Sacrifice, Future, Family, Bankruptcy...

April 2, 2009 11:09 AM

I'm currently working on my MBA at a relatively prestigious business school and am coming to understand that my parents are in a grave financial situation that may lead to them having to file for bankruptcy. My father's been unable to get steady work for the last year or two and my mother's income isn't large enough to maintain the household and service their debt. In all likelihood they'll lose their house in two to three months unless something dramatic happens. I'm considering dropping out of school and returning home to help them weather the storm but I don't know a) if they'd be able to stomach it, b) whether I'd be able to find a job quickly enough to fend off the fallout, c) if I'm really serious about doing this, d) if this is the right thing for me to do, and e) what it'll mean for my future.

I'm really not too sure what else to write. I come from a pretty specialized professional background and have no idea whether I'd be able to get a compatible job back home. If you have any questions I'll try to elaborate so long as I can do so anonymously. I keep asking myself 'what would a man that I admire do in this situation' and have yet to come up with an answer....

posted by anonymous to education (18 comments total)

Even if you were to drop out of school and find work, why would you have to "return home" to do that? You can send them money from anywhere.

I think you should stay the course, and they should deal with their problems. Why jeopardize the whole rest of your life to deal with something that you probably can't fix, anyway? They need to restructure their life in a sustainable way, and depending on cash flow from you for an indefinite period should not be part of the plan. At the most, you could promise that once you have the MBA and are gainfully employed, you could contribute $x, a very modest sum, monthly to their household costs.

I'm assuming you're financially independent and that they're not supporting your schooling. If they are, that's obviously something to deal with right away.
posted by beagle at 11:17 AM on April 2, 2009 [1 favorite]

I'm sorry to hear that you're in this tough situation.

At least isofar as your MBA program goes, will they offer deferment? Many professional school programs will offer deferment (usually for at least 12 months) if you come up with a compelling reason.
posted by NucleophilicAttack at 11:18 AM on April 2, 2009

It might be possible to take a leave of absence and come back in Fall 2010.
posted by mrt at 11:19 AM on April 2, 2009

Can your parents afford, on your mother's income, and after unsecured debt is discharged in bankruptcy, a one-bedroom apartment in a safe neighborhood?

If they can, than your job is to help them make that transition. That's not a reason to drop out, that's a reason to take a few weekends off and help them figure out Craigslist, avoid being ripped off by landlords and brokers, and move their stuff (into a U-Hall for what can fit into the new place, down to the driveway for what has to be garage-sold).

Everything else -- the unpleasant bankruptcy process, the unpleasant foreclosure and/or eviction process -- is paperwork you can help with on the phone.

Whatever gap that might exist between your mother's take-home and a safe one-bedroom without unsecured debt in the way could hardly be more than a few hundred a month. If you don't have that in pocket, it's a part time job. If they desperately need you around, than they should move closer to you. (They clearly don't have much reason to stay if all they have to depend upon is a job which can't pay for a one-bedroom apartment...)
posted by MattD at 11:22 AM on April 2, 2009 [2 favorites]

How far are you into your program? Maybe a leave of absence is possible?
posted by anniecat at 11:32 AM on April 2, 2009

Unless they're going to starve, maybe you should finish your education and use the leverage from that to help your parents. They'll still have debt if you finish or not, won't they?

Dropping out and not finding a job would be bad for everyone.
posted by Phalene at 11:32 AM on April 2, 2009 [1 favorite]

How much help do your parents need, if they are close to losing they're house they must be in pretty deep, can your additional income cover that?

Only if you could get work and that additional income can pull them out would I think leaving school early, there's no use hopping on the Titanic just to bail water.
posted by bitdamaged at 11:35 AM on April 2, 2009

If you get your MBA, you'll potentially be in a better position to help them later, after you graduate. They may have a difficult year or two, but if they can get through that, things could be much better later.

Whether they can get through that depends on a lot -- their attitudes, health, ages, other resources. And, of course, if you are constantly worrying and guilt-laden it will be difficult for you to study. But if you all can hold out for a while, you could all be much happier later.

They may lose the house. Many parents would want you to stay in school anyway. Their dilemma might be "house" vs. "my son, the prestigious MBA" -- the latter can be so wonderful for them. Also, you'll be better able to provide for their future grandchildren, not only financially, but by being a fulfilled person.
posted by amtho at 11:37 AM on April 2, 2009 [1 favorite]

As per usual, have them speak with a bankruptcy attorney. They may be able to discharge a significant amount of debt and keep their house. People use bankruptcy colloquially to mean "completely destitute", but in actuality you can preserve some of your assets, including your house.
posted by electroboy at 11:43 AM on April 2, 2009

It's easy to justify staying put, and it is true that you'll be in a better position to help them after you finish your program. However, the situation as it is calls for immediate and drastic action. A friend I admire, faced with a similar choice, gave up his schooling for a year to help his mother out. It meant that he worked temp jobs for state government offices, but it also meant that he helped his mom through rough times in a city he didn't want to be in.

I'm all for being your own person and helping your parents later when it is convenient for you, but 1) if you can get a job quickly enough 2) to make a dent in their debt, the two conditions you laid out above, I think you should take the time off now. Even if you can't save their house.

Of course you don't know 1) or 2) until you start to look for a job. In the meantime you need to do what others have said 3) get a deferment, which shouldn't be difficult given you're in an MBA program that you payi for, unlike graduate programs that pay you and 4)help your parents prepare to move or sell items or put things in storage.

Your helping them make ends meet, and understanding the processes they will be going through over the next six-twelve months is crucial. Imagine how horrible your father feels about the situation, in a society that expects men to provide for their families. A full commitment from you to help them with no strings attached, for a set period of time, would mean the world to them.

And whether you hit the job market in one year or two or three doesn't really matter. In fact, you might be in a better position in a few more years down the road. All that matters is that you help your parents make this devastating transition. That's the hard choice and that's why is admirable.
posted by vincele at 11:54 AM on April 2, 2009 [4 favorites]

If your dad can't find a job where he is, what makes you think you can?
posted by electroboy at 1:20 PM on April 2, 2009 [2 favorites]

What a tough situation. It sounds like you yourself might not be clear on the exact details, like: Have they talked with a bankruptcy lawyer? Tried to negotiate with the lender? Really taken a hardline look at the budget and eliminated absolutely all nonessentials (cable, eating out, second car)?

Further, although it is a tough question to face, can your parents responsibly manage money on their own? Do they just need a little extra help over the next few months, or will you need to help them transition to a more frugal lifestyle? And if you make sacrifices for them financially, are they willing to be completely transparent about these questions and to follow the budget you lay out for them?

You need to have a very frank discussion with them before making any decisions, if you can I'd go home for a weekend to do so. But in particular, if they simply have no idea how to sort through their legal options, then you taking a leave of absence for a few months to do it for them might be a very good thing.

Also, it would really, really depend on the situation, but as an alternative to dropping out of school, could you take loans in your name to lend to them?
posted by susanvance at 1:29 PM on April 2, 2009

I don't know if folks here realize what "losing a house" means. It's happening so quickly to people that somehow "walk away from the house and move into a one-bedroom apartment" just seems so normal now. But that house could mean so much invested equity that it DOES make sense for him to take a year off, work wherever, and contribute as much as possible. If that means he can do it while living at home, finding a job that makes enough to make a difference, then so be it. If it means making more money elsewhere and sending cash home, then so be it.

Have we really come so far into prioritizing "don't be codependent" and "be an individual" that a son, in good relations with his parents, should not be connected to their survival anymore, save for helping with paperwork over the phone? There are other ways to be a family.

But there are SO MANY unknowns here that it's impossible to give advice. You need to talk to your parents about all of this.
a) I know this is scary. You have to decide if it's because you're so tied to them you can never do anything on your own (bad) or you realize a temporary halt in your education can help the overall wealth of your family (good). Besides, what newly-minted MBAs are making a fortune these days?? Not many.
b) figure out if you can defer for a year
c) Talk to your parents - find out really really what is going on financially - what are the payments, terms, and what is the gap?
d) If you decide to do this -- find a job BEFORE taking a leave from school. Then you're not unemployed and not in school.

I'm all for healthy boundaries and not making other people's problems your own. But I'm also all for various kinds of arrangements that work for different people in different situations. That's not hypocritcal - that's life. You will not be able to make a satisfactory decision before knowing what's on the table here - that's why you have to find out the school issue, what kind of money your parents would hypothetically need, and how long you'd expect this to go on.

Think to the future you: does this make you feel insanely resentful? Or proud and strong? Obviously you can't know what the future holds. But deep down does this feel like the right thing or just what you 'ought' to do? It might be a bit of both. Sometimes the hardest things in life are the most difficult to figure out ahead of time, but seem so obvious in retrospect.

Good luck.
posted by barnone at 1:38 PM on April 2, 2009 [5 favorites]

A previous comment made me think -- maybe you could offer to pay for a visit to an accountant or another financial advisor. They might not have the cash to do so, but a pair of new eyes over the numbers, options, terms, and financial habits might really be worth it for all of you to see what's going on. And definitely look into refinancing or talking to the lender.
posted by barnone at 1:41 PM on April 2, 2009 [1 favorite]

Students in professional programs sometimes have easy access to credit, because they are usually become high earners (this was the experience of a friend of mine in engineering -- he was amazed at how easily he was able to borrow large amounts of money). Perhaps you could take out a loan for your parents. In effect you're donating your future earnings. Then you focus on completing your program and making your earnings actually happen.
posted by PercussivePaul at 2:32 PM on April 2, 2009

Don't drop out. Do whatever you can while staying in school and finishing out your degree program. It's unthinkable to me that a parent would want their kid to forgo a prestigious education just because they were going through a rough patch. In fact, if you asked your parents what to do, I'm sure they would tell you that they'd rather you stay in school.

I'll go with MattD's suggestion upthread; if they can stabilize their situation such that they have a safe, comfortable place to live, then you should go on and finish your degree. You'll have a lot more to offer them in the long run.
posted by Afroblanco at 4:59 PM on April 2, 2009

I'd agree with PercussivePaul. I'm not sure what your debt situation is, but if its minimal you should be able to take out a line of credit or even a loan based on the fact that you are getting an MBA.
posted by captaincrouton at 9:40 PM on April 2, 2009

I would say first you do need to know what their financial situation is in very concrete terms. You say my mother's income isn't large enough to maintain the household and service their debt, but does that mean if the credit card debt was discharged she would be able to handle the mortgage? If so then your parents should definitely consider Chapter 7 (liquidation) bankruptcy. Depending on factors including their equity and federal or state exemptions, keeping the house is a distinct possibility.

Your parents should probably start with credit counseling such as CCCS (see numerous other threads). This is a non-profit that will help your parents determine whether they can repay their debts within five years if payments and interest are reduced. Only if this is impossible should bankruptcy be considered.

The other option is Chapter 13 (repayment) bankruptcy, the "wage-earner plan". Your mother's income might be sufficient to repay the debts at 0% interest, possibly not even repaying all of it depending on equity, debt, and income factors.

In any case, the plan forward needs to be determined before you quit your schooling and move across the country. Without a plan there's no clear way to judge whether your help is necessary or critical.
posted by dhartung at 10:48 PM on April 2, 2009