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How Family Caregivers Can Prevent and Manage Debt

Review bills carefully and avoid taking on loved one's financial liabilities

spinner image a couple sitting at a table with a computer looking at medical bills and looking stressed
Ariel Skelley/Getty Images

Recently, my friend and fellow AARP expert Amy Goyer confided to me that she had filed for bankruptcy. The last time we were together, pre-COVID, she had shared how damaging caregiving had been to her finances.

Since the bankruptcy has become final (a process that took two years), she said she felt incredibly relieved and made her story public in a recent article for AARP. I think this was courageous. Culturally, we are conditioned to keep our finances private and not to talk about money woes. There is a fear of judgment and a sense of vulnerability to disclose that we are struggling. With so many family caregivers in the U.S. hurting financially, I believe we can't afford not to talk about it.

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When caregiving comes early

Personally, my family has still not recovered from the financial blows of caregiving. I became a caregiver to my mother when I was a newlywed who had just bought a house. When I was fired from my job at the end of my caregiving medical leave, my family lost its primary income. To me, caregiving came calling 20 years before I thought it would and I had inadequate savings to meet its demands. There were no public benefits my family or my care partner qualified for. So, all our expenses were private pay.

Then more unexpected events happened — like our house flooding (multiple times!) — and the income and nest egg we had were insufficient. Very few people know this, but my family eventually filed for bankruptcy. It was an emotional last resort for me, but my husband, who is board-certified bankruptcy attorney, saw our debt and knew that bankruptcy was an appropriate financial tool for our situation.

When I finally came around to it, bankruptcy was a relief. It doesn't mean all of our debt is gone (we each pay $1,000 a month in student loan repayments, which cannot be reduced and cannot be discharged in a bankruptcy), but it allowed us the opportunity to stop living in a sinking ship and to begin building our life again.

About 1 in 5 caregivers experience short- and long-term financial strain. Not many Americans have savings to dip into when faced with job loss, mounting medical bills and increased expenses that come with caregiving. Despite that, we can arm caregivers with knowledge and resources that will inform their financial decisions and possibly help reduce the strain of caring for a loved one.

Don't take on someone else's liabilities

My wish is that all family caregivers would be armed with a durable power of attorney or trust for their care partner. I know it's not the reality. The majority of people don't do any kind of planning. I encourage everyone to set their future caregivers up for success by preparing the proper legal documents that will help them help you.

Those documents also have a financial benefit to the caregiver. For example, a power of attorney makes you a fiduciary; it separates your personal finances from actions you take on behalf of your care partner. So, if you needed to sign your loved one into a facility, you would be signing as their “agent.” They would be the one who would be responsible to pay for their care, not you.

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If you don't have the legal documents in place, be cautious about signing any contracts or agreements for treatment or services for your care partner. There may be language that asks you to be the “responsible” party (or guarantor or cosigner), but remember: If you sign off on language like this, then you may be liable for the expense. Always read everything before you sign and have someone explain the paperwork if you don't understand. You don't want to get surprised with a big bill with your name on it a few months down the road.

Explore all options

It was my mom's idea to check into a skilled nursing facility. She wanted to relearn how to walk and thought it would be better to be in a focused environment than at home. The cost was about $7,000 a month. The facility admissions manager, after encouraging me to voluntarily agree to pay the bills, casually mentioned, “You may want to explore Medicaid.” I recall feeling so overwhelmed at the time. I truly felt like I couldn't take on another “thing” to figure out.

In the prior months, I had tried to find programs that would help. But we made a little too much money and were a little bit too young to qualify for anything. Because of the severity of her diagnosis, my mom did qualify for Social Security Disability benefits. But just the process of getting her application completed was a huge endeavor when I was hands-on caregiving 24 hours a day. Looking back, I can see why I just chose to pay out of pocket for the nursing home. Regardless, I wish I had enlisted the help of friends or hired an attorney to explore programs that may have been out there or whether Medicaid qualification was in fact a possibility.

In addition to looking for government benefits, like Social Security Disability, Veterans Affairs (VA) benefits and Medicaid, try to research foundations and nonprofit organizations specific to your care partner's disease or condition. There may be grants or programs available that can assist with out-of-pocket costs, insurance costs or even transportation costs to get your care partner to treatments. Check out the national Eldercare Locator or your state's Department of Children and Families for home- and community-based services that may provide help with meals, utility payments or respite care.

Understand your obligations and ask for help

Caregivers know how to be self-sufficient. But they don't always have to be. Asking for help early and often can save you stress, time and even money.

Deciphering medical and insurance bills is not easily done. Before you pay them, get a trusted friend or adviser to help you review them. Take all steps to understand what the bill means and what the patient is obligated to pay out of pocket. You may receive several bills in varying amounts for the same service; sometimes the bills are automatically adjusted or reduced by the provider. And sometimes you can negotiate the amount down or work out a payment plan. Often, a bill you receive may be just plain incorrect and doesn't need to be paid at all.

Most important: Don't ignore bills when they come in. The worst thing you can do is fail to communicate if you cannot pay a creditor. When accounts accrue interest or late fees, or are sent to collection agencies, the amount of debt can explode. You may end up being sued by the debt collector and end up with a judgment against you. These judgments can result in your wages (or even your stimulus checks) being garnished. While this wasn't my experience, events such as these are what commonly lead a family into bankruptcy.

Debts after death

The time may come when your care partner or a loved one passes away. You may feel the need to pay any bills that arrive in the mail after his or her death — possibly even sending checks from your personal accounts. Wait! Again, investigate these bills before paying them. If your name isn't on the bill and you're not the account holder, don't dip into your personal finances to pay it. Find out whether these bills should be paid through your state's probate procedure rather than directly by you.

Don't wait until it's too late

If you feel that debts are piling up, reach out to a consumer advocate or bankruptcy attorney. You don't need to wait until it feels like the last resort. Many provide free consultations and will review your options with you. Often, bankruptcy may not be the solution and the debts can be handled another way. They can help you come up with a plan of action to take control of what can feel uncontrollable.

Like my friend Amy said: The thought of bankruptcy may feel like a terrible loss. But it can also be a helpful solution and an opportunity for a more stable future.

What to Say When Asking for Help With Caregiving Costs

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