Need Help for a long time friend with spending issues.

[ivinsfan]

Sunset you get it. Everything you said is true.



His childhood was not so much poor. He had a mentally troubled Mom that denied basics to her children so she could save the money for herself. Even food sometimes, Dad looked the other way. When Mom was around 50 she left Dad bought a new house for cash out of her cookie jar. I have great compassion for him.



As to reverse mortgage his asked about it but you can't get one without a current tax return.

Almost all government programs require some sort of tax return for income verification. He hasn't filed since 2015

 

[ivinsfan]

I understand. I was just spouting off a little in disbelief. It sounds like it is going to end badly for him. good luck

Believe me, every rational person has the same solution the two of us have.

 

[ivinsfan]

I feel bad for you trying to help with something that likely has no good solution, but other than what others have already suggested I can't think of anything additional. Just keep self-preservation in mind so you don't get sucked into the mental abyss yourself trying to help someone who is not yet ready to accept the help that is needed.

That's the irony, there is a good solution sell the house, get money, find smaller place to live. He's technically not destitute he 's just resistant to the only solution.

 

[pb4uski]

He needs a big reset. Sell the house and the truck and he'll have $550k after selling costs (I assume that the truck is worth the personal loan so that is a net zero).

$550k could buy a single life SPIA of $2,657/month per immediateannuities.com. Add in $800 for SS and that is $3,457 a month of income with a small part of it inflation protected... but it should be enough for him to rent a low-income senior apartment and get by.

Separately, he needs to figure out how much it would cost for him to settle his debt with the IRS. First step is to go back and create returns to see how much he owes with underpayment penaties added in.

I would not give or lend him any money. He's a grown man with mental issues and needs to experience the consequences of his past bad acts if he is to have any prayer of setting himself straight.

Tell him that you'll be glad to help him sell the house and the truck and find replacement transportation and get settled into a low-income senior apartment as first steps.

If he balks at that then tell him that if he's unwilling to to those basic things to help himself that there isn't anything that you can do to help him and walk away.

I put into FIRECalc a $550,000 starting portfolio, 25 year time horizon, $9,600/year of SS and 60% equities portfolio and solved for 95% success rate spending and it was only $33,661/year.

 

[ivinsfan]

pb4 that's the ideal outline. We actually have another mutual close friend who is divorced and lives alone in a big newish house in Iowa. He's willing to room with broke friend for a nominal rent. We've done everything possible it make it work.


re.. the taxes they wont be horrible because for the last 2 years he's had no income except his SS...

 

[CardsFan]

$550k could buy a single life SPIA of $2,657/month per immediateannuities.com. Add in $800 for SS and that is $3,457 a month of income with a small part of it inflation protected... but it should be enough for him to rent a low-income senior apartment and get by.

This looks like the perfect case for a SPIA. No heirs, will spend what he has, so investing is not a great solution.

$3,500/month sounds like he could live reasonably well, if he is frugal.

That said, I don't see it happening. Sorry.

 

[Sojourner]

That's the irony, there is a good solution sell the house, get money, find smaller place to live. He's technically not destitute he 's just resistant to the only solution.

I once "loaned" a very cash-strapped friend who was heavily indebted (credit cards, 2nd mortgage, etc.) around $5,000 to get him through a really rough patch. Long story short, I never saw that money again and he ended up declaring bankruptcy and losing everything... house, car, family, job, dignity, etc.

In your shoes, I would not loan or give your friend any money. It will not help. The best help you can provide is to sit him down, go through all his financial options with him—very calmly, logically, matter-of-factly—and mutually decide what makes sense. Assuming he has some level of intelligence and rational thinking ability, you can probably make him see the inevitable ruin that is barreling down upon him unless he takes action (like selling the house). On the contrary, giving him money is just like giving a hard-core opioid addict another handful of pills. It may feel good in the (very) short run, but it does nothing to truly help them.

 

[ivinsfan]

This looks like the perfect case for a SPIA. No heirs, will spend what he has, so investing is not a great solution.

$3,500/month sounds like he could live reasonably well, if he is frugal.

That said, I don't see it happening. Sorry.

Even if he bought it, remember there are places that will cash them out for you.

 

[pb4uski]

imho: best possible scenario for your friend (if not for us) is to declare bankruptcy and discharge all Debt. As much debt as possible. That is the American way. For good or bad. ...

That doesn't work because he isn't bankrupt yet... he own's a house free and clear worth about $600k and the truck and doesn't have any debt other than the personal loan for the truck.... so his net worth is probably over $500k ignoring any debts to the IRS.

I doubt he would be bankrupt even after considering the IRS debt (unknown amounts).

 

[pb4uski]

Even if he bought it, remember there are places that will cash them out for you.

True, but there is only so much that one can do.

He could request a guardian for his financial affairs so he wouldn't be able to sell the SPIA (think Brittany Spears lack of control over her finances).

 

[Sojourner]

I would not give or lend him any money. He's a grown man with mental issues and needs to experience the consequences of his past bad acts if he is to have any prayer of setting himself straight.

Tell him that you'll be glad to help him sell the house and the truck and find replacement transportation and get settled into a low-income senior apartment as first steps.

If he balks at that then tell him that if he's unwilling to do those basic things to help himself that there isn't anything that you can do to help him and walk away.

+1000

 

[tulak]

One thing to keep in mind is that you don’t have to do anything. If I was in your situation, I would tell him I don’t want to talk about his financial problems. You gave him solutions years ago and he failed to listen. Talk about any other subject with him, but not money.

You can reiterate - and I’d only do this once - what he should do, sell the house, etc, but if he doesn’t do that, it will end bad. Tell him you don’t want to see that outcome, but giving advice is all you’re willing to do and only if you see him taking responsibility. Otherwise talk about something else.

You’re a good friend for trying to help him
and I hope it works out ok.

 

[pb4uski]

pb4 that's the ideal outline. We actually have another mutual close friend who is divorced and lives alone in a big newish house in Iowa. He's willing to room with broke friend for a nominal rent. We've done everything possible it make it work.


re.. the taxes they wont be horrible because for the last 2 years he's had no income except his SS...

I was going to suggest that he share an apartment, but what you wrote about your mutual friend sounds even better for him. And kudos for your mutual friend for being willing to help.

I have a friend who plans to retire soon who I am concerned for but he is a bit better off than your friend. He'll have SS, a paid off duplex house that he rents one unit and rents a room to another friend and about $75k of savings. Saving grace he is pretty frugal and more LBYM than your friend. Still, it looks like a skinny retirement to me.

 

[rothlev]

I imagine he owes the IRS bundle.

Unfortunately even if he sold his house and paid off his debts, it doesn't sound like he'd change his ways. I imagine he'd p*ss through the balance. I wouldn't enable him. Time for tough love. An occasional free meal along with the tough love and send him on his way.

IRS normally has 10 years to collect. However if he Never filed in the first place the 10 year clock probably never started. In any case, he can plead uncollectible status with them.

However once he sells the house and has cash they will go after it unless that 10 year clock has run out.

 

[RetiredAndLovingIt]

Maybe you can check local rental prices and even look at a couple with him so he will have an idea what he will need to pay for a decent but affordable place. He's probably terrified that he will end up homeless if he sells but he also needs to understand that and he may well end up there if the house gets taken away and sold at auction for a fraction of it's worth. Does he even need the truck, does he go anywhere? if not get rid of that as well.
Of course he will also need someone to manage what money he ends up with after his debts are paid off or he's liable to blow that as well. I hate annuities but this guy sounds like the kind of person that might benefit from a guaranteed monthly income.
The resource list that was already suggested is a great idea.
Bottom line, help him all you can with advice but make it clear loaning him money will only delay the inevitable and it's time to put on his big boy pants and deal with the problem he's created.

 

[skipro33]

This friend needs professional help and you suspect your version of help may cause him more harm than good when you say you might be enabling him. Trust your gut. Help him find professional help and leave it at that. Financially, you might offer to assist paying for the professional help, but to give this spending junkie money is like giving prescription pain killers to a drug addict. It could just drive him further away from recovery.
I'm surprised he hasn't gotten in with loans from the wrong crowd, if you get my drift, and end up with broken body parts or worse. Or that he hasn't gone into crime to cover his debts. He just might you know. Maybe he's good at hiding those sorts of behaviors.

Hope you are able to find him the help he needs and are able to let go of trying to fix someone who needs more than you could ever offer.

 

[aja8888]

I imagine he owes the IRS bundle.

I will bet the IRS already has a lien on the house.

 

[ivinsfan]

I will bet the IRS already has a lien on the house.

Well who knows he has piles of unopened mail from the IRS and MN dept of revenue. If we help short term with any bills opening this mail will be the first order of business

 

[Amethyst]

My fear for you, OP, is that your friend is no longer really a friend, and sees you as an enabler rather than a genuine pal. My fear is he will nag, cry, and play on your feelings of pity and guilt, until you hand over some money to keep him quiet. Then he will be so grateful, until he needs another handout.

I hope I'm wrong, and he has more human decency left than that. But if it does play out that way, you need to harden your heart, because it would mean he is not really your friend any more.

 

[yhoomajor]

That doesn't work because he isn't bankrupt yet... he own's a house free and clear worth about $600k and the truck and doesn't have any debt other than the personal loan for the truck.... so his net worth is probably over $500k ignoring any debts to the IRS.

I doubt he would be bankrupt even after considering the IRS debt (unknown amounts).

I'm not very familiar with Bankruptcy process (in general), but have seen reports that different states have different exemptions.

https://www.nolo.com/legal-encyclopedia/how-to-file-bankruptcy-in-iowa.html#6

Iowa Bankruptcy Exemptions
Here are some commonly used Iowa bankruptcy exemptions. Iowa adjusts its exemption amounts from time to time, and additional exemptions exist. Check for changes on the Iowa Legislature website.

Iowa Homestead Exemption
An unlimited value in one home or a one-unit apartment. Property located in a city or town is limited to one-half acre; forty acres elsewhere. (Iowa Code §§ 561.2, 561.16, 499A.18)

Iowa Motor Vehicle Exemption
Up to $7,000 in a motor vehicle. (Iowa Code § 627.6)

A good bankruptcy attorney may be valuable to help this guy stay in his house and discharge debt (as much as possible).

 

[aja8888]

Well who knows he has piles of unopened mail from the IRS and MN dept of revenue. If we help short term with any bills opening this mail will be the first order of business

Good luck with helping your friend. It seems like a desperate situation. But that house needs to go and he needs professional help.

The house we tried to buy 5 years ago was in an estate, and the son of the parents who passed had taken some big personal loans out for a business that eventually failed. When we were in the title checking process for the purchase of the house, the title check indicated the IRS had placed a lien on it for the son's debts.

 

[pb4uski]

I'm not very familiar with Bankruptcy process (in general), but have seen reports that different states have different exemptions.

https://www.nolo.com/legal-encyclopedia/how-to-file-bankruptcy-in-iowa.html#6

Iowa Bankruptcy Exemptions
Here are some commonly used Iowa bankruptcy exemptions. Iowa adjusts its exemption amounts from time to time, and additional exemptions exist. Check for changes on the Iowa Legislature website.

Iowa Homestead Exemption
An unlimited value in one home or a one-unit apartment. Property located in a city or town is limited to one-half acre; forty acres elsewhere. (Iowa Code §§ 561.2, 561.16, 499A.18)

Iowa Motor Vehicle Exemption
Up to $7,000 in a motor vehicle. (Iowa Code § 627.6)

A good bankruptcy attorney may be valuable to help this guy stay in his house and discharge debt (as much as possible).

Fair point... I was focused on that his net worth wasn't negative and forgot that they exempt some assets. Usually you file bankruptcy because some creditor is chasing you and it sounds like that is not the case yet with the OP's friend but will likely happen soon between $500/month personal loan payment, property taxes on the house, tax debt, etc.

I guess if he could use bankruptcy to try to have the personal loan and tax debt discharged and retain the house and that might help slightly but he would still have to eventually sell the house because he doesn't have the income to afford to keep the house. I think the increased housing costs during the period of bankruptcy would likely exceed the benefit of bankruptcy.

And bankruptcy could take years. I still think he is better off to sell the house and the truck and try a fresh start quickly rather than use bankruptcy and the stress that bankruptcy would cause and the time that it would take.

 

[ivinsfan]

My fear for you, OP, is that your friend is no longer really a friend, and sees you as an enabler rather than a genuine pal. My fear is he will nag, cry, and play on your feelings of pity and guilt, until you hand over some money to keep him quiet. Then he will be so grateful, until he needs another handout.

I hope I'm wrong, and he has more human decency left than that. But if it does play out that way, you need to harden your heart, because it would mean he is not really your friend any more.

Point taken and to this point we have given no money. Well once my husband put 50 bucks in a cookie jar in case his CC got closed.



At this point most likely one of two things will happen. Our friend from Iowa and my DH and I will sit with this friend over the weekend.



The 3 of us are in agreement we will lay out what needs to be done and offer whatever help we can(not money). We will be persistent and keep it real, won't listen to friends excuses.



Some things we say might be hurtful to the friend but we are past sugarcoating the situation.


At the end of it, our friend will either accept our help or be angry and upset and cut us off. I am willing to accept either outcome.


We will buy our friend some groceries, fill his truck with gas and get his phone paid up. After that it's all up to him. We have a deacons fund at church and our minds this is no different then the money we donate to the deacons to help people with problems.


You all have given me clarity that no government assistance program will really help my friend and will contribute to his delusion that he can keep his house. If he lists and begins the process of selling we will encourage him to list some of his better things on Craigslist as he will need to downside anyway. If he does this we will fill the gaps money wise until his house sells.



He's been a good friend to us and we'd like to see this end well for him. I understand there are mental health issues at work here and it could be one step forward and two steps back, but we need a big step forward at this point or I need to check out for my sake. I can do that without guilt after our talk this weekend. Anyway I hope I can.

 

[yhoomajor]

Fair point... I was focused on that his net worth wasn't negative and forgot that they exempt some assets. Usually you file bankruptcy because some creditor is chasing you and it sounds like that is not the case yet with the OP's friend but will likely happen soon between $500/month personal loan payment, property taxes on the house, tax debt, etc.

I guess if he could use bankruptcy to try to have the personal loan and tax debt discharged and retain the house and that might help slightly but he would still have to eventually sell the house because he doesn't have the income to afford to keep the house. I think the increased housing costs during the period of bankruptcy would likely exceed the benefit of bankruptcy.

And bankruptcy could take years. I still think he is better off to sell the house and the truck and try a fresh start quickly rather than use bankruptcy and the stress that bankruptcy would cause and the time that it would take.

Right.. that's what a normal person with healthy thought process and decent mental health would do. Which is to downsize and pay back the debt.

But there is a possibility here that this person has mental health issues and probably depression (buying expensive truck when broke is a symptom of that... although folks may not agree on this).

Very likely . IRS and some other agencies/companies may be eyeing to get a bite out of his money... but there are programs by these agencies to help people in such scenario. And formal bankruptcy helps in those situations as well.

 

[RunningBum]

I am no psychologist nor social worker, but it sounds to me this is a case of a mental problem that manifests itself as a financial one.

More money will not help the root cause.

Right. And I think this may not be a very good place to ask because people like us can't comprehend such a spending problem, so we don't know how one would deal with it.

One idea, is he the type of person who would honor an agreement he signed? If so, you could write up something that says you'll help but he'll have to abide by your decisions, and sign it. Then, of course, get the house sold. And come up with some plan to keep him from blowing through those proceeds.