Hi Mustachians,
My parents are in a pickle, and I'm trying to advise them. I could use some help working through the options.
My Stepdad recently suffered a very serious stroke, which landed him in the hospital. He has been there for a month in rehab and is making progress. He is partially paralyzed, has lost some brain function, and is fighting hard to regain his independence. Our hope is that he can return to the home, but that remains to be seen. Needless to say, his recovery is his primary focus. My mother is working to reconfigure their finances to their new reality.
They are both retired and get by on about $50k a year, $20k of which is a part time job he worked. They have no savings and live paycheck to paycheck. He is unable to return to work, so they will need to learn how to survive on $30k a year. Mom has done a good job reconfiguring their expenses to fit into the new $30k reality, and they could continue to pay the loan, with some sacrifice, at least until the next emergency strikes. Doing so seems foolish to me given all the challenges they have in front of them. There is no margin for error.
They have two cars. He will not be able to drive, and my mother wants to get rid of one car, which is a good choice. Her car is owned free and clear and driven about 3000 miles a year, for groceries, doctors, and visits to friends and family. His car is worth about $14k, and they owe $18k. They can't sell the car, because they don't have $4k to pay the loan off. I'm considering advising her to call the lender and negotiate a repossession. My understanding is that this would result in a deficiency after being sold at auction. What I don't know, is what kind of cost this would add - repossession fees, and who knows what else. She could then work out a repayment plan with the lender.
Some other info, my Mom is retired and partially disabled, she has been looking for part time work for four years without any success. Stepdad is a retired veteran. They are both over 65. I could bail them out, but there are a whole separate raft of problems and consequences that come with that, and it would mean a lot to my mother's pride to work through her problem on her own. She has not asked me for money and I have not offered, although I feel tremendous and crushing guilt about it.
What would you do in their situation?