My In-laws are sinking and pulling my family under.
January 24, 2012 6:09 PM   Subscribe

My in-laws are broke, bankrupt, and have massive car payments. How can we help dig them out of this smoking crater without falling in?

My in-laws are in their early seventies and have never been good with money. Three years ago, they filed for bankruptcy in the wake of a foreclosure on their condominium. Two years ago, post-bankruptcy, they traded in their not-yet-paid off cars in for two fancy sedans, with a monthly payment of over $500 for each car, on a 60 month loan at 0%.

Fast forward to today, they're broke, my father-in-law is unemployed, and my mother-in-law got her hours at her part-time retail job cut to almost nothing. With my mother-in-law's wages plus their social security payments, they can barely scrape together enough money to cover the rent, let alone $1000 dollars worth of car payments.

I want to help them get rid of these cars and get them something reliable used for cash, but the options seem limited.

The remaining balance on each car is over 20,000 dollars. I would say they should do voluntary repo but blue book on the cars is significantly below the remaining balance and they'd be on the hook for the difference. I can't help them cover the difference without digging deeply into my own emergency reserves, and as it is not my debt I am unwilling to do so (and I'm feeling guilty about this).

It's been less than seven years since their last bankruptcy, so I can't see any way for them to escape this unsecured debt. If the lender gets a judgement to take money out of their social security or my mother-in-law's paycheck, they'll be unable to pay their rent.

Currently I'm giving them money every month to cover the rent but the gap is getting wider and I don't know what to do. I'm angry and frustrated and I would love to wash my hands of the whole situation, but they are my daughter's grandparents and aside from their horrendous financial irresponsibility they've always been very kind to us.

Help. I feel like I'm drowning.
posted by anonymous to Work & Money (15 answers total) 5 users marked this as a favorite
A Chapter 13 bankruptcy is a possibility here. It is a repayment plan, rather than liquidation, but it will reduce their debt payments to something they can afford.
posted by notme at 6:18 PM on January 24, 2012 [2 favorites]

Social Security benefits can't be garnished by lenders. I believe they can only be seized by the government.
posted by dcjd at 6:29 PM on January 24, 2012 [2 favorites]

Sell one car. It will help with the debt and will reduce what they are paying in car insurance and upkeep.

The older they get, the worse this will get. At their age, they are not going to learn from their mistakes. Any money you use to help them out will be wasted because they will just keep doing this stuff. Is it just one of them that makes these bad decisions or is it both of them? Can you get them to agree to consult with you before making any more decisions?
posted by myselfasme at 6:32 PM on January 24, 2012

Sell both cars and get a Honda Civic, which is cheaper to maintain.
posted by rhizome at 6:42 PM on January 24, 2012 [2 favorites]

Instead of giving them money, could you give them some good personal finance books like Your Money or Your Life, or Dave Ramsey's Total Money Miracle, or whatever you think might resonate with them? Or if you can't bring yourself to stop giving them money, maybe ask them to read the books as a condition of getting the money? (it sounds kind of patronizing, but then again what they are doing is very inappropriate)

I agree with the folks above who say this is only going to get worse and that tough love might be the only way to get them to realize they need help and prevent them from getting into trouble that you won't be able to save them from. The car thing is only a symptom of a widespread problem. They have to understand how they are hurting themselves and have the self-motivation to change, so it's going to be a challenge.
posted by treehorn+bunny at 6:45 PM on January 24, 2012 [1 favorite]

Would it be possible to build a tiny house on your property and let them live there rent free. And then when, god forbid, they pass on you could rent it out for income.

And just get rid of the cars any way you can. If they lived in your rental it wouldn't matter what their credit is like. So you wouldn't have to do things just to protect what credit rating they have. I'm saying you may have to get them off the grid.
posted by cda at 6:50 PM on January 24, 2012 [5 favorites]

If it were me, I'd agree to pay for some professional financial advice (lawyers, accountants, whoever) and nothing more until they take you up on your offer. Professional advice is really what you need to get them out of their situation. They are not suffering because of problems that are out of their hands; their own very clearly bad decisions led them to be in this situation. Therefore you should not feel guilty if you want/need to stop giving them financial support. In fact, I would stop, because you are sending them the message that they can rely on you for support if they get into (even more) trouble. And this kind of thing can't be sustainable for you unless you really have tons of cash lying around.
posted by two lights above the sea at 6:51 PM on January 24, 2012 [6 favorites]

Is there any chance that as they are in their early 70's their amazingly bad financial decisions might not just be their lack of skill with money? I mean buying those cars doesn't seem like a logical decision and maybe their age is catching up with them? Of course you know them better and this might be exactly what they would do, I just worry that if there is an outside cause that this whole situation is going to get worse before it gets better.

Is there anyone you could talk to about it, some sort of financial advisor or get legal advice to find out what your options are for helping them. Chapter 13 is a pretty heavy way to go, but it might be their best choice but get legal advice first, if they won't go at least you can go and find out the options and lay them out clearly and simply for them.

Don't feel bad about resenting helping them, you have your own family to think of.
posted by wwax at 6:59 PM on January 24, 2012 [5 favorites]

anonymous, do you have a cash limit as to what you can/are willing to do to help?

There is $40K+ owed on the two cars. I'm guessing the cars were roughly $40,000 each, new? I'm trying to imagine what they might be, perhaps Cadillac CTS? I'm also a bit surprised that a three-year-old car that sold for $40K cannot be sold for $20K now. Trade-in might be below that, but street retail should be above it. For example, I cannot find a 2009 CTS for sale locally to me that's below $22,000. So unless they've put huge miles on them or beat them to crap, they should be able to walk away from loans once they sell them, probably empty of pocket, but not owing money.

Plan 1) Sell one car for retail via CL. If you're nearby, do this for them. Sell the nicest/lowest miles one, if you only sell one, you'll get a higher price. Pay off the loan, they keep the other car for their own use, monthly expenses cut in half.

Plan 2) Sell both cars, pay off all loans, and then buy a dependable used machine like the aforementioned Civic or Subaru Forrester or whatever. If needs be, buy this yourself, and loan it to them. Do not buy something which requires a payment of more than a couple hundred dollars, if they buy it themselves.

Also see if you can freeze their credit. This just prevents them from opening new lines of credit, it doesn't affect any cards or whatever they might have. That extra bit of hassle might keep them from walking into the nearest dealer and driving out in a new car an hour later.
posted by maxwelton at 7:03 PM on January 24, 2012 [3 favorites]

Please stop giving your in-laws money! You are shorting your own family by doing so. Their problems are not your problems; you have nothing to feel guilty about.
Chapter 13 was invented for people like them.
posted by BostonTerrier at 7:10 PM on January 24, 2012 [14 favorites]

You need that money for your own daughter. You owe her the reserves, not them. Do not make your family poor paying for these people. (That would be something to feel guilty about.)

Also: financial advice will not help people like this. They didn't buy two Cadillacs because they thought it through and came to the conclusion that it was a good investment to make. They did it because they don't think. Don't give them your money to make more bad decisions with.
posted by fingersandtoes at 7:18 PM on January 24, 2012 [2 favorites]

Sell both cars, pay off all loans, and then buy a dependable used machine like the aforementioned Civic or Subaru Forrester or whatever. If needs be, buy this yourself, and loan it to them.

Yikes! I'd be worried about long-term loaning anyone a car, let alone someone in their 70's. For instance, what would be your liability if they were in an accident? Sure, they might have insurance. But if they hit someone, because you own the car, that person may come after you with your deeper pockets.

I'm not saying "Dont' do it." Just don't do it without talking to a lawyer first about the consequences.
posted by sbutler at 9:10 PM on January 24, 2012 [1 favorite]

Trade in both cars for one Hyundai Elantra. IMO better looking, less trendy, same reliability and mileage. Might even be cheaper to insure.
posted by just sayin at 11:52 AM on January 25, 2012

Seconding what "dcjd" said, if you google a bit, you'll find multiple sources indicating that social security cannot be garnished.
posted by Dave. at 2:02 PM on January 25, 2012

Would it be possible to build a tiny house on your property and let them live there rent free. And then when, god forbid, they pass on you could rent it out for income.

Um, what? Why exactly should the OP build his/her in-laws a HOUSE because they can't manage their money? OP clearly states that "I can't help them cover the difference without digging deeply into my own emergency reserves, and as it is not my debt I am unwilling to do so (and I'm feeling guilty about this)."

They're your in-laws and it sounds like beyond their money troubles, they are otherwise good people who you care about deeply. So yes, help them get their financial house in order with some of the wonderful suggestions above, but don't do it by giving them money or paying off their debts - this will teach them nothing and you'll be out that money forever.
posted by futureisunwritten at 3:15 AM on February 7, 2012

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