Got served and have questions....

[NewDawn]

My mother and father-in-law just got served by a collection agency for Cap One two days ago. They owe at least 50,000 in credit card debt and are contemplating filing for bankruptcy or just waiting out the statute of limitations of 4 years. It has been at least 3 years since they have paid on any of the credit cards. Their only income is social security retirement income and they live in Texas.

They want to know if only one of them files, does that mean they can only take the single exemptions? They are married. Every time I read the Texas exemptions, it only says 30,000 in personal property for single adults and 60,000 for a family. So I'm not entirely sure if only one of them files if they can claim the family exemptions or not.

The other question they have is regarding tax returns. They haven't filed them because they were under the income threshold to file. Again, their only income is social security retirement. So do they need to file just so they have a copy of their tax returns, or is there some other form they can use instead?

[brokejoker]

I don't know the answers to all your questions but if they just got served the debt will not go away in a year. The creditor will get a judgment against them that stays on their credit report for at least 7 years and can be renewed for longer.

If one of them files they only get the one exemption.

I don't know about the tax matter...

[SMinGA]

If they file bankruptcy - they will probably need to catch up on their tax filings.

If only one files, that person can only claim the single exemptions. But that spouse would also only list 1/2 value of owned items. Such as if they own a car with both names on title and its worth $5000, then $2500 belongs to each of them. The filing spouse would exempt the $2500 value he/she owns. So ultimately - the #s work out the same if they own everything jointly.

It would be a good idea to consult a couple of bankruptcy attorneys. I may be mistaken, but I believe TX is fairly pro-consumer in terms of garnishment laws and such. With SS being their only source of income - I don't believe the creditors can get that. But if they own a house, the creditor could possibly put a lien on it w/ a judgment.

[NewDawn]

How do they list their Social Security Benefits on Schedules B and C? Or do they just list the amounts that are direct deposited into the bank account? They will be filing under the Texas exemptions, but I wasn't sure how they would list the law that exempts the funds in their bank account.