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Should I Bailout My Parents From Their Debt? – Angela

“Dear Steve,

My parents owe $36,000 in credit card debt and have a $120,000 home equity loan on their home (valued at $285,000). They are in their late 70’s. My father does not work and my mother works a $9.00/hr. job. Their total monthly net income including SS is around $3000. They have been turned down for additional home loan, and have given up paying their creditors so are racking up horrendous penalties. Their mortgage and utilities take everything they make. They looked into bankruptcy but can’t afford the monthly mortgage plus consolidated debt payments if they save their home and if they give up their home they still end up with nothing to live on and don’t have a place to live either. They want to sell their house but it is in significant disrepair and they feel they have to be able to make some repairs before listing it in order to get enough out of the house to live off of.

My parents have now asked my husband and me if we can loan them around $40,000. We would have to take out a HELOC on our home to do that. We have two children in college which requires a significant amount of money from us as we don’t want them to start out their adult lives in debt and most of the rest of our savings is tied up our retirement. We know we would be making the payments on the HELOC until my parents sold their home and we are really afraid they will not be able to sell their home very quickly. We love my parents and want to do what we can to help (we’ve offered to let them live with us while they get things under control but we live 8 hours away and they don’t want to move.) None of my three siblings who live close to my parents have the financial means to help. They feel we’re their last hope, but we really can’t afford to loose that kind of money. What options are out there or should we just bite the bullet and get them the money?

Angela”

The Answer

Dear Angela,

I’m struggling with trying to figure out how it is fair for you to place yourself in a bad place financially to save your parents that have not made the wisest choices.

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In my opinion they should sell their house now for what it is worth on the market for a quick sale and use part of those proceeds from the sale to settle their debts. I think you should contact Damon Day and discuss this with him. He is a debt settlement specialist.

This approach would allow them to deal with their debt for about $20,000, would leave you without a HELOC you don’t need and let your folks take responsibility for their debt.

Am I missing something?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://Website Angela

    Thanks Steve for your response. Your opinion regarding loaning my parents money confirmed how my husband and I felt, so that was extremely comforting to me. I had been feeling like an unappreciative, selfish child and didn’t want to make my decision from that perspective. I am passing on the information to my parents to contact Damon Day. Being able to pay off their debt for about 20,000 rather than the full 36K sounds encouraging. Hopefully, they will agree to a quick sale on their home. I’ll let you know how it works out. Thanks again for your advice.
    Angela

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