Advice for mother considering bankruptcy

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Re: Advice for mother considering bankruptcy

Postby ddunca1944 » Fri Mar 22, 2013 1:05 pm

If dozens of fortune 500 cos can restructure, cancel debts, and keep operating, why can't a single mom. CC companies also have no problem charging double digit interest rates to high risk debtors because they know it's good money for them and it all factors in default rates.


I quite agree. The Supreme Court ruled that "corporations are people".... Why should regular people be held to a different standard than corporate "people"?
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Re: Advice for mother considering bankruptcy

Postby Hilda » Fri Mar 22, 2013 2:00 pm

Index Fan wrote:
Hilda wrote:It just seems to me that if an obligation to pay back what we owe isn't contractual as well as moral, then...chaos.


Agreed, but we live in a world where such things are seen as antiquated and old-fashioned and besides, they inhibit us from doing what we want to do. John Adams had a quote about this in another context.


"Antiquated Anachronism" could have been my username. I'm a couple years older than the OP's mother. And I've had the experience of incurring massive credit card debt which threatened to overwhelm me. Getting rid of that debt required some major and serious changes in my life but I was sick of the oppression of debt, so I did what it took. Which also meant having to change the mindset where I believed that I should have a thing and have it right now simply because I want it and I'm an American, dang it, land of the free and all that. I paid back all I owed which honestly was very empowering and I've made good use of the lesson learned.

I'm not against helping people, especially loved ones. Figuring out the line, however, between enabling and legitimately helping is really tough sometimes. If the OP's mother doesn't understand the part she has played in her own situation and isn't willing to make changes, then I agree with the other posters who've said that she will ultimately end up back in the same situation.

Side note: Corporations defined as sociopathic people-- it's the first time the concept of corporations=people has made sense to me.
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Re: Advice for mother considering bankruptcy

Postby goggles » Fri Mar 22, 2013 3:57 pm

On another thread you posted that you received a $55,000 windfall in December. Isn't it disingenuous to claim you don't have the money to help your mom? At least enough to match her credit card payments every month, when they were accrued paying for your education?
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Re: Advice for mother considering bankruptcy

Postby momar » Fri Mar 22, 2013 6:48 pm

Banks and credit card companies lend you money knowing there is a risk you won't pay them back. If there wasn't, then you ought to be able to borrow at the risk free rate. Instead, they let you borrow at a rate that is roughly proportional to the perceived risk of you defaulting. They willingly take that risk.
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Re: Advice for mother considering bankruptcy

Postby kitteh » Fri Mar 22, 2013 6:56 pm

Hilda wrote:It just seems to me that if an obligation to pay back what we owe isn't contractual as well as moral, then...chaos.


Hilda, I certainly feel obligated to pay what I owe. However, I have never had a credit company ramp up my interest rate to usurious levels like 20% plus. That's unethical loan shark territory, and it happens all the time to people who get into financial difficulty.

Credit card companies put people like this is situations where the company is making a vast bundle of money off their misery, far in excess of any legitimate level of profit.

It looks like the Mom here would, at the rate she's been able to pay off the credit card companies, be paying them for twenty more years, most all of it criminal interest, and money she could otherwise be saving to ensure her retirement.

In this case I have no qualms about telling the loan sharks to take a hike.
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Re: Advice for mother considering bankruptcy

Postby BL » Fri Mar 22, 2013 7:24 pm

You need to take a really good look at the interest rate on the CC and how much of the minimum payment goes toward reducing the loan. It may take almost forever to pay it off if she continues to pay the minimum.
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Re: Advice for mother considering bankruptcy

Postby assumer » Fri Mar 22, 2013 8:46 pm

goggles wrote:On another thread you posted that you received a $55,000 windfall in December. Isn't it disingenuous to claim you don't have the money to help your mom? At least enough to match her credit card payments every month, when they were accrued paying for your education?


Hi, yes, I actually had already used that windfall from a death in the family to pay down most of my student loan debt (I had $60k in debt originally and actually received slightly less than $50k in the windfall when all was said and done) as per the advice of that thread, in addition to accumulating a small emergency fund of ~$2,000 (and I ended up not putting any money aside for vacations or the like as I originally had wanted) so there is almost none of that left. I didn't mean to be disingenuous.
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Re: Advice for mother considering bankruptcy

Postby market timer » Fri Mar 22, 2013 9:22 pm

I think you should pay off your mom's debt that she incurred for your education. Surprised this is even question.
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Re: Advice for mother considering bankruptcy

Postby assumer » Fri Mar 22, 2013 9:38 pm

market timer wrote:I think you should pay off your mom's debt that she incurred for your education. Surprised this is even question.


I literally do not have the funds to do that right now. I am a graduate student, and the money I did receive in December has already gone into my own debt, of which there is still thousands of dollars remaining. I don't understand how I can consider paying off her debt when I do not have money to. I'm not trying to be heartless, nor unappreciative, but any money I have received has already gone into my own student loans. I do not have any sort of income, nor assets, to pay her debt off.
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Re: Advice for mother considering bankruptcy

Postby market timer » Fri Mar 22, 2013 10:03 pm

It would have been preferable to use the inheritance, but there are other options: take out $20K in student loans now to pay off your mom's credit card debt, send her $150/mo to cover her shortfall with a promise to take care of the rest when you get your first job, get a balance transfer from credit card with a promotional interest rate, borrow money from a person-to-person lending website, etc.
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Re: Advice for mother considering bankruptcy

Postby kitteh » Sat Mar 23, 2013 6:26 am

market timer wrote:It would have been preferable to use the inheritance, but there are other options: take out $20K in student loans now to pay off your mom's credit card debt, send her $150/mo to cover her shortfall with a promise to take care of the rest when you get your first job, get a balance transfer from credit card with a promotional interest rate, borrow money from a person-to-person lending website, etc.


I woke up thinking about this this morning and have somewhat modified my views.

I do still think the option to tell the credit card companies to pound sand is reasonable. Whether to get rid of the whole debt or get it sharply reduced and a reduced interest rate. It may be possible to do this without bankruptcy, but if bankruptcy is necessary, so be it. Also, telling the credit card companies she is considering bankruptcy, in which case they get nothing, may motivate them to compromise.

On the other hand, I will start by saying that when I was a young person, I really had no conception of the sacrifices my parents made to put me and my brothers through school. Once I was older, I realized the full extent. I suspect the OP is in the former boat.

The OP's Mom has been saddled with this debt for some years and has made a small amount of progress paying it off. I'm sure it has cost her a lot of money, stress, and ongoing scrimping to do so, and I am equally sure the credit card companies have been making out like bandits in this situation because her interest rates are surely usurious. The effort and money she has put into this has mostly gone to the basically criminal companies' pockets, so small progress for a lot of effort.

On the other hand, the OP came into an unexpected $50,000 or so recently and used it to pay off a lot of his student debt. I'm sure the student debt has been a burden to him, but I also think the interest rates are not remotely like what his Mom has been paying.

If I were him, I would have used $20,000 or $15,000, whatever the amount is his Mom owes, off the top of the inheritance to pay his Mom's debt. Then I would have set aside whatever was needed to pay (I think this is called) the gift tax, and used the rest to pay off part of his own debts.

Yes, this would have him more in debt, but he owes this help to his Mom. I would a lot rather my Mom, were she still here, have a less stressful life after what's she's been through, than know I owed less myself. Also, as things are now, his Mom cannot save for when she is too old to work.

This can presumably still be done by the OP's taking on enough additional student debt to pay his Mom's debt now.

Without reading back through all the posts, I think I recall siblings being mentioned. It would not be out of line to ask them to chip in. However, I would myself realize that I might be the sibling with the most sense of responsibility and not hold things up by expecting others to chip in.

If job prospects are as good for PhD engineers as seems to be the opinion of another poster who is one, $20,000 is not going to be that difficult for the OP to pay off once he has a job.

The one thing I would not do is drop out of school, even "temporarily." The world is littered with people who do that and never go back.
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Re: Advice for mother considering bankruptcy

Postby linguini » Sat Mar 23, 2013 6:51 am

PhD students receive a stipend and don't pay tuition. Can they still take out student loans?
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Re: Advice for mother considering bankruptcy

Postby assumer » Sat Mar 23, 2013 7:04 am

Thanks for the further suggestions everybody. A few responses below to some specific questions:

kitteh wrote:On the other hand, I will start by saying that when I was a young person, I really had no conception of the sacrifices my parents made to put me and my brothers through school. Once I was older, I realized the full extent. I suspect the OP is in the former boat.


Well I currently think that I understand the sacrifices they've made, but it's impossible to know if my views will change when I grow older and have kids myself. How do I know if I'm "realizing the full extent" of the sacrifices? I suspect that without kids I can't know that for sure.

kitteh wrote:On the other hand, the OP came into an unexpected $50,000 or so recently and used it to pay off a lot of his student debt. I'm sure the student debt has been a burden to him, but I also think the interest rates are not remotely like what his Mom has been paying.


Most were between 6.8% and 7.9% (stafford and PLUS loans).

market timer wrote:It would have been preferable to use the inheritance


kitteh wrote:If I were him, I would have used $20,000 or $15,000, whatever the amount is his Mom owes, off the top of the inheritance to pay his Mom's debt. Then I would have set aside whatever was needed to pay (I think this is called) the gift tax, and used the rest to pay off part of his own debts.


Hindsight, right? I wasn't fully aware of my Mom's situation when the inheritance came, and made the best decision with the money at the time that I could (much thanks to this forum).

kitteh wrote:Without reading back through all the posts, I think I recall siblings being mentioned. It would not be out of line to ask them to chip in. However, I would myself realize that I might be the sibling with the most sense of responsibility and not hold things up by expecting others to chip in.

A sister. responsibility, or "doing the right thing" wouldn't be a concern. But she recently graduated college and does not have a stable job right now, nor any assets.

kitteh wrote:If job prospects are as good for PhD engineers as seems to be the opinion of another poster who is one, $20,000 is not going to be that difficult for the OP to pay off once he has a job.

I am hoping that is true. But I can't know until I graduate in the future.

kitteh wrote:The one thing I would not do is drop out of school, even "temporarily." The world is littered with people who do that and never go back.

Despite others' advice, I never actually considered that. That was never an option in my mind.

market timer wrote:but there are other options: take out $20K in student loans now to pay off your mom's credit card debt

kitteh wrote:This can presumably still be done by the OP's taking on enough additional student debt to pay his Mom's debt now.

linguini wrote:PhD students receive a stipend and don't pay tuition. Can they still take out student loans?


Not federal for sure. Anytime you receive a stipend or tuition remission, your "need" or personal "cost of attendance" drops, regardless of personal circumstances. If I used my measly monthly stipend for her debt, I would not have money for basic necessities for myself but I may be able to squeeze a bit.

market timer wrote:get a balance transfer from credit card with a promotional interest rate, borrow money from a person-to-person lending website, etc.


Thanks for these suggestions. So if I wanted to pay for her credit card debt myself, I could look into private student loans (although I believe they ALSO use the school's reported cost of attendance so that option is likely out), or opening credit cards in my name, or borrowing money from peer lending, to reduce her debt.
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Re: Advice for mother considering bankruptcy

Postby 2stepsbehind » Sat Mar 23, 2013 8:50 am

As you said, hindsight is 20/20 because looking over your original windfall thread it appears you could have used the inheritance to pay off all your unsubsidized loans, kept the subsidized loan money in a savings account until graduation, and then you would have had the money on hand to wipe out the vast majority (if not all) of your mom's debt.* As it is, it looks like you expect to find a well paying job this year. I would agree with market timer that if you can find some good 0% balance transfers (look at Chase Slate, U.S. Bank offerings) it would be worth doing so. Live like a grad student for the first year and pay off the cards before the promos end and sock up a decent emergency fund.


*Worth pointing out to the Board that in the future people should not be so quick to suggest paying subsidized loans off right away if the poster is still in school, because those can be the ultimate "emergency fund."

Edit: I should note at least one person in the original thread gave the OP this advice (Bob's Not My Name)
Last edited by 2stepsbehind on Sat Mar 23, 2013 8:54 am, edited 1 time in total.
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Re: Advice for mother considering bankruptcy

Postby allie » Sat Mar 23, 2013 8:53 am

My parents filed bankruptcy 18 months ago. Unfortunately, they did not share their problems until 2 weeks before their court date and there was nothing I could do to help them sort through things to see if there was another option. I had one of Ramsey's ELP financial counselors talk with them (and they told her they were too far into it to do anything different) and I paid for them to go to Ramsey's FPU.

While they are doing better, they aren't out of the woods. They have changed their lifestyle somewhat - but not nearly enough to successfully live on their fixed SS income. My 70 yr father works a part time job and my 69 yr mother babysits for a neighbor's child - and they rely on those income streams. I took over their cell phone bills and supply some household basics quarterly.

Bankruptcy does not fix the problem. I truly believe that if my parents had gone through the hard work of adjusting their budget and figured out how to live on a budget of their fixed incomes, they would be much better off. My father loves his part time job, and my mother loves the neighbor's child - they would be able to really enjoy those income streams instead of needing it. They are also scarred psychologically from the process. That is not how someone in their 70's should have to be living.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sat Mar 23, 2013 8:58 am

2stepsbehind wrote:As you said, hindsight is 20/20 because looking over your original windfall thread it appears you could have used the inheritance to pay off all your unsubsidized loans, kept the subsidized loan money in a savings account until graduation, and then you would have had the money on hand to wipe out the vast majority (if not all) of your mom's debt.* As it is, it looks like you expect to find a well paying job this year. I would agree with market timer that if you can find some good 0% balance transfers (look at Chase Slate, U.S. Bank offerings) it would be worth doing so. Live like a grad student for the first year and pay off the cards before the promos end and sock up a decent emergency fund.


*Worth pointing out to the Board that in the future people should not be so quick to suggest paying subsidized loans off right away if the poster is still in school, because those can be the ultimate "emergency fund."

Edit: I should note at least one person in the original thread gave the OP this advice (Bob's Not My Name)


Thanks, 2stepsbehind. Yes it was likely unwise to pay off part of my subsidized loans, but it was ultimately a decision for some peace of mind on my part. I take full responsibility for my actions. I don't necessarily think it was the "wrong" choice that I made (I don't actually regret it), but it may not have been the "optimal" choice. Anyway, I am where I am.
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Re: Advice for mother considering bankruptcy

Postby Hilda » Sat Mar 23, 2013 9:02 am

Assumer, did you ever find out what the interest rates are on your mother's credit card debts? Is she being charged outrageously high APRs?
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Re: Advice for mother considering bankruptcy

Postby assumer » Sat Mar 23, 2013 9:10 am

I will likely get some heat for saying this, and note that it does not affect my decisions of if / how to help my mom.

But knowing what I do now, I truly believe that my parents would have racked up that credit card debt even if my sister and I had received full rides to college. They bought a house they couldn't afford, took vacations we couldn't afford, bought furniture and other "stuff" we couldn't afford, etc.

If they hadn't gone into so much more debt to help pay for our education their situation could have been different, and the splitting of the debt during the divorce would have been different, but I honestly don't believe they would have made better decisions in terms of retirement (as I said, $2,000 saved... my dad had $5,000 saved... ) or spending habits, and less money being paid towards college would likely have not been saved.

So to be clear, while I am saying that debt was also to subsidize a middle class lifestyle (which has since changed), this doesn't diminish the sacrifices they made for me, nor my desire to do what I can to help my mom.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sat Mar 23, 2013 9:10 am

Hilda wrote:Assumer, did you ever find out what the interest rates are on your mother's credit card debts? Is she being charged outrageously high APRs?


Will call her today and find out, and edit my OP when I do.
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Re: Advice for mother considering bankruptcy

Postby 2stepsbehind » Sat Mar 23, 2013 9:11 am

Well we all have different "regret" thresholds. If my mother was considering bankruptcy due in part to sizable contributions made toward my education and I had the means of alleviating that burden, I'd regret if I didn't. YMMV.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sat Mar 23, 2013 9:18 am

2stepsbehind wrote:Well we all have different "regret" thresholds. If my mother was considering bankruptcy due in part to sizable contributions made toward my education and I had the means of alleviating that burden, I'd regret if I didn't. YMMV.


Yes I understand, and would also likely regret not helping her now.

But it seems a waste of emotional energy to spend time regretting a decision that's already been made and that I can't do anything about (using inheritance to pay off my loans a couple months ago). I will learn from that decision and use it, but spending energy feeling regret isn't going to help anybody right now.

Since I can likely predict that if I don't help now I would regret it, I will help now. But I don't like sitting around regretting a decision I already made when, at the time, I believed it was the best decision. I am going to use my past decisions to learn and make better decisions in the future.

Anyway, off the philosophical topic, I appreciate your suggestions and input, 2stepsbehind :D
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Re: Advice for mother considering bankruptcy

Postby MN Finance » Sat Mar 23, 2013 9:24 am

Too much concern for the morality of paying of mom paying off the cc co. My MIL also raised two kids on a $10/hr job and did her best to get the kids through school so they'd have better lives. There are no easy answers. Wait until she gets calls from the collections agent and see how much morality is on the other side of this contractural arrangement
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Re: Advice for mother considering bankruptcy

Postby linguini » Sat Mar 23, 2013 10:47 am

I think people should stop trying to guilt trip the OP. His mother helped raise him, and as part of the cost of raising him, provided a sizable but fully voluntary financial contribution to his education. As I understand it, this contribution was given freely, was not forced out of his parents, and was not expected to be returned. In other words, it was a gift, not a loan. His mom is not a bank; his mom is a loving parent who raised two smart, well-educated, successful, caring, family-oriented children. Yes, that contribution may have ultimately negatively affected her current financial situation, but that doesn't mean it falls solely on her children to liquidate her debts.

His mom chose to contribute to his education. She also chose to take out a mortgage on an expensive house, to take vacations, to fail to live within her means. The OP never made those decisions for her. Her current credit card debt reflects the result of a lot of choices she voluntarily made as an individual. The OP is very graciously trying to intervene on her behalf, and we should laud him for that. We should be encouraging him to do what he can to help his mother learn how to live by spending what her income allows, how to reduce the burdens of paying off her debt, even directly contributing to paying off that debt. We shouldn't be encouraging him to individually take on all responsibility to subsidize all the behaviors that got her into a financial mess.

Most of us never pay our parents back for every last dime they spent on us. We don't reimburse them for the food, clothes, and diapers they bought us, or the time they spent caring for us and teaching us and raising us to be independently functioning adults. For most parents of recent history (probably including the OP's), the greatest payoff of having children is seeing those children grow up to be successful and happy. OP's mother is probably proud that her son grew up to be the type of man who would help his mother try to get her financial life in order and is even willing to contribute financial resources to her well-being. He should be lauded for what he is doing, not treated like an ungrateful jerk for having the audacity to take a gift of financial education and use it to give himself a good life rather than immediately take on more loans himself in order to reimburse the credit card debt of a known lavish debt spender, especially before he is actually financially stable.

Which isn't to say he shouldn't directly help to pay off some or all of the credit card debt his mom has accumulated over the years. It would be a gracious thing to do, when he is financially ready to do so, because it would be a good way to help his mother lead a more comfortable life. It says a lot of positive things about his character and family values that he is considering doing so once he graduates from his PhD program. But it's not his debt, it's his mom's debt, no matter how much she paid for his education while accumulating it.
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Re: Advice for mother considering bankruptcy

Postby Rosco » Sat Mar 23, 2013 1:31 pm

You're wrong. It's partly his debt. She's all his mom. Young people have time to lay out and work, and, finally, bankruptcy is devastating. SS
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Re: Advice for mother considering bankruptcy

Postby kitteh » Sat Mar 23, 2013 2:47 pm

allie wrote:My parents filed bankruptcy 18 months ago. Unfortunately, they did not share their problems until 2 weeks before their court date and there was nothing I could do to help them sort through things to see if there was another option. I had one of Ramsey's ELP financial counselors talk with them (and they told her they were too far into it to do anything different) and I paid for them to go to Ramsey's FPU.


For what it's worth, once when I was visiting my Mom I looked over her shoulder and was horrified to see her monthly budget included items like $15 for this and that, i.e. tracking pennies. Mom was very frugal, so there was nothing about her financial dealings that needed correcting, just money added by the kids, but I think adult children need to check in with their older parents and find out what's going on.
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Re: Advice for mother considering bankruptcy

Postby linguini » Sat Mar 23, 2013 3:07 pm

Rosco wrote:You're wrong. It's partly his debt. She's all his mom.


The credit card debt is no more his than is the IRA. His mom is an individual who chose to borrow money that she could not pay back. Naturally, he is upset by the ill effects of that debt on his mother because he cares about her, but that doesn't make the debt "his" by the legal, ethical, moral, or practical standards of the United States in 2013. She has lived her life, and she made bad choices that have left her financially troubled. He never made those choices. He gets to start fresh. It is unjust and inequitable to fully impose those debts on him.

Young people have time to lay out and work, and, finally, bankruptcy is devastating. SS


As opposed to dropping out of grad school and thus taking what will probably amount to a $25k per year salary cut forever, and then spending a whole year working just to pay off his mom's credit card debt before even having an opportunity to earn anything for himself? You think that's less devastating than, what, going through a few court proceedings and having higher interest rates on any future credit card debt that she probably shouldn't be using anyway? Bankruptcy isn't punishment. It's not like going to prison or being assaulted. Bankruptcy is bad because it means you are insolvent enough to be eligible for it, but I don't see why actually going through the process would be so much more "devastating" than asking one's son to give up his career aspirations or to take on enormous credit card debt through a balance transfer in spite of only earning a grad student stipend and thus potentially risk his own insolvency before he has even bought his first home. Plus, there's no guarantee that the gap between expenditures and income won't be back in another 10 years. We're talking about someone who is not willing to give up cable TV and a smartphone to tamp down on crushing debt, and whose income will only go down within the next 20 years after retiring and having to depend on social security to make up most of her income without any savings to supplement it. Will the OP be better prepared to deal with that situation if he tries to teach his mom to live within her means and provides only limited help now until he gets a job after graduating with a PhD and is actually able to afford to help out financially without settling for a worse career or going into deep debt himself, or will he be better prepared to take care of his mom if he provides a no-strings-attached $20k gift payment that leaves her temporarily debt-free (and, frankly, free to rack up some more, just as if she went through bankruptcy but at his cost instead of the banks') while sacrificing his own current and future financial security? Whether or not she ends up requiring bankruptcy, I think she'll be fine in the long run once she cuts back on her transportation budget and maybe cuts out cable TV, but he won't be fine if he devotes his every last resource to immediately paying down a $20k debt that was built up over decades by his parents.
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Re: Advice for mother considering bankruptcy

Postby 2stepsbehind » Sat Mar 23, 2013 9:55 pm

linguini,
You are obviously free to believe as you do and the OP is free to make whatever decision he wants. But the OP's mom sunk over 100k into his/his sister's education. I do not think it unreasonable for him to take a relatively modest balance transfer or even take out student loans to repay his mom. Bankruptcy is costly and it will have ramifications for a significant period of time. We are not talking about some crazy balance, but 15-20k--a fraction of what the OP believes he'll command thanks in part to his mom's sacrifice.

This thread however is a great lesson in why people should prioritize funding their own retirement/make sure their financial future is set and let their kids take our loans/work part time/go to a cheaper school etc. If you help your kids out and are left virtually destitute, you risk being repaid with ungratefulness/scorn.
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Re: Advice for mother considering bankruptcy

Postby linguini » Sat Mar 23, 2013 10:47 pm

2stepsbehind wrote:linguini,
You are obviously free to believe as you do and the OP is free to make whatever decision he wants. But the OP's mom sunk over 100k into his/his sister's education. I do not think it unreasonable for him to take a relatively modest balance transfer or even take out student loans to repay his mom. Bankruptcy is costly and it will have ramifications for a significant period of time. We are not talking about some crazy balance, but 15-20k--a fraction of what the OP believes he'll command thanks in part to his mom's sacrifice.


But that's exactly the point -- it's not a fraction of what he's earning right now. 15-20k isn't a crazy balance for someone making $100k a year. It is a crazy balance for someone making $25k a year. He's earning no more than his mom, who already cannot afford the loan service payments, so how can you expect him to be able to afford them? (Incidentally, no, he cannot take out more student loans. This has been established earlier in the thread.) Why wouldn't it make sense to wait until he actually has that sort of money instead of piling debt on him now? And why would it be any better than just having him give her small cash gifts while she pays off the debt? Because it'll save a hundred dollars a month in interest during the promotional period? In this case, moving debt from the mom to the son is like rotating the wheels on a car to try to fix a flat tire. You're just moving the same problem around without actually fixing it, and it's not making anyone better off.

And nobody's really explained what exactly is so costly about bankruptcy here. It seems to me that the costly thing here is having to pay over 20% of your salary in credit card servicing payments.

This thread however is a great lesson in why people should prioritize funding their own retirement/make sure their financial future is set and let their kids take our loans/work part time/go to a cheaper school etc. If you help your kids out and are left virtually destitute, you risk being repaid with ungratefulness/scorn.


Come on now, the problem isn't that she's being repaid with ungratefulness and scorn. The problem is that she, her son, and her daughter cannot afford the amount of debt she has on their combined incomes right now. I'm not saying he should let her die destitute without offering to help. Clearly that is not his intention, and it would be repulsive if it was. I'm saying that it is not sensible for the OP to immediately take on his mother's debts when he can't afford to pay them off in the first place, and that he should not ruin his own credit or job prospects just to take a shot at it. I actually agree that parents should make sure their financial future is set, but a big part of that is to avoid becoming a huge financial burden to their children specifically so they don't have to stress out about problems like this. And yes, part of that means that sometimes they have to tell their children no, they simply cannot afford to send them to such and such school and they will have to take out loans in their own name. That is part of being an adult: you have to be responsible for your own choices about how to spend your money and handle your finances. It has nothing to do with kids being ungrateful punks or whatever it is you're suggesting here. Sometimes you get lucky and your kid gets a $100k engineering job after graduating with his PhD and can help you pay off the loans you took out when you couldn't afford them. But your children aren't your debtors. They are also responsible for their own finances, just as you are for yours.
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Re: Advice for mother considering bankruptcy

Postby market timer » Sat Mar 23, 2013 11:01 pm

linguini wrote:Incidentally, no, he cannot take out more student loans. This has been established earlier in the thread.

He can take out loans to the extent his stipend is less than the estimated cost of attendance. For example, at MIT, the graduate student cost of attendance (on top of tuition) is around $29K. This number is actually negotiable with the financial aid office. Many (most?) graduate student stipends do not cover the estimated cost of attendance.

http://web.mit.edu/sfs/afford/graduate_ ... enses.html
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Re: Advice for mother considering bankruptcy

Postby tom0153 » Sun Mar 24, 2013 1:07 am

assumer wrote:
tacster wrote:Judging by this post it sounds like your mother's debt situation has been steadily improving since 2008, true? If so, why consider bankruptcy now, versus continuing to pay down the debt until it's gone? You don't say exactly how much debt she started with so it's hard for us to judge how she's really doing.


Indeed as far as I can tell it's been steadily improving, but slowly. My guess is that it started at around $25k - $30k but I don't actually know what it was back then, so I honestly don't know it's rate, and I'm nto even sure she kept track of it.


You are a good concerned son. The best suggestion that I see so far for you is to use the credit counseling group; for the small fee, they can help your mother directly, and get you out of the emotional mess that a son advising a mother can present. You can review and reinforce the info she is getting.

Declaring bankruptcy may not be a good idea for the amount involved here. It costs money, to begin with, and the aftermath has its own emotional costs, and some practical and negative effects for your now single mother trying to rebuild her life. Bankruptcy would not clear off of her record until the mid-sixties for her, and too many potential employers can look at credit in the hiring decision, as do potential spouses when seeking a mate at that age.

I also think that paring the expenses down, as much as possible, will be helpful so that the credit counseling bureau has more to work with, and this likely will include taking her mother up on the offer for housing for a period of time. You might also approach your father, if he is in a better situation, and ask that he help clear up some of that debt that exists from the marriage, which might roughly be translated into support when you and your sister were still their dependents.

I have seen this happen from time to time, where a parent has responded positively for such a request.

Best to all of you.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sun Mar 24, 2013 8:08 am

Thanks I will push for the credit counseling services before anything else is done.

tom0153 wrote:You might also approach your father, if he is in a better situation, and ask that he help clear up some of that debt that exists from the marriage, which might roughly be translated into support when you and your sister were still their dependents. I have seen this happen from time to time, where a parent has responded positively for such a request.


A couple years ago he voluntarily took on more debt than was required of him in the divorce hearings to help her out, so he was definitely not above such requests and still cared enough to want to help her to the extent her could. But he has since died so that's out of the question as well.
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Re: Advice for mother considering bankruptcy

Postby 2stepsbehind » Sun Mar 24, 2013 9:09 am

linguini,
There are both statutory filing fees and attorney fees associated with bankruptcy.

As market timer notes, it is likely that he can take out more student loans (I was a grad/professional student once and I'm highly aware of how flexible student loans can be--our financial aid office more than once offered to inflate amounts so that people could use student loans to pay off credit card debt) and he likely can do a 0% balance transfer at little to no cost which saves the interest over this period which I'm guessing is substantial. Your solution is letting the car stall out/abandoning the car instead of putting on a spare. Not exactly helping matters either.

For the record, I said that parents risk being paid back by ungratefulness/scorn not that the OP has repaid his mother with such. That said, I don't think I'm the only one that found some of the posts in this thread a tad supercilious.
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Re: Advice for mother considering bankruptcy

Postby 2stepsbehind » Sun Mar 24, 2013 9:22 am

OP--Obviously this doesn't help in the short term, but your mom may be able to collect on the social security record of your father. She may want to start looking into how and when to apply.
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Re: Advice for mother considering bankruptcy

Postby rooms222 » Sun Mar 24, 2013 9:53 am

I would just say that the OP should not take out private student loans to pay off her mother's debt. This debt would be non-dischargeable if the OP suffered a severe setback, such as disability or delays in getting a good-paying job. Changing dischargeable (by the mother) debt to non-dischargeable debt is not a good idea without a strong, current reliable income stream to pay off the debt quickly and easily. Private student loans have caused a great deal of strife in my family due to a similar, but not identical situation.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sun Mar 24, 2013 10:16 am

2stepsbehind wrote:OP--Obviously this doesn't help in the short term, but your mom may be able to collect on the social security record of your father. She may want to start looking into how and when to apply.


I thought there was no entitlement to SS benefits as a divorced widower, but according to http://ssa-custhelp.ssa.gov/app/answers ... e-benefits and http://www.ssa.gov/survivorplan/ifyou3.htm this may not be the case after my mom turns 62 years old. She would supposedly have to wait until that age to apply for the benefits, but this is quite useful. Thanks 2stepsbehind.
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Re: Advice for mother considering bankruptcy

Postby kitteh » Sun Mar 24, 2013 10:34 am

assumer wrote:
2stepsbehind wrote:OP--Obviously this doesn't help in the short term, but your mom may be able to collect on the social security record of your father. She may want to start looking into how and when to apply.


I thought there was no entitlement to SS benefits as a divorced widower, but according to http://ssa-custhelp.ssa.gov/app/answers ... e-benefits and http://www.ssa.gov/survivorplan/ifyou3.htm this may not be the case after my mom turns 62 years old. She would supposedly have to wait until that age to apply for the benefits, but this is quite useful. Thanks 2stepsbehind.


There is a nasty gotcha in SS which may still exist and needs to be looked out for. I have forgotten exactly how it works, but it's something like this. My Mom was collecting SS as my Dad's widow, but she was continuing to work. At some point the benefit she was entitled to based on her own work exceeded what she was getting as my Dad's widow, but she did not know this and SS did not tell her. When she realized it, it was 2-3(?) years after the fact and although she could apply for and did receive the higher amount starting then, there was no retroactivity so she actually was out thousands of dollars. Nice way to do in a secretary, SS.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sun Mar 24, 2013 10:39 am

kitteh wrote:There is a nasty gotcha in SS which may still exist and needs to be looked out for. I have forgotten exactly how it works, but it's something like this. My Mom was collecting SS as my Dad's widow, but she was continuing to work. At some point the benefit she was entitled to based on her own work exceeded what she was getting as my Dad's widow, but she did not know this and SS did not tell her. When she realized it, it was 2-3(?) years after the fact and although she could apply for and did receive the higher amount starting then, there was no retroactivity so she actually was out thousands of dollars. Nice way to do in a secretary, SS.


Thanks, makes sense. However, given the disparity between her income and my father's past income, even given the extra working years from her, I doubt she'll have to worry about that.

There are no programs such that she can start getting entitled benefits (or some annuity / loan based on it) earlier than 62, is there?
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Re: Advice for mother considering bankruptcy

Postby BL » Sun Mar 24, 2013 11:22 am

Since her main problem is the cc, it seems like finding the good credit counseling place would help the most (be sure to verify that it is the good one). There may be city or county social services that could help verify that. She is insolvent, so there is no way she can pay those credit card debts. Just quitting paying might be an option, but the counseling may also help her with managing to live on her current income (how can current spending be higher than her income, unless she is continuing to borrow on cc?) I doubt bankruptcy is even worth considering except as a threat in dealing with CC companies.

With her income she may be eligible for low-income housing, based on a percent of income (?30% of ? income) Also, food banks/food shelves may not have as stringent rules as other formal low-income programs she may not qualify for due to income.

There may be various possibilities when she is eligible for SS:
age 60-70 for starting widows benefits
age 62-70 for starting her own benefits
When is best to start/switch from one to another. When is it possible? Anything started before full retirement age is reduced and after is increased.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sun Mar 24, 2013 12:18 pm

I have edited my OP to include the full breakdown of her debts.
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Re: Advice for mother considering bankruptcy

Postby market timer » Sun Mar 24, 2013 12:28 pm

assumer wrote:I have edited my OP to include the full breakdown of her debts.

At $1550/month excluding credit card payments, your mom's budget is pretty lean as it is, though sustainable given her income of $1800/month. With the $1000+/month minimum payments, she is going to sink. If you can find $11K from a combination of student loans and credit card promotional offers, and pay down her highest interest debts (#2, 3, and 4), I think she'll be able to make it without bankruptcy. It doesn't even look like bankruptcy would save her much. If she had six figures of debt, this would be another story.
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Re: Advice for mother considering bankruptcy

Postby tom0153 » Sun Mar 24, 2013 12:37 pm

assumer wrote:
2stepsbehind wrote:OP--Obviously this doesn't help in the short term, but your mom may be able to collect on the social security record of your father. She may want to start looking into how and when to apply.


I thought there was no entitlement to SS benefits as a divorced widower, but according to http://ssa-custhelp.ssa.gov/app/answers ... e-benefits and http://www.ssa.gov/survivorplan/ifyou3.htm this may not be the case after my mom turns 62 years old. She would supposedly have to wait until that age to apply for the benefits, but this is quite useful. Thanks 2stepsbehind.


Your mother, as a widow, entitled to take benefits under her deceased (ex)-husband's account (for those married more than ten years), would take benefits at age 60 with a rather large discount to the benefit at normal retirement age. The longer she can hold out, the more comfortable she will be in the future. Further, there is a reduction in benefit for those who continue to earn over a certain amount. You should revisit the SSA website to learn more and help your mother to gain primary knowledge of the site.

She will get a certain education in personal finance from the budget counselors (the one that was previously recommended to your mother is one that I often see suggested, http://www.nfcc.org/index.cfm, and they have information of value whether you are a client or not on this web site). She may also want to see if the library or similar, maybe a Y, offers something that will catch her interest.

Your recent revision suggests that your mother's situation is untenable, with her rent going up, and the credit card companies about to descend upon her, so help her take action with a call to the agency asap. It looks like she will indeed need to give up the apartment and share costs with her mother until she gets out from under. That car lease is also an albatross.

Wise people in the past have established programs for situations that are untenable. Your mother may also benefit from a visit to a social services agency that assists older folks; your mother may not fit into the senior citizen category, but she has experienced losses similar to the older generation, and such an agency may be able to help ... including figuring out a way to let her have access to some of the help that was described in a prior message.

Best.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sun Mar 24, 2013 2:30 pm

Thanks again, everybody. I will continue to look into things for her. Lots of good suggestions.
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Re: Advice for mother considering bankruptcy

Postby assumer » Sun Mar 24, 2013 2:31 pm

market timer wrote:It doesn't even look like bankruptcy would save her much. If she had six figures of debt, this would be another story.


Can you explain what you mean? If bankruptcy cleared her existing $22,000 in debt (since she has no assets) and freed her up to be able to budget and live on $1,800 per month, wouldn't that be a good outcome?
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Re: Advice for mother considering bankruptcy

Postby Jack » Sun Mar 24, 2013 4:16 pm

assumer wrote:
market timer wrote:It doesn't even look like bankruptcy would save her much. If she had six figures of debt, this would be another story.


Can you explain what you mean? If bankruptcy cleared her existing $22,000 in debt (since she has no assets) and freed her up to be able to budget and live on $1,800 per month, wouldn't that be a good outcome?

The idea of not saving much doesn't make sense as long as the debt is greater than the cost of filing bankruptcy. It doesn't make any difference if your nose is one inch or 10 feet underwater if you are drowning.
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Re: Advice for mother considering bankruptcy

Postby market timer » Sun Mar 24, 2013 4:54 pm

Jack wrote:
assumer wrote:
market timer wrote:It doesn't even look like bankruptcy would save her much. If she had six figures of debt, this would be another story.


Can you explain what you mean? If bankruptcy cleared her existing $22,000 in debt (since she has no assets) and freed her up to be able to budget and live on $1,800 per month, wouldn't that be a good outcome?

The idea of not saving much doesn't make sense as long as the debt is greater than the cost of filing bankruptcy. It doesn't make any difference if your nose is one inch or 10 feet underwater if you are drowning.

My point is that after lawyer fees, time spent to declare bankruptcy, settlement amounts, and potential wage garnishment, there may not be much advantage to bankruptcy. Having good credit is worth something--seems that declaring bankruptcy for just $22K is selling yourself short.
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Re: Advice for mother considering bankruptcy

Postby Default User BR » Sun Mar 24, 2013 6:59 pm

market timer wrote:My point is that after lawyer fees, time spent to declare bankruptcy, settlement amounts, and potential wage garnishment, there may not be much advantage to bankruptcy.

What wage garnishment? You declare bankruptcy your debts are wiped.

Frankly in her situation, it's unlikely that any CC company would be able to get a significant judgment. Really she's in bankruptcy already. The CC companies will harass for awhile, then write it off and move on.


Brian
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Re: Advice for mother considering bankruptcy

Postby Epsilon Delta » Sun Mar 24, 2013 7:07 pm

BL wrote:There may be various possibilities when she is eligible for SS:
age 60-70 for starting widows benefits
age 62-70 for starting her own benefits
When is best to start/switch from one to another. When is it possible? Anything started before full retirement age is reduced and after is increased.

Usually the best SS claiming strategy is one of:
  • Apply for widows benefit at age 60, there will be a reduction for filing early. Apply for her own benefits at age 70, claiming widows benefit early will not affect her own benefits and she gets full credit for delaying her own.
  • Apply for your own benefits at 62, these will be reduced for filing early. At full retirement age apply for widows benefit, the widows benefit will not be reduced because she got her own benefits early.

Which is better will depend will usually depend on which gives the highest benefit after age 70 (i.e. if his PIA is more than her PIA plus the increased benefit for the maximum delay).

kitteh, you should consider the above. It is usually best to delay switching until you are 70 to get the maximum credit. If your mother was under 70 when the switch was made she probably benefited from the delay.
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Re: Advice for mother considering bankruptcy

Postby ddunca1944 » Sun Mar 24, 2013 7:16 pm

Default User BR wrote:
market timer wrote:My point is that after lawyer fees, time spent to declare bankruptcy, settlement amounts, and potential wage garnishment, there may not be much advantage to bankruptcy.

What wage garnishment? You declare bankruptcy your debts are wiped.

Frankly in her situation, it's unlikely that any CC company would be able to get a significant judgment. Really she's in bankruptcy already. The CC companies will harass for a a while, then write it off and move on.


Brian


Exactly. Bankruptcy damages your credit , but only for a number of years (7 I think). If she is being charged userous interest rates (20+%) I would have no qualms about doing so... It is entirely possible that she has already repaid the original debt..
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Re: Advice for mother considering bankruptcy

Postby kitteh » Sun Mar 24, 2013 7:22 pm

Epsilon Delta wrote:kitteh, you should consider the above. It is usually best to delay switching until you are 70 to get the maximum credit. If your mother was under 70 when the switch was made she probably benefited from the delay.


My late Mom was over 70, and lost by the delay, but thanks.

I've looked at the OP's updated credit card information in his original post. If I were his Mom, I'd pay off the small debt with 0% interest rate and then file for bankruptcy. According to several web sites, the combination of filing fee and attorney's fee would be about $2000. She would need to find a reputable attorney and ask for an estimate. I would also do this now before the hole got any deeper.
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Re: Advice for mother considering bankruptcy

Postby jon-nyc » Sun Mar 24, 2013 7:37 pm

The only advice I'll add is to ignore the people who are lecturing and moralizing and do what's best for your mom.
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