to realize psychologically is that they cannot be vulnerable to phone calls, because that is the creditor’s strongest weapon, i.e. to call and intimidate, threaten, and cajole the person into believing that the path of least resistance in their life is to pay the creditors. So I recommend changing the number to unlisted (or use a cell phone); and/or screening calls with caller ID and voicemail.

One service that we offer, which is an alternative to bankruptcy, is something that we call “letters to creditors”, whereby I will explain to the creditors that this geriatric person is judgment proof and not worth pursuing, and then we asked the creditor not to call the person and to call us instead. It is fairly effective, and sometimes what I refer to as a “poor man’s bankruptcy;” less than half the cost and a lot less effort. Not quite as effective as the bankruptcy though, because the bills will continue indefinitely, and the creditors do have the right to seek judgment, issue 1099’s to the IRS for canceled debt, seek financial disclosure and contempt of court for failing to provide financial disclosure, amongst other remedies.

A lot of times people who don’t really need to file bankruptcy, just go ahead and do it anyway, to put it all behind them, and not have the worry of potential legal action ahead of them. My honest thought is that if the person is in their 60’s they should file bankruptcy, if they are in their 80’s they should just do the letters, and if they are in their 70’s it is more of a case-by-case judgment call depending on the person’s level of sophistication and understanding of the meaning and effect of their rights outside of bankruptcy. If the person does have real estate, sometimes it is best to just file the bankruptcy so that judgments don’t attach against the real estate.