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The high cost of descending into drug-related debt

By Erica Sandberg

Substance abuse results in more than health and relationship wreckage: Financial disaster often follows.

Many addicts ignore necessary bills, blow though earnings, deplete savings and borrow extensively from friends and relatives. Getting clean can be a brutal battle, and has its own set of costs. (See "The high cost of rehab: expensive, but attainable")

Can sobriety be achieved under such circumstances? Former users and top experts say "yes."

Drug-related debt: A debilitating descent

An addicts road to economic ruin
David Parnell, a father of seven from Martin, Tenn., is a recovering methamphetamine addict who knows all too well what drug dependence can do to finances. "During my addiction, I took out numerous 'quick cash' loans, high-interest loans and pawned the title to my vehicle," says Parnell. "My credit was destroyed." He was constantly maxing out his credit cards, and by the time it was over, owed $40,000. With no money, he couldn't take care of his children, and family members on both sides had to step in to buy groceries.

Stress and depression took a grave toll. In 2003, Parnell attempted suicide by shooting himself under the chin with a high powered rifle. He lived.

After recovering physically, Parnell had to become sober while also dealing with looming obligations and expenses. "When I left the hospital, we did not even have a vehicle because the title loan place had repossessed it. We would have been homeless if my mother had not let us live in her old farm house," says Parnell, who is now nine years clean. "The financial hardships hang with an addict."

Descent into drug-related debt can be slow or fast, with much depending on the substance. Mike Bloom, owner of Pasadena Recovery Center in Pasadena, Calif., says any drug can lead to financial ruin; however, "methamphetamine, crack cocaine, pain killers, alcohol and heroin are at the top of the list," he says.

In fact, some drugs, such as the increasingly popular "bath salts" (the American Association of Poison Control Centers reports that the number of calls concerning them rose to 6,138 in 2011 from just 304 in 2010, and more than 1,000 calls have been made so far this year) produce effects so strong and debilitating that the user cannot function well enough to hold a job or manage even basic tasks.

According to Dr. Dwight Zach Smith, medical director of Marbella Recovery Clinic in Plymouth, Mass., drugs that offer intense but quickly dissipating highs can get a user into debt swiftly because they don't stay in the system long. "The drugs with the shortest half-life push the person to use more frequently and lead to more significant financial losses."

Still, explains Smith, addicts typically don't start borrowing money to pay for their habit overnight, but over time. "They don't buy $1,000 worth of drugs at once. It will be $80, then $50, then $80 again. It adds up incrementally, but quickly."

Who do they owe? Everyone, everything
As a person's drug habit becomes more expensive (or if he gets fired or has already sold everything), he will typically exploit all financing opportunities. Cash sources include home equity loans, advances from credit cards and loans against their car. Bank accounts are overdrawn. They may pawn valuables, both their own and others'. Employed addicts may ask for payroll advances or take out payday loans. Almost all stretch out a hand to friends and family members.

Legal fines are common, too, and can be astronomical. The total cost of DUI is typically around $10,000, though it varies by state. For example, in Alaska, it's nearly $25,000. With each subsequent infraction, the figure escalates.

Many addicts end up behind bars for alcohol and drug-related crimes. The most recent Bureau of Justice report found that 53 percent of state inmates and 45 percent of federal inmates were abusing or dependent on drugs in the year before their admission to prison. During incarceration they aren't earning, bills are piling up (especially child support, if the addict is a parent to minor children). A judge may also order the addict to pay restitution to his victims, which can be thousands of dollars.

Then comes the most dangerous debt of all: running a tab with a dealer. Like many hardcore addicts, Parnell also had experience on the sell side. He extended credit to buyers as long as they were employed.

"The problem is when they don't pay you," Parnell says. "It could get really ugly if they refused. You had to retaliate, physically. You may not be a naturally violent person, but you'd have to do it. You'd rough them up or confiscate something, like take their motorcycle or tools." Some dealers will even accept sex with the debtors' wives as payment. "It's an evil world." 

Getting sober with bad credit
Financial obligations can be overwhelming and work against an addict's commitment to sobriety. The more they owe, the more difficult returning to a normal life becomes. "Most of the time, an addict has a low credit rating," says Bloom. "In a tight economy, addicts have a hard time renting an apartment, buying a car or house."

Bankruptcy can relieve some of the pressure. Before an addict considers it, though, Philadelphia business and bankruptcy attorney Michael J. Duffy says it's vital to first address the addiction in coordination with substance abuse programs, recovery programs and medical professionals. If and when the person is stable enough, says Duffy, "we may then recommend moving forward with a bankruptcy or other debt relief as might be appropriate. The client is then able to begin to rebuild their life, their credit and look toward a brighter future."

Not all debts are dischargeable, however. "The child support and alimony that results from an addiction ruining one's marriage would remain," says Duffy. "Also, debt as a result of fraud is not dischargeable, so if a creditor (including family members) claim that it was misrepresented to them that the money was to buy a new car to get a job and repay the loan, while in fact it was for illegal narcotics, they might be able to make this claim in the bankruptcy proceedings and prevent the debt from being discharged." Still, getting a legal reprieve from some debt can make it possible to meet remaining obligations.

Even when walking away from a financial mess is an option, it's not appropriate for everyone moving toward sobriety. If they want to improve their credit report, repaying debt is usually the best way.

More, making amends is an important part of recovery. It fact, it's step nine of the 12-step program. Parnell rebooted his life with the support of Narcotics Anonymous and understands the emotional healing making good on debt provides.

"I'm slowly paying off people," says Parnell. "I just paid a guy $900 from 1992. For me, it feels real good."

Parnell's advice to others working their way off substances: "Try to not worry about the finances -- get well and healthy. As the time comes when you're getting over the cravings you can deal with the debts. Later you can think of your business end and get yourself back in financial shape. Get clean first."

See related: How going to jail impacts your credit, Going to jail? 10 tips for reducing the financial damage

Published: July 5, 2012


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