Can creditors sue if the only source of income is Social Security?
My grandmother owes on a lot of freakin credit cards, plus Verizon is on her about returning DVR boxes, that were already returned, but can't find the receipt to prove it. Verizon can kiss my a** as far as I'm concerned, but she has a good $20k piled up on credit card debt. Can credit card companies, if they are successful in trying to sue her, garnish her Social Security? She has no other assets, I swear.
I WANT Bankruptcy to be an option, but her money is just leaking out of her bank account too quickly to save up for a lawyer. Yes, I've tried to open a separate account, but there's already a bankruptcy on my credit report, so I can't open one, and my grandmother can't open a 2nd account because she just foreclosed on a home :\
There's nothing I can do for her financially, except insuring her cell phone gets paid (as well as insurances)
What the f. I mean, really.
The credit card companies have no doubt have taken more in interest than your grandmother charged on them to begin with. That's what I discovered when I found out that my father had run up multiple cards. In fact, once someone has a lot owed on cards, opportunistic companies start offering them even more cards with even higher interest rates and more penalties and fees. It's a racket! They knew her income when they offered the cards. They calculated that they could squeeze more interest out of her than what she'd pay on her purchases.
Bankruptcy costs money. If your grandmother has no real estate to protect, why bother.
Also look into law passed this year I think in May but at only be fla they cannot garnish ss acct.
Before they extend credit, the credit card company asks you how much money you make and how much debt you have. When an elderly person states that they have $20,000+ in debt and they make less than $20,000 per year, and the company still sends them a credit card. Who's to blame when they can't pay?!
Dementia often is at the root of the poor financial decision making. Sometimes, it's one of the first symptoms and it's often not recognized by family members until it's a real mess. I speak from experience.
Medicare is the program provided by the state to cover medical expenses for up to 80% of the cost for the elderly. Premiums are automatically taken from the social security so you never see that money. That is parts A & B. Part D is the drug benefit which has to be paid separately. Medicaid is a program for those living below the poverty line and it pays for any and all medical expenses for that individual. It can be a bit tricky because some providers do not accept Medicaid It is based on household income and depends on the number of family members living under the same roof it is possible for some very low income seniors to qualify for both programs. Your area office on aging usually has volunteers who can help you understand this.
I am worried, after reading this thread, about myself. I am 69, unable to work, and living on a very small fixed income, which consists of $999 Social Security (after medicare payment which is supposed to increase significantly in 2014 due to Obamacare!), about $250 (reduced by half for pyament of Medicare supplement) from the state retirement, and an annuity from the federal government for retirement from the Postal Service in the amount of less than $400. I know Social Security if safe from garnishment, but I don't know about the other small government retirement. I don't know how I would get by without what I get now and really worry about the future rising expenses. Good luck with figuring out your grandmother's problems.
That there is now "income" based on the 1099-C is the sticky tricky part for those on Medicaid. Remember Medicaid is a needs-based program to qualify and so if you somehow now have "income" via the 1099-C, you could get disqualified because of your new"income". What is so totally crazy in this is that this is phantom income and it could be from a debt that was written off years ago. It's totally phantom income from zombie debt. Zombies are so "In", aren't they?
It also matters if say your folks have limited income (not on Medicaid and still living at home and only get SS) and they had credit card debt written off as they could find they have to pay taxes on the supposed "income" and they haven't done taxes in forever because they don't have any reportable income.
If you or your parents get them, then what you kinda need to do is file taxes and do an IRS Form 982 - Insolvency Exclusion so that your exclusions totally off-set whatever "income" you have. You need a tax professional to do this who has experience with dealing with 1099- C and Form 982 because it is a totally loco form to figure out. There's this whole worksheet which makes no sense as it's designed for foreclosure written off debt and not for dealing with your financial terrorist of a MIL who had 30K in credit card debt forgiven. It is not imho (in my humble opinion) a do-it-yourself project or done via on-line tax filing, H & R Block has folks who can do it but they are usually the ones at the Block for Business offices that have year round office staff and it might run a couple of hundred but well worth it as you don't want to deal with IRS or having them disqualified for Medicaid till it all get's sorted out.
Personally I think it's criminal that they can issue a 1099-C from debt that is from years and years ago.
Does this make a difference for this year's taxes, I'm not sure.
show up on her taxes it then would be considered by Medicaid and might knock her
off being eligible for Medicaid. I believe the form is from Medicaid not the IRS. Maybe I didn't understand, but I know it has to do with keeping them eligible for Medicaid.
However, it sounds like a 1099-c form is for the purpose of showing interest incurred on a debt, but because the debt is not being paid it shows as income? That makes no sense to say, "Okay,so you're not spending the money on us, it must be income!"
I'm just going to ask a tax guy (and a lawyer). Thank you everyone.
If you do not get an expected 1099 (or any other expected statement) by the 31st of January of the year following the year income is received, you can call IRS and report you did not get a statement.
Should IRS get a statement you did not report as income, you will receive a CP-2000 notice showing IRS's tax computation and what they think is not on your return. All you have to do is contact them about the discrepancy and work it out. Now, if one were to ignore the notice (yes there are people who ignore notices from and appointments with IRS), the tax will be assessed and collection activity will be started.
I do not know where you live, but if there is a local IRS office, they have people there who will help you with all of this. You might also find someone at a voluntary tax preparation site that can help you with this. There are several kinds available including some for the elderly.
1099 C are imho a really sleeping nightmare as not dealing with it can trigger IRS and that (the IRS) in turn can affect Medicaid. Medicaid is a needs-based program in order to qualify which basically means for NH Medicaid that they have 2K in non-exempt assets and 2K monthly income...so if the IRS gets a 1099-C that shows income of 15K in forgiven debt, that is 15K in reportable income and takes you above the 2K income level for Medicaid. So you have to file taxes and do an impoverishment form to zero out your "income".
1099-C from CC debt are real zombie's to deal with as they could be from any old debt over $ 600 that wasn't paid off in full and from years and years ago.
This has nothing to do with Medicare.
OR - is it something I have to request?
Also, my grandmother doesn't have Medicaid. Just Medicare. What's the difference?
I know nothing about how it affects Medicaid.
However, there is something to be on the look-out for when it's charged-off:
1099-C aka Cancellation of Debt. This will come from whomever was the original creditor (like Bank of America or Chase or whatever bank group held the credit card) who wrote off or charged-off the debt (and not the collection agency). This gets issued in January and you cannot ignore it. Oh & to make this even more fun, the 1099-C does not have to be issued the year the debt was written off. It could have been debt from years and years ago. So 10K DIscover card charge off could go to 15K with interest & fees and you get a 15K 1099 in reportable income.
What the 1099 -C does is becomes INCOME for the tax year the 1099-C was sent. And this can be sticky to deal with both in that you owe taxes on income and if you get Medicaid, then the "income" (which is really phantom income) can take you over the Medicaid limit for income. What you have to do is file taxes and do an impoverishment for the year against the debt so there are no taxes due. You kinda have to have a CPA or other tax professional do this as it is sticky.
The 1099-C's get routinely done for people who do a foreclosure, or short-sale or walk away from a mortgage. The outstanding $ due on the mortgage but not paid is forgiven as debt BUT the amount becomes taxable income. Imho that was what the intention of the law was - for dealing with foreclosure crisis. But the CC companies can do 1099-C's if they are a bank (so AMEX doesn't do them). If you just ignore the 1099-C, the IRS will get involved as you did not pay taxes or file an impoverishment in excess of the "income".