Relative Needs Money - What Would You Do?

[DustyMom]

Wow, I guess my situation really hit a nerve with a lot of you. Thank you so much for the advice and the support. I think I really needed to hear that we should not feel guilty for not wanting to offer up the "riches" we've accumulated through aggressive saving and living below our means over many years.


I want to rectify the impression that I may have given that these relatives are spendthrifts or deadbeats. I think their main problem has been getting in over their heads with a house back in the early 2000's. They've struggled to make the payments and in the process have neglected other debts which have continued to snowball. We did some searching of public records online last night and were dismayed (to put it lightly) at the extent of the problem. We are confident now that there is no way for us to help them out of the hole. I'm not even sure if they've admitted to themselves how bad the problem is (and I'm not even thinking of the hospital bills here). Outwardly they give the impression that they almost have it under control, just need a little help past a rough patch. I also think bankruptcy is their only option. We are meeting with them tonight (not looking forward to it) and we'll see if they actually have an action plan or it they are just waiting to find out if any of the various feelers that they've put out will result in a savior.


It is so painful because it is family that we love and dearly wish we could help, but we can't contribute to a lost cause.


Thank you all again for sharing your situations. We have to believe that they can emerge from these dark times in a better place, but I'm not sure they will be believing that anytime soon.

 

[exnavynuke]

That's a good approach, but …

Our ne'er-do-well relative asked (years ago) what he could do to convince us to help him. We spent a couple of weeks researching his situation and came up with a good plan for how he could get out of debt, restructure his business, and turn his life around. It would have entailed him making a few small sacrifices in the short term.

Took him out for a good meal at a restaurant he liked but normally couldn't afford. Over the course of the meal, DW started outlining the plan and we said we would cover his current debt if he agreed to follow the plan.

He got very indignant, told her to save her breath because he wasn't listening, and refused to even accept the sheet of paper with the plan spelled out. "You aren't smart enough to tell me how to run my life. I've told you what I need."

That was the end of that. As mamadogmamacat said, they have to be serious about changing.

I've loaned money to family twice. The first was to my sister to help her with college, she paid me back ~25% of it by the time she got married and I forgave the rest of it as a wedding present.

The second time was to my brother and his wife to help avoid foreclosure. The stipulations I had were:
1. First we would sit down and go through all of their finances to determine if they would be able to pay me back (their income situation had changed for the better, but they hadn't yet caught up).
2. The repayment plan included them following a budget that I established for them for the duration.
3. They gave me collateral for the loan (his old truck).

They never missed a payment and repaid me in full ahead of schedule. If their situation hadn't changed to make their budget affordable (the new job he'd recently got), then their finances wouldn't have allowed them to pay their bills and me and I wouldn't have given them the loan. It's not a loan if you're fairly positive they can't afford to repay it, it's a donation.

 

[Rustic23]

So an individual is going to pay someone (give them a gift) to maintain a relationship? Personally, I wouldn't want to maintain a relationship with a family member or friend who didn't "try" to repay a loan I made to them.

While I agree with you, I disagree. Go Figure! I really want the money repaid, and I really think it should be. However, I know it won't. It may be hard for someone to understand, but, if you give it, you never really expect it back. Somehow, for me, that lets me rationalize the situation. If I lend it, I expect it back. I recently gave a relative $4,000. Several weeks later that turned out not enough and they ask to borrow $1,000 more. While I did not say it was a gift, we sent them the money. In our eyes, and in theirs it is different. There was suppose to be a quick repayment in total. That has changed to half now half later, and now down to 20% now and some sort of payment plan. I know it will not be repaid in full. I think they know, and it hurts the relationship on both sides. It's not that the don't want to pay it back, they just can't! 70+, looking for a job, living on some form of SS.

If there are no easy answers to complex problems.

 

[ImaCheesehead]

Hey there Dustymom. You have gotten fantastic advice and I have nothing to offer that would have a different pov so lets talk about something more fun for a moment.

You have sold your house and are waiting for your motorhome to be delivered. ME TOO! I am assuming you will be full timing if you don't have a S&B any longer. ME TOO! Our Newmar Dutch Star is in paint right now and we start our new lifestyle next month.

I just want to offer you my best wishes as you start on your new adventure. I think that sometimes we can feel a bit guilty over our "good fortune" when someone close is struggling. You worked for it, it didn't just happen out of the blue because you are lucky. Help your family by using your planning and organizing skills to put them in contact with the right resources, then enjoy the life you have set up for yourself.

 

[Hermit]

Very tough place to be and there can't be ONE right answer for this. I'll just add, from my own painful experience, that loans to family members more often than not ( FAR more often than not), don't turn out to be "loans" at all, but rather they are "gifts". I don't think I'm unique in this, but I have never been paid back by relatives for personal loans - no matter whether they could, or could not afford to pay it back. So, whatever you decide, consider your money gone! If you can live with that and still want to help, then go ahead. If you can't afford to lose the money, don't lend it out.

+1 I have agreed to lend $6k to a friend. He has set up an automatic payment from his bank to repay it. If he does not pay it back, there will be no more financial assistance. From my perspective, that would not end our relationship, but I am in a position where this loan would not affect me financially. I have had this approach to lending money my whole life. Sometimes I am repaid, sometimes not. I have never lent money where it was a financial burden to me.

As an interesting side note, many years ago FIL (an alcoholic) spent quite a bit of time telling me about all the people who had lent him money and that he had never paid them back. He then asked me for a loan. I turned him down. He never asked again. I must say, he was quite up front about his intentions.

 

[brett]

It is actually not a lost cause.

Bankruptcy will be a way for them to shed their encumbrances and have a fresh start. After all, some famous and successful politicians have followed this course of action...numerous times.

So turn this situation on it's head. Instead of looking at it as a disaster look at it from a different lens. A chance to really move forward instead of being mired in the current situation.

 

[FANOFJESUS]

I have found that people who want to borrow money always want to borrow. Their "needs" seem to be unending. A lot of times they seem to be people that do not want to cut their lifestyle. So I stay away from it.

 

[daylatedollarshort]

One thing I would keep in mind is if one or both of these relatives passed away, after it is too late to help, would you feel good about what assistance you tried to offer or experience regret? This actually happened in our family, and I think some family members felt afterwards that they should have done more to help while the person was alive. I was glad I had been helping out, even though it wasn't a huge dollar amount - just being a sounding board, offering budgeting help, buying groceries, checking into social services, etc. I'm not saying in this case you should help, as only you know the full circumstances, but if something happened and you would feel guilty, then for your own peace of mind if nothing else I would provide some help now before it is too late.

 

[Sunset]

......
I want to rectify the impression that I may have given that these relatives are spendthrifts or deadbeats. I think their main problem has been getting in over their heads with a house back in the early 2000's. They've struggled to make the payments and in the process have neglected other debts which have continued to snowball. We did some searching of public records online last night and were dismayed (to put it lightly) at the extent of the problem. We are confident now that there is no way for us to help them out of the hole. I'm not even sure if they've admitted to themselves how bad the problem is (and I'm not even thinking of the hospital bills here). Outwardly they give the impression that they almost have it under control, just need a little help past a rough patch. I also think bankruptcy is their only option. .......

From the original post, where you stated they had no health insurance and no disability insurance (which by the way is cheap) certainly sounds like they like to spend beyond their means.

I also have a relative who spends beyond her means, never a thought to saving 10% of income for the "rainy day" even when it was an inheritance.

This same relative also got into money troubles, and I find out when the bank refused to renegotiate the mortgage, as she wanted to pull out money from the house to pay off her credit cards of $30,000.

Jump ahead many years, and she told a friend she only owed $100 on her new credit card, when it turned out that was the minimum payment and she really owed $5,500

The common theme, is grasshoppers magically forget about debt & bills they owe, thinking of only the most recent one.

Bankruptcy is the only solution, so don't lend them money as it will only be lost in bankruptcy.

They should also not pay their bills with 401K/IRA money as these are protected from bankruptcy, but chances are they never saved into a 401K/IRA anyhow.

 

[braumeister]

she told a friend she only owed $100 on her new credit card, when it turned out that was the minimum payment and she really owed $5,500

Wow! That is a classic.

 

[Souschef]

I have a cousin, who is financially irresponsible. They burned through almost $1 M in inheritances.
My dear BIL sat down with them to try and work out a budget, but they cannot make ends meet.
I have absolutely no pity for them. I have saved all my life, and am enjoying the fruits of it now. There is no way I would loan them money or give them a dime.
I know that may seem harsh, but I refuse to help support their reckless lifestyle.

 

[karen1972]

Personally, i would have them file bankruptcy if that is really where they are at, then I would give them a specified limit to get back on their feet and help them in the minimum needed to have a roof over their head, food, medical bills if it required becoming employable again. I will help you out for x amount of time. You could rent them an apartment for a year, give them some stipend for food...and thus limit your bleeding. They will be angry no matter what you do, but they will survive and hopefully learn from it.

Ive taken people through this process, with the debt off their backs they could then use their limited resources to get back on their feet. I wasn't throwing good money after bad, no reason for me to give money that is just going to a creditor. Keeping a home they cant afford, cars they cant afford, etc is just not helping them. I had them create a reserve and once they had some money set aside they stopped hating me and realized it was nice to not have the burden, fear, etc. If they didn't get to that point, I personally felt our relationship was doomed anyway. Tough love sucks, but its not kind to have people live a life of constant unthinkable stress because they fail to admit how bad it is.. if they can't be honest with themselves, they will NEVER change or dig themselves out. They are likely not sleeping, likely fighting, likely freaking out.. ripping the bandaid off is terrible, but necessary.

 

[ivinsfan]

What is the definition of a deadbeat OP? If you pour money into a house you know you can't afford and go without health insurance, it's almost a given that bad things are going to happen. So they owe people and businesses money that they can't pay back? Sorry to me that's a deadbeat especially since it's been going on for 15 years.

This reminds of my step-nephew when he was fired from his umpteenth job because of repeated warnings about lateness. The day he got fired, he actually had a flat tire and he couldn't believed he got fired over that because "it wasn't his fault he was late that day".

 

[stephenson]

Couldn't help reading this thread

As noted, this is no win.

Recommendations:
- play loan company not loan relative by insisting on being a formal lien holder of whatever they have (ex: house, cars, etc - you probably will be number two in line) ... if they have nothing of value, definitely say no
- if you don't like the sister, simply demur and say sorry your money is in CDs, offer to break them but let them know the penalty will be added onto what they owe you
- have a formal contract for whatever you do - let them know they will have to pay for the attorney to draw it up
- charge them 12% per year interest, noting it is better than the credit card rate (but, still have formal collateral documentation)
- delay and hope the house sells, the grab the RV and leave
- be a good relative and offer to provide food and good financial advice
- DO NOT LET THEM MAKE YOU FEEL GUILTY


Jeez .. I hope this never happens to me .... sheesh ...

 

[Mdlerth]

People are awesome!

I definitely feel for you. BTDT. We have a relative who has also been digging himself deeper and deeper into the hole for many years, and we have helped out many, many times.

Last time he came to us for a loan of $X, offering some collateral we have no interest in.

We agreed, after an agonized debate ($X was a large sum). Then the fun began. It turned out that he actually needed $2X, and had a friend who was going to put up the other half. Then the friend backed out and we needed to put up the whole amount.

Then there were a lot of associated expenses he hadn't mentioned, and what he needed was actually $3X. By the time the actual deadline was approaching, he knew we had lost faith so he had his lawyer call us (several times) and literally beg us to put up the $4X that would really fix the problem (for now), and by the way, could we make it $4.5X so he (the poor lawyer) could get some payment out of this for all the work he had done.

It wasn't easy, but we stiffened our upper lips and said we just could not help this time. Weeping, wailing, gnashing of teeth.

Next month, we found out that he was able to get the loan from someone else who actually appreciated his collateral. He has little chance of ever paying back the loan, so he will lose the collateral, but he'll survive.

This was brilliantly written! The subject of this thread is a discouraging one, to be sure. All the more so because it seems to be so common. But your description of the escalating demand is pure gold. You even close the anecdote with an ironic twist. Well done. Worthy of P G Wodehouse!

Too bad about your errant relative, but sometimes the only thing to do with a crazy painful situation is fall back into your chair and chuckle over the absurdity of the universe.

 

[braumeister]

Thanks, but every word of it is all too true.

 

[Mdlerth]

Thanks, but every word of it is all too true.

Which is why God, in His mercy, gave us beer. Let us toast our feckless families and continue to love them in hopes that someday they get their acts together!

 

[aja8888]

As I am sitting here reading all these stories and feeling for the OP, I am reminded that I told DW that we are no longer going to pay the rent and medical bills for her daughter (my stepdaughter "Kim").

Kim is 49 years old and walked out on her husband of 22 years 4 years ago. And walked out with nothing except for the clothes on her back and her pickup truck. She "walked out" because of a new "man" in her life that she met in a bar that catered to Packer's fans (long story here).

Now, I don't know the gory details of the separation and resulting divorce 4 years ago, but DW felt obligated (motherly?) to help her daughter. Help, meaning us paying her lawyer and other expenses getting started over with "Bill" (the new guy). Unfortunately, Bill turned out to be a Dud, and left Kim in an apartment that her job could not support two years into the affair. (I found her that first job as she had never worked while being married and had no marketable skills or experience)

Our "help" to KIm (thousands $$) has been off and on for the last four years and we have found her jobs and paid for vehicles (three wrecks in there). Plus, she has moved into our home twice between jobs.

This month is the last month of any financial support. I hope she takes the cue and gets on Medicaid if she can't find a job with insurance and moves in with her real father (who has been absent on this whole matter). My relationship with DW has been stretched thin over this ongoing support as Kim has not felt the pain of starting over and sees us as a backup. Kim is not "friendly" with me at the moment, but I could care less.

The sad part about this is that DW's other two children have been on her about continually "enabling" Kim and that she should quit providing monetary support.

Seems like we all have some kind of story to tell about the OP's subject matter.

 

[Teacher Terry]

We have lent our kids $ and have always been paid back. We have also gifted them $. My DH lent 1k to a friend that had always been poor but managed to make ends meet. Then their trailer gets flooded and they lost everything so he loans them 1k. I don't expect to ever see it since they are poor. However a few years later they invite us over for a steak dinner. During the dinner they reveal that they won 50k the year before. I was furious and had trouble finishing dinner and then made an excuse to leave. That ended our friendship. One of my sons borrowed 5k about 3 years ago and then made a few payments and stopped. I told him I was subtracting all his birthday and xmas gifts from the balance. But a few years later I feel resentful so I call him up and tell him I want 50/month until it is paid. He put it in bill pay and is steadily paying. I felt it was the principle because I had not offered to gift it to him. Anyways our relationship is great again and it is better for him to follow through on his promise. In the past he had so not sure what was different this time.

 

[Texas Proud]

Wow, I guess my situation really hit a nerve with a lot of you. Thank you so much for the advice and the support. I think I really needed to hear that we should not feel guilty for not wanting to offer up the "riches" we've accumulated through aggressive saving and living below our means over many years.


I want to rectify the impression that I may have given that these relatives are spendthrifts or deadbeats. I think their main problem has been getting in over their heads with a house back in the early 2000's. They've struggled to make the payments and in the process have neglected other debts which have continued to snowball. We did some searching of public records online last night and were dismayed (to put it lightly) at the extent of the problem. We are confident now that there is no way for us to help them out of the hole. I'm not even sure if they've admitted to themselves how bad the problem is (and I'm not even thinking of the hospital bills here). Outwardly they give the impression that they almost have it under control, just need a little help past a rough patch. I also think bankruptcy is their only option. We are meeting with them tonight (not looking forward to it) and we'll see if they actually have an action plan or it they are just waiting to find out if any of the various feelers that they've put out will result in a savior.


It is so painful because it is family that we love and dearly wish we could help, but we can't contribute to a lost cause.


Thank you all again for sharing your situations. We have to believe that they can emerge from these dark times in a better place, but I'm not sure they will be believing that anytime soon.

It sounds like they bought too much house and during the crisis the value dropped and put them under water.... yet, like many, they were not willing to cut their losses and move out.... now they have compounded the problem by allowing many other debts to grow to an unsustainable level... if this is the case then they need BK to fix the problem... and if the house is still a huge burden (which I think it would be since nothing has changed) they need to move... remember, no equity in the house means they are not losing anything.... except the large house payments...

 

[Hermit]

... My DH lent 1k to a friend that had always been poor but managed to make ends meet. Then their trailer gets flooded and they lost everything so he loans them 1k. I don't expect to ever see it since they are poor. However a few years later they invite us over for a steak dinner. During the dinner they reveal that they won 50k the year before. I was furious and had trouble finishing dinner and then made an excuse to leave. That ended our friendship...

One thing I have noticed in quite a few people that are the type to ask for a loan is when you lend them money once that money is in their hands it is their money, not yours. Paying you back is not really in their interest. They "know" you are much wealthier than they and so it only makes sense that they keep "their" money. If it bothers you that someone will not pay back a small loan, I would suggest you not do such loans. I am quite sure the only one who lost sleep over it was you.

 

[Texas Proud]

I have a cousin, who is financially irresponsible. They burned through almost $1 M in inheritances.
My dear BIL sat down with them to try and work out a budget, but they cannot make ends meet.
I have absolutely no pity for them. I have saved all my life, and am enjoying the fruits of it now. There is no way I would loan them money or give them a dime.
I know that may seem harsh, but I refuse to help support their reckless lifestyle.

One of the problems with the approach of making a budget.... they do not WANT a budget.. that would mean they cannot do what they want to do...

I know the sisters of my best friend.... one of them has been in financial trouble many times... I have listened to her stories and suggest that she keep track of her expenses for 3 months and we can talk about a budget... well, NOOOO.... that will not 'fix' my problem of me being evicted and the car being repoed.... but I say 'nothing is going to fix it if you do not change'.....

Funny thing is that her mom has called me a number of times asking me what I thought.... as SHE did not want to lend money to her since she knew it would never be paid back and her DD would be in the same situation sometime soon... it was a recurring theme....


The only good thing on this is she moved in with her ex-husband since he was having medical problems and needed help... so she has a place to live and food.... have no idea about debts....

 

[haha]

I think the best thing you can do is help them seek out social services.

I did this for (to?) a cousin who actuality had worked all her life (she was about 55 at this time). But she was always maybe marginally sane, and it got the better of her. She could no longer hold what had been a pretty good job. So that part is ++ in her ledger. But she also always spent money like water., and I think, hey, I don't do that, and while I will spend brain power and some social working to find what is out there that I am already paying for via taxes that she or no one of us has ever done other than compulsorily support, time to make some withdrawals from that bank. It worked, not to get her back to work which is likely no longer possible, but to keep her from sleeping on the street.

I feel for your dilemma, it stinks.

Ha

 

[haha]

My relationship with DW has been stretched thin over this ongoing support as Kim has not felt the pain of starting over and sees us as a backup.

This is the heavy part. Good luck at getting things back to smooth between you two.

Ha

 

[Teacher Terry]

HA, when someone has a long term MI it often ends in the way you explained where eventually they can no longer work. They usually are able to get SSDI, low income housing, etc and survive. It is sad because it is not their fault but just life and the genes they were born with. So glad that you helped her.