Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
Dear To Her Credit,
When my son (49) had bad, bad credit, I authorized him to
use two accounts of mine -- a Visa and a business American Express card. I had
the AmEx account because I was going to start a cookie business and the rates
seemed good. I never used or signed either card. I told him he could use the
cards for a couple of months, and I assumed he wouldn't spend more than a few
hundred dollars.
His signature is on all of those bills. I didn't know he was
still using them, in fact I thought I had closed the American Express. Now I find out that
he called them and had all the bills sent to him. He has run up balances of
over $20,000.
What can I do other than seeking legal help and ruining his
life? I cannot pay those bills nor do I want to hurt my credit score as I
pay the minimum or more each month, but the companies have been calling me.
I know I should not have been so generous, but he is my only
son. -- Lenore
Dear Lenore,
You have a worse problem than a $20,000 debt right now. You
have a son who, way past the age when he should know better, is treating you
disrespectfully.
I know you had the best of intentions. We parents all want
to help our kids and to have good relationships with them. In the short term,
it seemed like handing over your cards to him would accomplish both of those
things. In the long term, it has accomplished neither. Giving a card to someone
who cannot handle money is like opening a tab for an alcoholic. And unpaid
debts between parents and children only cause more stress in relationships.
If you authorized him to use the cards, he didn't break any
laws doing so. I don't know if he had the statements sent to him because he
intended to make the payments himself or to hide them from you. Either way, sorry
to say, the bills are in your name.
Bankruptcy is not a good option. That amount of money is not
worth going bankrupt over as it would cost you another $5,000 in fees by the
time it's over, plus repercussions to your finances for the foreseeable future.
It's not your answer.
People ask a lot about negotiating debt settlements with the
credit card companies. However, despite what you've heard in some
advertisements, nobody can snap their fingers and cut your debt in half or make
it go away. Banks typically settle with debtors only in extreme hardship cases,
such as catastrophic illness or unemployment. Loaning out your credit cards
to your son probably won't qualify.
The first thing you should do is close every account your
son has access to. Check your credit report and make sure he hasn't bought
anything else in your name.
Next, level with your son and tell him you cannot afford
these bills. Kids often assume their parents have unlimited money (although a
49-year-old kid should know better). Tell him he is going to have to pay you
back and give him suggestions on how he can do so.
He must have bought things with the $20,000. Is any of it
returnable? People who go on spending sprees often have clothes with the tags
still on or electronics still in the box, for instance. They can go back to the
store. Used items can be sold on eBay or Craigslist. If he's enjoying the
latest sound systems and video games while you get stuck with the bills, the
party's over. I don't care if it's installed in his car -- tell him he has to
pay for it or sell it.
You can even offer to take items of value in lieu of cash.
Does he have a motorcycle, a fishing boat or guns? He may laugh when you tell
him to hand over his toys, but this level of debt is no joke. You are perfectly
capable of turning it into cash to start paying down this debt. If he can't
part with his stuff, maybe he will suddenly find cash.
Don't let him reduce what he owes you by claiming inflated
values of what he owns. People tend to overestimate what their things are worth
-- often by two or three times. Check out the wholesale values yourself, or
agree to only reduce the amount he owes you by the cash you get out of them.
I'm assuming that if your son is 49 years old, you must be
retired. Earning enough money to pay off $20,000 would be daunting. Your son,
however, is in his prime earning years. He spent the money -- he can pay it
off.
If he's already working full-time, your son might have to
take an additional part-time job to pay off the debt. If there are no jobs
where he lives, he may have to start a service business of his own that doesn't
require an investment. Depending on his skills, he can do odd jobs such as
driveway resurfacing, roof cleaning, after-school tutoring or Web site design. Essential
services are the best bet because even in a slow economy, people still pay for them.
The bottom line is this: Your son owes you $20,000 and he
has to pay it back. It's the best thing for him, for you and for your
relationship with him.
Sally Herigstad writes about women and credit every week for CreditCards.com. Herigstad is a writer and finance consultant for MSN Money, a personal finance software product. She is also a member of the Washington Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Her Web site is http://helpicantpaymybills.net. Sally Herigstad lives in Kent, Wash., with her husband Gary. They have two grown children, Valia and Grant.
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
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