So, my younger brother has borrowed money from me a bunch of times over the past few years. He always paid me back right away, so I never really asked questions.
After about 10 times, I figured it was alcohol, drugs or gambling or something like that, finally confronted him. We had a long talk the other day, and the real reason is so much worse in a way I wasn’t expecting.
Turns out, after he got married, his wife lost her job, and things just started unraveling. They got hit with medical bills, car repairs, vet bills—you name it. He started using those 0% APR credit cards to keep things afloat, but then the pandemic happened, and everything changed. Interest rates shot up, his credit score tanked, and now the debt is just this giant, unmanageable monster. He doesn’t even know the total anymore. He just set everything to auto-pay and stopped looking.
The worst part? He’s not just struggling with money, he is depressed. I didn’t even notice until we talked, but looking back, it’s like the pandemic broke him. He used to be the kind of guy who just kept going no matter what, but now he’s just… done. He doesn’t even try to keep up anymore.
His wife is aware of the situation but it sounds like she buries her head as well and they don't communicate.
If the pandemic hadn't had happened they probably would have been homeowners by now, and possibly have less credit card debt.
He asked me what would I do? I told him I wasn't sure, but let's meet again in a month to talk things over.
I want to help him find real resources—financial counseling, maybe even therapy—but I know there are a ton of scams out there. He’s your stereotypical middle-class guy who got wrecked by the pandemic (okay, and some bad financial decisions, but who hasn’t made those?). I don’t know where to start.
He says he has considered bankruptcy, has considered paying I'm trying to negotiate all depts on his own, and what worries me the most to see says he's considering using a service or agency to negotiate but from what I've heard many of them are scams.
From what I hear many of his credit cards are between 20% to 30%. APR
I don't know the total amount of debt but I'm guessing around $40000 to $80000.
I really want to help him develop an outline a plan. I know I can't help him myself, but he's willing to listen and strategize.
Has anyone been in a situation like this? What actually helped? I’m not looking for a miracle, just something that won’t make things worse. Any recommendations of next steps for him and advice would be appreciated. (My next step I mean financial counseling, plus individual and marriage therapy)
My brother is asking me for advice.
byu/Organic_Alarm_5113 inpersonalfinance
Posted by Organic_Alarm_5113
10 Comments
You’re not going to be able to help him until he can confront the debt, get a number for what it is, and make a plan.
It doesn’t sound like he’s there yet.
Credit card interest rates were average like 18% before COVID now they’re like 22%. Credit card debt was awful to have before COVID so I’m not sure COVID is to blame.
[NFCC.org](http://NFCC.org) is a network of non profits which can get the credit card debt on a repayment plan and the interest rates likely lowered quite a bit. But honestly, if he owes say 40k and truly has no savings and no assets then bankruptcy very well might be the best choice. But bankruptcy is in a way the easy part. What is going to change in their attitudes and behaviors that would prevent them from getting right back into debt? A lot of people who claim bankruptcy once claim it twice or more. Dealing with the finances is the easy part.
Also, I suspect your brother probably doesn’t have but if he did have a 401k (or other similar retirement account) he should absolutely make sure not to take money out of the retirement account because it could be protected from a bankruptcy. 401k protection is more absolute. IRA protection varies by state.
Attorneys often do short consults for free. Other than BK, earning more and cutting spending to the bone and throwing *more* at the debt every month is really the only way. With the facts you describe, personal loans and 0% floats are likely off the table, and all those do is buy time anyway. Start with bk lawyer
There are millions of people just like this…. I have them in my own family. Nothing you can really do about it.
Is the wife working? If not, that might be step 1 unless she is also providing childcare.
See if he will sit down and have a conversation about what his debts are and where is money is going. Look for ways to cut expenses and develop a plan to pay down the debt.
It honestly sounds like both people need a full time job despite their aspirations. When they can solve their current bills based on their current jobs, they can look at spemding more between the both of them.
Credit card companies will often work out payment plans if he can’t make the minimum pmt anymore. I did this a couple years ago in an AMEX at almost 30%. They dropped it to 9.99% and froze it. Started at 10500, now down to under 7000.
There’s a company called national that really that might be what he’s looking for?
https://nationaldebtrelief.com
I think we would need to know their household income and the actual total amount of debt in order to give any helpful advice.
If the two of them have a combined income of 90k a year and their debt is 80k, then that would maybe be bankruptcy. If they make 160k a year and their debt is 40-50k, then that would fall more into the realm of cutting expenses and paying it down.