Author Topic: Relative needs to borrow money  (Read 8265 times)

Malcat

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Re: Relative needs to borrow money
« Reply #50 on: October 23, 2019, 05:41:05 AM »
I think you should get to counselling with your wife about this quickly.

Her side of the family are normalizing this extremely unusual demand. It doesn't even really matter that this person loaned you money at a better rate than the bank, because you obviously had the capacity to pay it back, and this person doesn't.

Either get to counselling with your wife, or insist that she sit down with you and an accountant who can show her that this is not a loan, this money will disappear.

This is not a reasonable request, and it is not reasonable for your wife to railroad you into losing many tens of thousands of dollars just because you were loaned money before.

Villanelle

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Re: Relative needs to borrow money
« Reply #51 on: October 23, 2019, 02:37:21 PM »
You keep mentioning that they lent you money in the past.  Was it anywhere near the amount they are asking you for?  Did they have good reason to believe you could pay it back (unlike their current situation)?  You said their loan was at better rates than the bank, which suggests you could have gotten a bank loan. They almost certainly can't.  That tells you something about one of the major differences here. 

And of course your wife didn't find the thread helpful.  She has her mind made up and is determined to proceed, even in the face of logic and math.  This thread doesn't agree with the narrative she's created.  It was unhelpful because she wasn't looking for help.  That doesn't mean she's right or that you should give up on changing her course, even if it's just finding some middle ground.  Perhaps that could be that you lend them only the amount they lent you (assuming that's meaningfully less than $30k), and perhaps you offer additional resources and help. 

BicycleB

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Re: Relative needs to borrow money
« Reply #52 on: October 23, 2019, 03:17:43 PM »
When the money is short and feelings run high, there will be temporary unhappiness. What happens after that depends on what you do and how you do it. So act for the long term.

Why is your wife set on this? Is the person lent to an emotional manipulator, who knows how to push her buttons better than you do because you're a person of reason and don't know how to push buttons? Why did ya'll take a loan in the first place for a couple of percent? Did the lending relative do this to gain an emotional advantage?

Logic says calculate the loan savings, multiply it by market returns since that date, and "pay them back" with a "gift" in that amount to wash your hands of obligation. But...as everyone pointed out, there are emotional roots and marital questions in this.

Have you and wifey discussed whether it would be wiser to help the relative after their seemingly inevitable bankruptcy?

Is your wife normally involved in the family finances? Is this out of character?

Best wishes!!!

PS. I wouldn't divorce over $33,000. But I would seek to establish a sound sustainable basis for the marriage. It sounds like decision making is not yet a united front.

Personally, I wouldn't be comfortable in a marriage where decisions were irrational and a spouse's concerns were disregarded. So I'd want to find a way to meet the wife's concerns, but also yours - you're both important. Perhaps find a way to show care to the sick, but not to accept the sick's requests. Bring them dinner and a hug but no check, for example, and the offer of the bankruptcy lawyer. Leave calmly, repeat the same actions later.

Result: A united front by two responsible adults who preserve their financial future; assistance that resolves the problem if really needed, plus care shown at an affordable price; a record of finding solutions that husband and wife can eventually respect.
« Last Edit: October 23, 2019, 03:21:03 PM by BicycleB »

happy

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Re: Relative needs to borrow money
« Reply #53 on: October 23, 2019, 04:19:56 PM »

what to do when it all runs out within a few months.


To me, this is really the heart of the matter. You've already accepted you are going to do the "loan" and already accepted that you'll probably not get it back. For both your and your brother's sake he needs to have some sort of sustainable plan and currently there is none, even if he doesn't pay you back.

Personally I would indicate that I would try to find the money to help him (not make it sound like you have 30k lying around), emphasise its a one-off, assure him that you value and care about him and your relationship and BECAUSE of that you'd like to help him find the best plan (including getting some advice that you could offer to pay for) to ensure his ongoing financial stability.

If he just wants the money and is hostile to help, then I would give it, and work on girding my loins for the inevitable request for more.

Dicey

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Re: Relative needs to borrow money
« Reply #54 on: October 24, 2019, 05:56:12 AM »
You mentioned a 20% penalty. There will presumably be taxes due as well, so why don't you stop calling it $30k?  Have your accountant do the math (if you can't) and start using the real number.  Next, what does this number represent compared to her total account balance?

In some ways, this is no different than a spouse who insists on buying a boat, or a new car, or a bigger house.  However, all of these scenarios, including your own, are indicators of bigger problems in the marriage.

Finally, your relative charged you interest? What interest rate are they offering to pay you for this loan no bank would touch?

Jon Bon

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Re: Relative needs to borrow money
« Reply #55 on: October 24, 2019, 11:24:43 AM »
So you feel obligated to lend the money because they lent it to you. However these two things are about as different of a situation as can be.

1. You were lend money by said relative when you had decent income coming in and good future prospects correct?
2. Now you lending to a relative who most likely is completely unable to repay is a completely different situation.

So I guess what I am saying is the fact they lent you money in the past has zero bearing on this situation. IMO they lent to you when you had a 800 credit score. They want you to lend to them when they are insolvent. This is not a quid pro quo.

Apples/Oranges




Daisyedwards800

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Re: Relative needs to borrow money
« Reply #56 on: October 24, 2019, 11:38:50 AM »
1)  How much is left on their mortgage and what is their yearly property tax?
2)  How much is the house worth?
3)  Is the $750 disability insurance, or SSDI?
4)  Can they collect Social Security anytime soon?  How old are they?

Cpa Cat

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Re: Relative needs to borrow money
« Reply #57 on: October 24, 2019, 12:02:05 PM »
Hey all,
I showed this thread to Spouse, who said, "That wasn't helpful at all."

Yeah dude. If the visit to the accountant, who said all the same things that we did, didn't convince her, then a bunch of rando's on the internet weren't going to change her mind. She ain't interested in the opposing point of view. She's emotionally invested in whatever this twisted family dynamic is, and clearly such paltry things as "logic," "marital strife" or "a paid professional telling her not to do something" are not going to stop her.

former player

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Re: Relative needs to borrow money
« Reply #58 on: October 24, 2019, 12:11:11 PM »
Hey all,
I showed this thread to Spouse, who said, "That wasn't helpful at all."

Yeah dude. If the visit to the accountant, who said all the same things that we did, didn't convince her, then a bunch of rando's on the internet weren't going to change her mind. She ain't interested in the opposing point of view. She's emotionally invested in whatever this twisted family dynamic is, and clearly such paltry things as "logic," "marital strife" or "a paid professional telling her not to do something" are not going to stop her.

Agreed.  It seems as though she is emotionally invested in providing help to this relative.  So perhaps the way forward is to reframe the issue as: what is going to be most helpful to relative and is there something we can do that will be more thoughtful and useful than a lump sum of money that may just go to the finance companies rather than helping relative?

Villanelle

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Re: Relative needs to borrow money
« Reply #59 on: October 24, 2019, 12:18:22 PM »
Is your wife's family by any chance from another culture/country? 

Also, depending on how your finances are set up, you might be able to frame this, or at least part of it, as her discretionary spending.  If this is SO important to her, you can't really support it (as backed up by an expert and because you truly don't believe it is actually helping them in the long run to enable them to postpone the inevitable).  But if she wants to make cuts to her personal spending (not family spending), then you will agree to a dollar for dollar match.  For every dollar she cuts from her personal grooming, shopping, other family assistance, whatever else budget, you will agree that a dollar of your joint money (to include all retirement accounts) can also go to them.  Something like that?

yachi

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Re: Relative needs to borrow money
« Reply #60 on: October 24, 2019, 01:40:50 PM »
Can't your relative just resell one of their purses to pay off the credit card?
https://www.neimanmarcus.com/p/the-row-margaux-15-alligator-top-handle-bag-prod210710164

The above is meant as a lighthearted poke at the fact that we don't have much information about what the sum of $30,000 means to you.

I lent a relative money to rehab a house because there is high probability that the money is returned and earns an outsized return.  I did not lend money to a relative who could spend the same amount on frivolities and have nothing to show for it 3 years from now. 

I have to say though, requesting that they repay a credit card with your hard earned money while being near 100% certain you will not be repaid is the dumbest suggestion in this thread.  Why should the credit card company get repaid 100% for their lending but you get the shaft for yours?  Certainly they should be able to recover from the credit ding of shafting the credit card company spending less than $40K.
« Last Edit: October 24, 2019, 01:55:05 PM by yachi »

FIREedUpCS

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Re: Relative needs to borrow money
« Reply #61 on: October 24, 2019, 10:10:36 PM »
You will not get repaid, you could be asked for more and your relative may end up resenting you. Debt can cause some strange emotions.

If you want to give a 30K gift, that's up to you.

Malcat

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Re: Relative needs to borrow money
« Reply #62 on: October 25, 2019, 04:32:20 AM »
You will not get repaid, you could be asked for more and your relative may end up resenting you. Debt can cause some strange emotions.

If you want to give a 30K gift, that's up to you.

Actually, apparently nothing is up to him and his wife gets to make unilateral 30K spending decisions.

fredbear

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Re: Relative needs to borrow money
« Reply #63 on: October 25, 2019, 03:16:01 PM »
In the thread on killers of wealth, one of those I listed was "failure to divorce a profligate saboteur." 

RetiredAt63

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Re: Relative needs to borrow money
« Reply #64 on: October 25, 2019, 03:26:48 PM »
In the thread on killers of wealth, one of those I listed was "failure to divorce a profligate saboteur."


Can you give that thread address?


Finances_With_Purpose

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Re: Relative needs to borrow money
« Reply #66 on: October 26, 2019, 09:51:21 PM »
I'd be a lot more willing to offer advice and assistance with preparing the house to sell than lending/gifting money. Hand-ups are a lot more useful than hand-outs.

How is he paying his current obligations, when his pension only covers a small portion of his expenses? If that's really his only source of income, I'd recommend stopping all payments on credit cards and negotiating a settlement with them. It's better to default on them than the mortgage. It may take a few months of not making payments, but they'll eventually settle, which will save him a lot of money. You/he can just lay out the current situation to them and tell them that there simply is no money to pay them.

In the meantime, I would see what can be done to prepare the house to sell.

Can he do anything to earn extra income with his disability? Does he have a lot of stuff that can be sold in a garage/yard sale?

This. 

And great username, @DadJokes

Beyond what he said: the guy has $40k in CC debt (already in a hole) and hasn't accepted reality, which is that the house must go.  ASAP.  You'd just be supporting denial by giving cash here. 

Read this book, since it relates to your situation.  Giving money can actually hurt people
as much as it's likely to help people.  (More often so, in my experience.)  Be careful when giving into a situation with bad history and that doesn't look sustainable--and this is both. 

FIREpower

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Re: Relative needs to borrow money
« Reply #67 on: October 28, 2019, 04:28:28 PM »
Hey all,
Do you have any idea what's crucial to include in a promissory note, besides the amount and the repayment terms? Accountant told me that we probably don't need to go to a lawyer for this because we won't want to take relative to court for non-repayment. Even so, I'd like to know what to look for in the free form I download from the Internet.

$30K is a significant part of our annual income, especially since I'm semi-RE. We can afford it, but not repeatedly. I don't feel comfortable with it because I want to cover our children's future education.

I said, "What do you think about making this a one-time thing, and after this, it's bankruptcy?"

Spouse doesn't want to think about it.

I know that makes all of you think we need counselling, but we'll handle the first $30K. After that, we'll see.

Thanks. I know it seems like I'm not listening, but I do hear you. I will quietly advocate for bankruptcy and refinancing. Spouse does have considerable retirement accounts that, if drained, means I'm back to work for another six years or so, and THAT would be a problem.

Cannot Wait!

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Re: Relative needs to borrow money
« Reply #68 on: October 28, 2019, 04:41:26 PM »
Is there any way to have a direct conversation with this relative alone and explain how bankruptcy works, your children's college costs, and that you'd have to return to work in order for him to delay the inevitable?  If you're already semi-RE; they might be assuming you're loaded. 
I'm not saying go behind your wife's back but if she 'doesn't want to think about it'; tell her not to worry about anything and you'll take care of it.  I find it hard to believe this relative would knowingly put you in this situation.

solon

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Re: Relative needs to borrow money
« Reply #69 on: October 28, 2019, 05:37:24 PM »
You're wasting $30k.

Here's what's going to happen. You'll give them $30k and they will live off it for a while. Six months from now they will declare bankruptcy. By then, the $30k won't have helped them at all, and it won't be helping you anymore either.

Whether you help them or not, they will declare bankruptcy. The only difference is they might be able to put it off a few months, but what does that matter?

But maybe the credit card company will send you a Christmas card. They are the only ones coming out ahead here.

You're wasting $30k.

Villanelle

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Re: Relative needs to borrow money
« Reply #70 on: October 28, 2019, 05:41:13 PM »
Hey all,
Do you have any idea what's crucial to include in a promissory note, besides the amount and the repayment terms? Accountant told me that we probably don't need to go to a lawyer for this because we won't want to take relative to court for non-repayment. Even so, I'd like to know what to look for in the free form I download from the Internet.

$30K is a significant part of our annual income, especially since I'm semi-RE. We can afford it, but not repeatedly. I don't feel comfortable with it because I want to cover our children's future education.

I said, "What do you think about making this a one-time thing, and after this, it's bankruptcy?"

Spouse doesn't want to think about it.

I know that makes all of you think we need counselling, but we'll handle the first $30K. After that, we'll see.

Thanks. I know it seems like I'm not listening, but I do hear you. I will quietly advocate for bankruptcy and refinancing. Spouse does have considerable retirement accounts that, if drained, means I'm back to work for another six years or so, and THAT would be a problem.

Do you plan on trying to secure the debt in any way?  I assume not, but you could fairly easily and cheaply attache a lien to the house so that you have some recourse.  When I refinanced my mortgage via my parents, we did this.  We contacted a realtor (or maybe it was a mortgage person?) and they did the paperwork for a fairly low fee. 

As for other terms, you should probably also include what happens when payments are missed or skipped.  Saying, "you owe me $30k at 4% APR" is pretty meaningless.  Adding that "payments are due on the 1st of the month, and late by the 5th, and that late payments will accrue a $25 fee for one week, $75 for two weeks, $150 for three weeks, and $300 for for weeks, and an additional $100 for each week after that, as well as the additional interest accrued"  actually makes those terms mean something.  And shows the relative you do actually expect payment.

I suspect your wife won't allow that because it's "mean" and she's completely unwilling to see basic sense in all this.  But if you want any hope of getting your money back, I'd be specific in terms, although you may want to do some googling to make sure you are within your local laws.  It also gives you some leverage to not lend more when (not if, when) they don't meet the specific terms of the first loan.  You can tell your wife that if they didn't meet the initial terms, why would you ever give them more money? 

I can't believe you are going to cave on this without at least getting a promise from the wife that this is absolutely it in terms of loans, until this loan is paid off.  You are caving without getting anything in return.  You've told her that she gets to do whatever the hell she wants, and that your desires don't matter.  And then *you* go back to work if her delusional plan falls through?

Finances_With_Purpose

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Re: Relative needs to borrow money
« Reply #71 on: October 28, 2019, 07:21:00 PM »
...

And counter to what other people are saying, I think the WORST thing you can do here is attach strings to the money and try and use it to leverage change in his behaviour. He's either going to seek your advice and input or he'll resent you for trying to push it on him. He'll likely push back against what he sees as you being a paternalistic asshole.

If you are willing to lose this money, then just give it to him and be prepared to lose it. Any other power plays you do along the way will just make this uglier.

Y'know what's A LOT worse than losing 30K to an irresponsible family member???
Being made out to be the bad guy while losing 30K to a family member.

This.  @Malkynn is spot on. 

I totally get that you guys feel obligated because the relative lent money to you in the past.  And you want to return the favor somehow: so I can understand giving a gift.

I will speak from experience here and tell you this: it's easiest to put in boundaries NOW.  It will come as a shock later: to relative, to spouse, to everyone.  A hard no up front often saves worse problems on the back end.  (Or a hard, here's 10k, the most we can do, and it's a one-time gift.) 

Choices have a path dependency to them: the relative won't feel so shameful asking next time, won't expect you to hesitate, and spouse probably won't struggle as much with the idea of giving cash to money pit at all.  Better to nip a lot of bad ideas in the bud, and at least set some hard limits. 

You're setting a boundary with this decision, which is: if you want it enough and feel strongly enough, I'll let it go.  I know you don't feel that way, but that's the message your actions are likely to communicate to all involved.  And Relative B may well expect you to toss in another 30-60k from the sound of it, and may well be mad if/when you don't: so better to set the boundaries up front. 

There is no way on earth would I trade off any of my kids' future or a lot of my own time for something so pointless.  (The issue here is that there's no realistic way forward for relative, and relative is in solid denial.  This does not end well.)

Consider: giving money often HURTS people.  Our culture says money is always helpful, but if that were so, a lot of people with a lot of income would actually be a lot better off (and more helpful!).  Instead, it can hurt people--ergo all the warnings on this thread about upset relatives plus lost cash.   

Also consider: I would struggle hard not to be resentful towards my wife and relative later on for this.  Especially if I saw my kids suffer.  Or have fewer options.  And relative loses it all anyway, which is the clear outcome here.  You're going to give cash now, but you're going to pay the consequences of that later on.  So take account of those now, because they're significant. 

I'm not nearly as pessimistic about your marital situation, though this does flash a big red flag that you need to deal with this now, before any cash goes anywhere.  Otherwise, spouse can get upset, have her(?) way, and feel that that will work going forward.  Because it's going to get harder as the relative ends up in a deeper ditch: not easier.  Now is as easy as this gets. 

You may well end up with some weird and very wasteful compromise as a bow to your wife - which is fine (your marriage is worth it - you're dead on there)- but just be sure you reach an actual joint decision on this.  There are a lot of compromise options, as some have suggested: e.g., wife wants it, so wife chips in more (e.g. working more, etc.).  Postponing the boundaries and the discussion of what happens next only sets you up for a repeat and a lot of hurt feelings: and the stakes after 30k (as you've noted) will be a lot higher.

Two tips on talking it through: validate your wife's feelings.  There's nothing wrong with her feeling like you all should do this.  Feelings tell us things, even though they don't define reality.  And clearly she has extremely strong feelings about it, and there's absolutely nothing wrong with having strong feelings; that's just information.  And second tip: find ways to compromise that you can both get behind and agree upon so that you make an actual joint decision. 

Everything you have said would make me run towards getting a joint resolution with the wife now as to how this will be handled.  And a tip on that front: if not counseling, at least widen the circle to some trusted community to discuss things. 

Time and pressure make for very poor financial decisions, so I would also slow the train down as much as you can: someone asked you for 30k, so you can take the time to see an attorney, etc.  There's no reason you can't.  Anyone who says otherwise has some real delusions about what even $30k can ever actually achieve in this situation... 

One final tip (though I am not qualified and can't give you any legal advice): that web form is likely useless.  You want debt tied to an asset -- secured, as they say -- and that needs to be done properly (e.g. a mortgage, filed with local clerk or person of record, etc.).  Or a car note, done right.  Otherwise, you're likely to get less than the credit cards, which is to say: zero.  A personal loan here has almost no real value.  You're kidding yourself/wasting your time with it. 

Linea_Norway

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Re: Relative needs to borrow money
« Reply #72 on: October 29, 2019, 02:01:19 AM »
Does your wife not have a plan on how to finance your children's education? That she doesn't want to think/talk about it, is no excuse. You can't just give away a big part of your savings without thinking of the long term consequences. Her solution is probably that you are working more, so her problem is solved. And she will have fulfilled her guild towards having borrowed money from them in the past.

Could you compromise be that you are willing to give the relative x amount after he declares bankruptcy? That way, you know the money will not go to the credit card companies.
« Last Edit: October 29, 2019, 02:14:48 PM by Linea_Norway »

yachi

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Re: Relative needs to borrow money
« Reply #73 on: October 29, 2019, 11:34:13 AM »
Two tips on talking it through: validate your wife's feelings.  There's nothing wrong with her feeling like you all should do this.  Feelings tell us things, even though they don't define reality.  And clearly she has extremely strong feelings about it, and there's absolutely nothing wrong with having strong feelings; that's just information. 

+1  It takes us analytical people a long time to get here sometimes.  Feelings matter to financial decisions.  I think this deserves more attention.  You, of course don't want bad things to come to the relative: homelessness, despair, an inability to receive medical treatment.
You also don't carry 40K of credit card debt - there is a reason for this beyond having had good health.  It's mostly due to your choices and spending priorities.  You can't force these choices on the people you give money to, so just giving them money is not going to bring them to your level of success.
I have had a difficult time making decisions regarding family and finances, partially because my level of financial comfort is very different from my family's.  I would be uncomfortable without a safety fund, or money in case of unemployment, but others are not.  I would forgo newer cars, a bigger house, and more expensive vacations to build up a safety fund, while my family would not.  My point is that you should be cautious projecting yourselves into the situation this relative is in, and asking "how would I feel about this".  Because you would likely have been stressed as heck when the credit card balance was 10K and not being paid off.
I think in your shoes, I would spend some time explaining to my spouse that I care about all the things she does - that the relative end up free from a hopeless situation, successful, healed from their condition, and independent.
You're relatives' needs have the potential to overwhelm your ability to pay for them.  If not in this situation, than possibly the next.  I would argue that the point where the money you're talking about is so high that it pulls you from working part time to working full time, or from being FIREd back to work, your relative's needs have overwhelmed your ability to pay for them. 

Captain FIRE

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Re: Relative needs to borrow money
« Reply #74 on: October 29, 2019, 11:55:35 AM »
Assuming that you are going to do as stated, and loan the money despite the many good reasons against, my advice on the best way to do it is to set milestones, and loan based on that.

For example, we will loan you:
$5k immediately (assume this is a gift)
$5k after you've developed a sustainable budget (...that has no more luxuries than your budget)
$5k after you've met with a financial planner or bankruptcy lawyer
$5k after you've put your house on the market
$5k after you've accepted an offer on your house
$5k after you've been able to keep the balance on the credit card lower/same for 3 months

If they can't meet targets you* establish, you KNOW you are throwing away money with the credit cards as the only winners.  You also have an easier way to stop the bleeding, if they fail to do any work themselves to fix matters.  This follows the "never help someone more than they help themselves" maxim.

[ETA: *To clarify, you here can be a joint you, I'm not saying this needs to be a unilateral command.  If you can get them to sit down at the table with you and figure out next steps, they'll have some ownership over the steps and are more likely to want to make them happen.]

Privately, see if you can get your spouse to agree - in writing - with you for next steps.  e.g. if they complete all of the steps, we'll forgive the first $5k afterwards.  On the other hand, if they do not do a step, they don't get the milestone money.  If X, then we won't give anything more other than help with a bankruptcy lawyer.  (It's pretty troubling the spouse refuses to even acknowledge the looming possibility of bankruptcy.  My guess is the relatives are even worse on this point.)  As part of the conversation, consider making explicit and immediate the tradeoffs of loaning the money (e.g. together agree that you will take a camping vacation instead of a trip this year to save some of the $30k, that you will cut the dining out budget by 50%, both work overtime, etc.)  It's dramatic, but you might also consider a postnup agreement regarding loaning the money.

[btw, everyone keeps talking about it being the wife wanting to loan the money.  Did the OP ever say wife?  I thought the OP kept it gender neutral.  Just an interesting observation on MMM crowd assumptions.]
« Last Edit: October 30, 2019, 06:52:19 AM by Captain FIRE »

Villanelle

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Re: Relative needs to borrow money
« Reply #75 on: October 29, 2019, 12:00:36 PM »
Two tips on talking it through: validate your wife's feelings.  There's nothing wrong with her feeling like you all should do this.  Feelings tell us things, even though they don't define reality.  And clearly she has extremely strong feelings about it, and there's absolutely nothing wrong with having strong feelings; that's just information. 

+1  It takes us analytical people a long time to get here sometimes.  Feelings matter to financial decisions.  I think this deserves more attention.  You, of course don't want bad things to come to the relative: homelessness, despair, an inability to receive medical treatment.
You also don't carry 40K of credit card debt - there is a reason for this beyond having had good health.  It's mostly due to your choices and spending priorities.  You can't force these choices on the people you give money to, so just giving them money is not going to bring them to your level of success.
I have had a difficult time making decisions regarding family and finances, partially because my level of financial comfort is very different from my family's.  I would be uncomfortable without a safety fund, or money in case of unemployment, but others are not.  I would forgo newer cars, a bigger house, and more expensive vacations to build up a safety fund, while my family would not.  My point is that you should be cautious projecting yourselves into the situation this relative is in, and asking "how would I feel about this".  Because you would likely have been stressed as heck when the credit card balance was 10K and not being paid off.
I think in your shoes, I would spend some time explaining to my spouse that I care about all the things she does - that the relative end up free from a hopeless situation, successful, healed from their condition, and independent.
You're relatives' needs have the potential to overwhelm your ability to pay for them.  If not in this situation, than possibly the next.  I would argue that the point where the money you're talking about is so high that it pulls you from working part time to working full time, or from being FIREd back to work, your relative's needs have overwhelmed your ability to pay for them.

Yes.  This is why I advocate helping them in non-financial ways.  Likely (and this is just a guess and is something you should calmly talk with your with about to determine if it's accurate) she doesn't want to abandon family.  She wants to help people who are very much in need of help. Acknowledging that and showing her that you actually very much want to help them as well will go a long way.  Then with that agreed upon, you can transition into the best way to help them.  Even if you were a zillionaire, throwing money at them likely would not be the best way to help.  It seems your accountant agrees with this.  You can help with resources.  You can help with knowledge.  You can help with elbow grease is you live nearby (working on the house to get ready for sale).  You can pay for a consultation with a bankruptcy attorney.  You can even pay for a session with an accountant. 

These are things that are likely to actually help solve their problem.  Giving your money to credit card companies and other creditors, with them as the pass-through middle man, is not.  So your hesitance to give them the money isn't because you don't think they are worth $30,000.  It's that $30,000 won't change their situation.  It won't actually help them.  They gave you the help you needed when you needed it (which happened to be money in your case, and from the sounds of it, that was a situation where you could clearly repay the loan and had a viable plan to do so).  You want to give them they help *that they actually need* when they need it. 

Malcat

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Re: Relative needs to borrow money
« Reply #76 on: October 29, 2019, 01:37:16 PM »
Assuming that you are going to do as stated, and loan the money despite the many good reasons against, my advice on the best way to do it is to set milestones, and loan based on that.

For example, we will loan you:
$5k immediately (assume this is a gift)
$5k after you've developed a sustainable budget (...that has no more luxuries than your budget)
$5k after you've met with a financial planner or bankruptcy lawyer
$5k after you've put your house on the market
$5k after you've accepted an offer on your house
$5k after you've been able to keep the balance on the credit card lower/same for 3 months

If they can't meet targets you establish, you KNOW you are throwing away money with the credit cards as the only winners.  You also have an easier way to stop the bleeding, if they fail to do any work themselves to fix matters.  This follows the "never help someone more than they help themselves" maxim.

Privately, see if you can get your spouse to agree - in writing - with you for next steps.  e.g. if they complete all of the steps, we'll forgive the first $5k afterwards.  On the other hand, if they do not do a step, they don't get the milestone money.  If X, then we won't give anything more other than help with a bankruptcy lawyer.  (It's pretty troubling the spouse refuses to even acknowledge the looming possibility of bankruptcy.  My guess is the relatives are even worse on this point.)  As part of the conversation, consider making explicit and immediate the tradeoffs of loaning the money (e.g. together agree that you will take a camping vacation instead of a trip this year to save some of the $30k, that you will cut the dining out budget by 50%, both work overtime, etc.)  It's dramatic, but you might also consider a postnup agreement regarding loaning the money.

[btw, everyone keeps talking about it being the wife wanting to loan the money.  Did the OP ever say wife?  I thought the OP kept it gender neutral.  Just an interesting observation on MMM crowd assumptions.]

Based on my experiences and those of people I've known who lent money to family and friends, I would never ever loan money with this type of paternalistic micro-management unless it was to my own child.

Dicey

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Re: Relative needs to borrow money
« Reply #77 on: October 29, 2019, 02:42:38 PM »
Okay @FIREpower, let me see if I have this right. Your wife insists you allow relative to borrow money, $30K to be exact.

Virtually everyone on this thread tells you it's a bad idea.

Now you're asking us how to do it, because you're going to do it anyway?

Did I miss something?

Assuming I did not: hire a lawyer.

Zamboni

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Re: Relative needs to borrow money
« Reply #78 on: October 29, 2019, 05:20:59 PM »
I think the title of this thread should be changed to "Relative needs to declare bankruptcy and file for public assistance"

It's a hard "no" from me. Sorry your wife is refusing to listen . . . this relative is driving a wedge into your marriage while also robbing from your children's futures. Please make sure your wife hears these things (again.)

BicycleB

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Re: Relative needs to borrow money
« Reply #79 on: October 29, 2019, 05:55:18 PM »
Your accountant assumes that you won't collect aggressively against your relative. But when they go bankrupt, a properly drafted lien against their house might give a chance to get some of the money back. You'd be competing against other creditors, not against your relative's interests.

"Properly drafted" probably means "get a lawyer", as the other poster said. I think the details influence whether you will or will not have any real chance to get repaid from the bankruptcy, presumably from proceeds of the house sale. Even if you just hand the money back to the relative, they might be happier at that point than if the money went to their credit card company.

Captain FIRE

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Re: Relative needs to borrow money
« Reply #80 on: October 29, 2019, 08:17:59 PM »
Based on my experiences and those of people I've known who lent money to family and friends, I would never ever loan money with this type of paternalistic micro-management unless it was to my own child.

I'm not surprised as you advocate for handing over the check with a smile and hoping it ends there.

I get it - that the family may (or rather will) resent putting strings on the loan/gift.  But, I'm trying to brainstorm a way that the OP can get the relatives to make changes for the better AND to avoid shelling out the whole $30k if nothing is being done to better the situation so the money isn't down the drain with a hand out again.  Perhaps others can come up with better ways, but it did seem like marital therapy/just say no/they must declare bankruptcy decrees had already been discussed ad nauseam without success.

So, if they want ideas for how to hand over the money, they can just write a check (and then another and another...) as you already suggested in this thread, or they can try to structure it to accomplish something to better the relatives, even if they aren't happy about it.  Depends in part on what matters most to them (relatives getting back on their feet?  Or relatives happy with them?) and how they think they can best accomplish that top goal.

dollarchaser

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Re: Relative needs to borrow money
« Reply #81 on: October 29, 2019, 09:18:17 PM »
Another suggestion

Keep the house payment current. Period. With MMM skills it will be easy and meet the desired outcome. Which is helping, without causing undue hardship to the responsible side of the equation.
A scenario for spouse to consider: hand over 30k, watch the card balance drop and then watch relative drop dead. Financial aid with undesirable outcome.
Keeping the house payment current provides aid with protection to unforseen circumstances.

WalkaboutStache

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Re: Relative needs to borrow money
« Reply #82 on: October 29, 2019, 10:57:03 PM »
Hi all,
Spoke to accountant, who basically ran the same numbers and said that even if we paid off the credit cards, relative will go back into debt because there's no way you can balance $700 in and $2000 out per month. It almost doesn't matter if we pay the credit card directly, because the relative can go back with an improved credit score and take the money out again.

 [...]

The problem with declaring bankruptcy is that Relative wants to hang onto assets. Same problem with not paying credit cards for a few months and negotiating a lower fee. Accountant says this is more a tactic for people without assets.

[...]


Your relative is bankrupt already and your wife needs to understand that. The plan needs to be finding the means to keep the house if it is not protected.  If it is, your relative needs to rip the bandaid, give up the other assets and buckle down to live on $750 or a bit more a month.  What you can do is perhaps offer to pay the mortgage and help with home repairs with the other relative who is also on the hook for 30K until the house sells and the debtor can go back to work (if at all).  You may well need to explore all options with an attorney, including defaulting on the unsecured credit card debt. 

Refusing to acknowledge that this ship has sailed and is sinking already will not help anyone.

Malcat

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Re: Relative needs to borrow money
« Reply #83 on: October 30, 2019, 06:01:37 AM »
Based on my experiences and those of people I've known who lent money to family and friends, I would never ever loan money with this type of paternalistic micro-management unless it was to my own child.

I'm not surprised as you advocate for handing over the check with a smile and hoping it ends there.

I get it - that the family may (or rather will) resent putting strings on the loan/gift.  But, I'm trying to brainstorm a way that the OP can get the relatives to make changes for the better AND to avoid shelling out the whole $30k if nothing is being done to better the situation so the money isn't down the drain with a hand out again.  Perhaps others can come up with better ways, but it did seem like marital therapy/just say no/they must declare bankruptcy decrees had already been discussed ad nauseam without success.

So, if they want ideas for how to hand over the money, they can just write a check (and then another and another...) as you already suggested in this thread, or they can try to structure it to accomplish something to better the relatives, even if they aren't happy about it.  Depends in part on what matters most to them (relatives getting back on their feet?  Or relatives happy with them?) and how they think they can best accomplish that top goal.

Lol! No, that is not at all what I advocate.
I advocate urgent and immediate therapy for this couple and from the very beginning have said that this is a marital issue.

If the money is handed over, the money is lost. What I don't think is a good idea is creating more conflict within his marriage and making himself the bad guy while losing his 30K.

I don't think he should roll over and hand over a cheque with a smile, I just don't think the relative is the person he needs to strike up conflict with as they are not his source of problem here.

I simply don't see any strategy where trying to micro manage the relative leads to a reality where the wife sides with OP down the line.

Maybe I'm wrong, but having been through something similar very recently, it's very very very easy to become the bad guy when loaning/giving money, and logic often doesn't really apply.

To be 100% crystal clear, since obviously my previous posts were misinterpreted. I don't think OP should hand over any money.

Cannot Wait!

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Re: Relative needs to borrow money
« Reply #84 on: October 30, 2019, 06:12:07 AM »
Maybe give them some cash now and then stall for time saying your money is tied up.  Who has $30,000 lying around? Keep making suggestions like looking into bankruptcy, alternative housing, budget planning, etc and maybe things will shift...
Can any other relatives (or you!) take this person in?

KBecks

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Re: Relative needs to borrow money
« Reply #85 on: October 30, 2019, 06:33:39 AM »
I think the problem is that in a hard place, that credit card is going to be too tempting when things stay tight.  So I don't expect your relative to get rid of the cc forever especially when they are feeling strained.

I also think you are setting yourself up for future asks, so it might be wise to say something like, this is all we can do, this is a one time thing.

I also think that Financial Peace is a good suggestion, as well as making a budget.  You may want to make your gift contingent on seeing a budget.

Linea_Norway

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Re: Relative needs to borrow money
« Reply #86 on: October 30, 2019, 06:38:52 AM »
I think the problem is that in a hard place, that credit card is going to be too tempting when things stay tight.  So I don't expect your relative to get rid of the cc forever especially when they are feeling strained.

I also think you are setting yourself up for future asks, so it might be wise to say something like, this is all we can do, this is a one time thing.

I also think that Financial Peace is a good suggestion, as well as making a budget.  You may want to make your gift contingent on seeing a budget.

Still, even if they would say it is a one time thing, we know that the relative will get into new problems within short time, maybe a few months at best. How will OP's wife react if the relative is forced out of his house this time? Will she want to help him again financially?

Captain FIRE

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Re: Relative needs to borrow money
« Reply #87 on: October 30, 2019, 06:50:00 AM »
...
If you are willing to lose this money, then just give it to him and be prepared to lose it. Any other power plays you do along the way will just make this uglier.

Y'know what's A LOT worse than losing 30K to an irresponsible family member???
Being made out to be the bad guy while losing 30K to a family member.
...

Got it.  FWIW, this is where it seemed to me that you were suggesting to just hand over the money with a smile.

(And yes, you did advocate for therapy.  I think everyone except OP has advocated for therapy because the ultimatum tossing/unilateral decision-making is just a train wreck in action.)

Malcat

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Re: Relative needs to borrow money
« Reply #88 on: October 30, 2019, 07:10:27 AM »
...
If you are willing to lose this money, then just give it to him and be prepared to lose it. Any other power plays you do along the way will just make this uglier.

Y'know what's A LOT worse than losing 30K to an irresponsible family member???
Being made out to be the bad guy while losing 30K to a family member.
...

Got it.  FWIW, this is where it seemed to me that you were suggesting to just hand over the money with a smile.

(And yes, you did advocate for therapy.  I think everyone except OP has advocated for therapy because the ultimatum tossing/unilateral decision-making is just a train wreck in action.)

Yeah, I get that.
At that point he hadn't actually established that he didn't have a real choice in the matter. That comment was more or a bluff call pointing out that he was going to lose 30K regardless of how he tried to control the "loan". Granted, I thought he had some autonomy in the decision. He doesn't.

KBecks

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Re: Relative needs to borrow money
« Reply #89 on: October 30, 2019, 03:59:33 PM »
Could you give some money every month to help cover food, lights, water and shelter?  Screw the CCs.  It will take a while before you get to a $30k total, and it will go a little at a time rather than a rush of fresh cash into a desperate situation.  Like sending $1500 a month for a year to cover mortgage and some food. You're only at $18,000 and perhaps the person will get it together in that time.
« Last Edit: October 30, 2019, 04:01:39 PM by KBecks »

OzzieandHarriet

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Re: Relative needs to borrow money
« Reply #90 on: October 31, 2019, 10:52:17 AM »
Saw this column today and thought of this thread. Michelle has good advice; also some interesting stories in the comments.

https://www.washingtonpost.com/business/stop-doling-out-money-to-your-adult-children-it-doesnt-really-help/2019/10/25/208ed9e4-f66f-11e9-a285-882a8e386a96_story.html