IL Bankruptcy and BIL Student Loans

[audette]

Maybe not the solution you're looking for, but there is the GI Bill. It'd be a few years before he could go to school, but it's a way to go without massive student loans...

[h]

I really like the idea of helping him finance a decent state school and taking it a semester at a time.

[pantsparty]

Nov 22, 2014 17:58:25 GMT -5 y4m said:

Nov 22, 2014 17:17:36 GMT -5 lime said:

Why would BIL loans automatically become your problem if he or his parents can pay them?

If he can pay them they wouldn't.  But I am skeptical of that given his dream of becoming a sports journalist.

If he can't, Student Loan companies can garnish wages (of the ILs).  Since we are taking on supporting ILs beyond where they can support themselves, that becomes our problem.

But...it really doesn't.

I guess I shouldn't comment on this situation as I don't know the history. I'm just confused as to why you are willing to take on financially supporting/enabling people who are irresponsible? You have already helped them significantly and that failed?

ETA: it seems like your FIL lost his job in re-reading the OP, so maybe disregard this. Although, I don't know that there is anything wrong with community college or reasonable in-state options given the financial situation.

[y4m]

Nov 23, 2014 0:53:35 GMT -5 pantsparty said:

Nov 22, 2014 17:58:25 GMT -5 y4m said:

If he can pay them they wouldn't.  But I am skeptical of that given his dream of becoming a sports journalist.

If he can't, Student Loan companies can garnish wages (of the ILs).  Since we are taking on supporting ILs beyond where they can support themselves, that becomes our problem.

But...it really doesn't.

I guess I shouldn't comment on this situation as I don't know the history. I'm just confused as to why you are willing to take on financially supporting/enabling people who are irresponsible? You have already helped them significantly and that failed?

ETA: it seems like your FIL lost his job in re-reading the OP, so maybe disregard this. Although, I don't know that there is anything wrong with community college or reasonable in-state options given the financial situation.

This is fair. Their financial situation is part bad decision and part bad luck I think. FIL did lose his job, but then when you look at the severance and other earnings across the year, he actually earned quite a bit. They have proven over and over they can't handle money--the ebbs and flows of things like getting a severance just don't work for them.

Even though I judge the hell out of the decisions they've made basically forever, they are getting to the end of their working years due to health reasons and have literally no assets, including retirement. And we're not going to let them be destitute while we live so comfortably. So we are figuring out the most efficient ways to help that enable as little as possible. In exchange, we'll get transparency and the ability to stop it from getting worse.

[orangeblossom]

I just wanted to say you and DH are great people for helping out.

We have similar issues with MIL, and the older she gets the less we'll be able to say no, simply because the situation is what it is and there is no income coming in. Our biggest issue with her is transparency, and she's going to have to realize, in order for us to help, she'll need to be more open.

Nobody wants to parent their parent, but if you want our money, then you'll have to give up some things to make it work.

[jillboston]

It worries me a great deal that parents (and other family members) are now having to be pulled into the student loan trap. Very scary. So schools are now requiring parents to co-sign? That's financial suicide in a lot of cases IMHO.

[livinitup]

I think 15K is very low to file bankruptcy. I get that "it's climbing" but fifteen thousand??? And what does the 'climbing' part mean? If they can't control their spending now, they'll just rack up more debt after - without the ability to file bankruptcy again. 

Whats the the urgency to get out from under this debt? What's going to happen if they don't get it discharged?

[y4m]

Nov 23, 2014 18:22:03 GMT -5 livinitup said:

I think 15K is very low to file bankruptcy. I get that "it's climbing" but fifteen thousand??? And what does the 'climbing' part mean? If they can't control their spending now, they'll just rack up more debt after - without the ability to file bankruptcy again. 

Whats the the urgency to get out from under this debt? What's going to happen if they don't get it discharged?

I think if you read the thread closely, you may find the answers you seek.

[livinitup]

Nov 23, 2014 18:42:37 GMT -5 y4m said:

Nov 23, 2014 18:22:03 GMT -5 livinitup said:

I think 15K is very low to file bankruptcy. I get that "it's climbing" but fifteen thousand??? And what does the 'climbing' part mean? If they can't control their spending now, they'll just rack up more debt after - without the ability to file bankruptcy again. 

Whats the the urgency to get out from under this debt? What's going to happen if they don't get it discharged?

I think if you read the thread closely, you may find the answers you seek.

Im not trying to be an @sshole, so I did re-read the OP. I'm still mystified. 

[y4m]

I'm not sure why you're confused. Buying them a house removes the underlying structural issue. There's no reason not to file now.

[livinitup]

Why not let the debt accumulated ?
ETA: Or get a payment plan for 15K? Even YEARS. I mean, this seems manageable beyond a discharge.

[y4m]

Bankruptcy puts a hard stop to their ability to accumulate debt (and honestly most of their lines are maxed out now anyway). We're not willing to be helping them while they simultaneously accumulate more debt.

Is your argument that they might as well run up as much debt as possible if they are filing anyway?

[livinitup]

Nov 23, 2014 19:00:08 GMT -5 y4m said:

Bankruptcy puts a hard stop to their ability to accumulate debt 

Again, I'm not trying to be an @ss, but no. It doesn't stop them. At all. With a debt discharge, it makes it EASIER for them to get more more new debt. Without the option to discharge. 


ETA: They may be better "forced" to face their limits under their current maximums, rather than than discharging the debt. 

[y4m]

Nov 23, 2014 19:06:39 GMT -5 livinitup said:

Nov 23, 2014 19:00:08 GMT -5 y4m said:

Bankruptcy puts a hard stop to their ability to accumulate debt 

Again, I'm not trying to be an @ss, but no. It doesn't stop them. At all. With a debt discharge, it makes it EASIER for them to get more more new debt. Without the option to discharge. 


ETA: They may be better "forced" to face their limits under their current maximums, rather than than discharging the debt. 

Who is going to give them credit with a recent bankruptcy? A credit freeze and regular credit reports are also part of the plan.

What are you saying we should do?

[lime]

I'm really not trying to pile on, but I want to ditto livinitup.

You said "And we're not going to let them be destitute while we live so comfortably."

While that is admirable, I would be a whole hell of a lot more tough love on them if I was going to be financing their retirement and their son's non-employable degree.

Otherwise, you are just enabling.

[y4m]

Legit though. Like what tough love? You give me specific things you'd actually do to your parent and I'm listening.

[krystee]

1. Make them go to Financial Peace University.
2. Match them dollar for dollar on the debt, rather than have them file.
3. Match them dollar for dollar on the college.

I would make them have skin in the game, or how will they ever change?

We had several people apply to rent our home who had relatively recent bankruptcies and also had new CC or substantial car debt. I guess you can freeze their credit and get their reports, like you said, but you can also do that without bankruptcy, right?

[y4m]

I don't think they are actually capable of paying off this debt themselves, and I certainly don't see any reason to pay a dime toward it ourselves when it can be fully discharged.

FPU makes sense.

[Deleted]

BOOTSTRAPS!!

No actual advice so...<3 <3 <3

[orangeblossom]

I think it's easy to say tough love and all that, but sometimes, the time for tough love has passed, and you have to work with what is. Be it age, health issues, poor job prospects through no making of their own, etc.

Certainly, her ILs can and should have some skin in the game, but to expect a drastic change and suddenly be the pillar of financial responsibility, may be asking too much. Not just from a lack of wanting to be financially responsible (if that is in fact the case, don't know that), but health issues and job prospects at this age, etc.

I get what OP is dealing with. We won't go that far with MIL, but she is simply not going to ever be a productive member of society again, in terms of working and bringing in money to save. It makes me and DH furious, and other family members are really over it, and are slowly not helping her as much. That said, there are still some things we will do, but it will be on our terms.

[ESF]

Nov 23, 2014 19:09:32 GMT -5 y4m said:

Nov 23, 2014 19:06:39 GMT -5 livinitup said:

Again, I'm not trying to be an @ss, but no. It doesn't stop them. At all. With a debt discharge, it makes it EASIER for them to get more more new debt. Without the option to discharge. 


ETA: They may be better "forced" to face their limits under their current maximums, rather than than discharging the debt. 

Who is going to give them credit with a recent bankruptcy? A credit freeze and regular credit reports are also part of the plan.

What are you saying we should do?

I believe there are companies that offer credit cards to people after bankruptcy. Between the high interest rates, and the excellent odds of late fees and over the limit fees, they often make a profit long before the debt is repaid.

The credit freeze and credit reports are a good idea.

[krystee]

I didn't mean to be all bootstrappy in my post. I am just frustrated FOR you that they are essentially getting a clean slate and no consequences while you pay for their mistakes and their child's college. I think it is very generous of you and I hope they appreciate it.

[mrsukyankee]

Has he considered taking a gap year and working? It's very normal in Europe to do so and is great for kids who are 'meh' about life/college/etc. It will allow him to save up some money, show the colleges that he has a good work ethic and my give you all some more time to figure out what to do. He can still apply if he wants this year and then defer, but it may give him better options.

[Cicero]

Nov 23, 2014 19:09:32 GMT -5 y4m said:

Nov 23, 2014 19:06:39 GMT -5 livinitup said:

Again, I'm not trying to be an @ss, but no. It doesn't stop them. At all. With a debt discharge, it makes it EASIER for them to get more more new debt. Without the option to discharge. 


ETA: They may be better "forced" to face their limits under their current maximums, rather than than discharging the debt. 

Who is going to give them credit with a recent bankruptcy? A credit freeze and regular credit reports are also part of the plan.

What are you saying we should do?

MIL was able to get several shortly after her bankruptcy. The bankruptcy plus a recent foreclosure definitely didn't stop her from being able to rack up more debt. All I can do is be thankful she's got a great pension. I really don't know what we would do if we were faced the responsibility you guys are.

[sparkythelawyer]

Nov 22, 2014 17:56:43 GMT -5 y4m said:

Nov 22, 2014 17:05:25 GMT -5 BirdGirl said:

Why are they filing now? Is it just the 15K in unsecured debt? Is there some pressing need for NOW (I know there are situations where it's about more than $). The "climbing" gives me great pause about whether they should file now, because once they file they can't file again (at least for a long time). If they haven't changed their spending, filing now can actually hurt them.

So the plan is for us to buy them a house in the next few months - in exchange for freezing credit, us regularly running reports, etc.  With no housing cost, they should be fine to live on what they make.

But to your point - we were originally going to give them some money to spend on Christmas, and then we realized it makes more sense to charge that on their cards as they normally would.  Moral hazard maybe.  But ultimately the card companies are the ones who extended these fools these lines of credit.

Does that make sense?

I appreciate your post because it gave us some pause.

This concerns me more than the co-signing the SLs.  What action are you prepared to take when they don't live up to the terms and start racking up debt again?

[sparkythelawyer]

The BK will be discharged and they will be able to get credit sooner than you think. I think that is what folks are concerned about. The "and climbing" gives a few of us concerns that they haven't learned anything, and won't even if they file for BK. They'll just wait for you to bail them out again.

What about credit counseling and a re-payment plan, and you guys since you want to help, put away the amount they pay as part of their payment plan each month in an account for them so they can build up some savings? A vast majority of credit cards and other lending institutions will not issue new credit during the repayment period, and the credit counseling program will kick them out of the program if they try to get new credit during the repayment period (or at least they did 15 years ago when I was doing this).

[iheartbanjos]

What a mess. They are lucky to have you, to say the least...

Can BIL work and put himself through school? This may not have been the norm on these boards, but many kids graduate from college without debt or help from mom and dad. Maybe you and your DH could come up with some sort of incentive to keep him on track.