What To Do When Your Parents Are In Debt Trouble
This article is posted under Life Lessons, Personal Finance.
As a child, most of us believed that our parents are perfect.
But as we grow older and become more independent, we often realize that our parents are just like any one who would sometimes make bad choices and commit mistakes.
Such is the realization of a friend who confided with me one night about the enormous debt that his parents have.
He was distressed, disappointed and have gone tired of trying to earn more money so he could pay the debt of his parents – credit card debts, debts from loan sharks, relatives and even some of their close family friends.
I felt that it was not really my place to ask for details, so I just listened to him express his feelings and in the end – I tried my best to give him some encouraging words and advice on how he can handle his situation.
Are you in the same shoes as my friend?
I know this is not an uncommon circumstance, specially for Filipinos where family ties are very close.
If you are, then what should you do? You may be asking, are you responsible for your parents’ debts? Should you feel obliged to pay those debts?
I took the liberty to ask a lawyer regarding debt settlement for parents and their children and I learned some very interesting facts.
First, you are NOT responsible for your parents’ debt UNLESS your name is on the account in question, for example – you co-signed with your father in the bank loan he availed.
Second, credit card debts are personal to the debtor and credit card companies CANNOT go after the children to pay for those debts.
However, there have been cases where parents have referred their children to the creditor to handle their debt. When a child signs relevant contracts such as a promissory note or a debt restructuring agreement, then they will become a co-maker and will then become accountable for the debt.
And third, in cases when the parent dies – the fact that you are NOT responsible to pay the debt still applies BUT the creditor CAN CLAIM from the estate of the debtor (the parent) if there’s any, and this will happen before the parent’s is distributed to the children.
I am not a lawyer and this is just how I understood the explanation of the attorney. Please be advised that if you have more questions on legal accountability and other related issues, then please consult a lawyer or a banker.
While it may be a relief for some to know that they are not legally liable for the debt of their parents – it is however, in my personal belief, the responsibility of a child to help their parents to get out of debt.
And this is where things become more complicated for the situation becomes less about the money and more about love and respect.
Here’s some advice you can take:
Start With Yourself
It will be hard for you to help your parents with their financial worries if you’re in debt trouble yourself. So always start with yourself – be financially smart, save money, learn to invest and control your own debt.
Your parents may be too proud to admit to you that they have debt problems. When you know that they are having financial difficulties, take the initiative and offer help. Be sensitive with bringing up the topic and it’s important to make them understand that your respect for them remains despite everything.
The reason why I said that you should start with yourself is because consequently, your personal finance will become “family finance”. You will no longer be tracking just your own expenses but your parents’ and possibly the whole household. Be strong and focused, be firm and take control.
Educate and Inspire
Helping your parents to get out of debt is not only about the money. It’s not as simple as taking all their credit card bills and paying them yourself. It’s important to also guide and educate them to become more financially responsible.
Inspire them to pursue wealth and financial freedom. Know that it’s never ever too late to start one’s journey – something that Colonel Sanders believed in and you should too.
This article is part of a collection of legacy articles On Money, Friends and Family. Please visit that section to get more related posts.
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Philippine Fair Debt Collection Practices Act
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