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Question: My 80 year old disabled Aunt, who is on medicaid & medicare, received a summons from the court to appear in reference to $12,000.00 credit card bill from 2 years ago.She owes other credit card bills, which are not being paid off. She receives $2900.00 monthly fm Social Security & her pension, but uses that to pay her monthly bills. She owns her apartment, however once she passes Medicaid will get everything she owns. Should she declare bankruptcy?
Response: No. She is Judgment Proof. She does not have any assets that can be reached by her creditors. That is, even if the creditors obtain Judgment against her, they cannot collect because her social security benefits and her pension are exempt from execution. Also, her equity in the apartment is exempt to up to $125,000.00. In addition, there is already a Medicaid lien on the property. So, she does not really own the property.
She just needs to make sure that she does not co-mingle her social security payments with any other payments. Otherwise, she would lose protection for those funds. Some courts have ruled that social security benefits payments lose their exemption when they are deposited in a bank account that has deposits from other sources. So, she needs to make sure that her account for social security deposit is for just that.