Helping parents recover from a financial train wreck

Dear Liz: My retired parents are in a financial crisis. They got behind on their credit cards while they were trying to pay the mortgage on their home of 41 years. That home is now in a short sale. An attorney has advised them to file for bankruptcy to discharge the credit card debt and any debt that might remain after the short sale. After the sale of the home, I need to relocate them to my state so that I can further assist them, but I’m not sure if any landlord will rent to them given their terrible credit history, which will look even worse after the bankruptcy. Right now they make too much to qualify for subsidized senior housing. Any advice would be greatly appreciated.

Answer: You’ll probably have better luck with mom-and-pop landlords than with the corporate kind that run huge complexes. The mom-and-pop types tend to have more flexibility with potential renters who have tattered credit, particularly if those renters can make substantial deposits. If your parents don’t have much cash left over after bankruptcy — and they probably won’t — you may need to front them some money or consider letting them live with you while they save up.

You also should get a better idea of what caused their financial train wreck to see what you can do to help avoid further crises. If they’re suffering from diminished capacity, you may need to talk to an elder law attorney about taking over their finances for them. If they’re chronic overspenders, they may benefit from budgeting classes from a nonprofit credit counseling agency or community college. Even if the only bad decision they made was to continue borrowing against their home rather than paying it off, they could still benefit from some financial education and advice about how to live within their means. A session with a fee-only financial planner could help you all figure out what that will look like.

Dear Liz: I read your column about the reader whose tax papers were missing and couldn’t believe my eyes. A similar thing happened with me. My accountant mailed my returns to me as always, but this time they did not arrive the next day as they always did. I was worried sick because, of course, the Social Security numbers and all of our banks are listed in the returns. I was very worried that someone had stolen our returns and would use them either for identity theft or to drain our bank accounts. I filed a theft report with the Postal Service and fraud alerts with credit reporting agencies. Three long weeks later, I got an envelope from the IRS with the returns in it, requesting the missing signatures on the returns. Apparently the returns had been sent to the IRS rather than to us. I strongly suspect there is a flaw in the software the accountants are using this year that is sending the returns directly to the IRS instead of to the accountants’ clients for signatures. If you have the email address of your reader, please have him or her call the IRS, and I bet they have the return and all of the original paperwork.

Answer: Actually, the reader followed up to say her supporting paperwork eventually made its way to her mailbox. The return itself, as noted in the column, was electronically filed without her permission or review.

Whether there’s a software glitch or simply overworked preparers making mistakes is unclear. But these experiences do highlight the risks of using the U.S. mail for sensitive information. Here are another reader’s thoughts on the subject:

Dear Liz: As a tax preparer, I deal with clients who live 100 or more miles away, and I have never had a problem with mailing of documents in either direction. Perhaps they may be delayed somewhat, but they have always arrived. As to the issue of the preparer filing electronically without permission, the IRS mandates that a return can be filed electronically only after the preparer receives the taxpayers’ approval (IRS Form 8879 must be signed by the client). Therefore it appears that the tax preparer in this case may have acted in a manner not acceptable by taxing agencies. This is something taxpayers should be wary of in dealing with tax preparers.

Answer: That’s definitely true, but perhaps you should consider being a little more wary of the mail system. Just because nothing has happened yet to all that sensitive data doesn’t mean something can’t or won’t. It may cost a little more, but if your clients can’t drop off information and pick it up themselves, paying for delivery services that offer tracking information is a way to make these transactions more secure.

Liz Weston is the author of the book “The 10 Commandments of Money: Survive and Thrive in the New Economy.” Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or via asklizweston.com. Distributed by No More Red Inc.