Dear Debt Adviser,
My father-in-law is nearly 70 years of age and has no savings or investments. He is a self-employed courier and will have to work until the day he dies. He has a FICO score of 450 and is almost juvenile in how he budgets and spends money. With all of his debt, I believe he should seek credit counseling and enter a debt management program. My wife disagrees and thinks that it's too late for him. Which one of us is right?
Sorry, but both of you are wrong! I can tell you from personal experience that people who are self-employed are optimistic by nature, extremely self-reliant and firmly believe they can do almost anything given half a chance. If he had wanted to get credit counseling by now, he would have. Next, considering that he has successfully completed 70 years and is self-supporting, my take is that the issue is that he just doesn't see the need to change what has worked for all these years.
You mentioned his debt as though it is a large number. If that is the case, and let's say 20 percent to 30 percent of his income is going to service credit card or loan debt, then he might find himself in a tight spot at some point. To help him get a handle on his debts -- should he be willing -- I would recommend he speak to a certified credit counselor at a trusted nonprofit agency that is a member of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. I would suggest that you refer to the credit counseling as a sort of free consulting service that is available to help people see if they are missing any opportunities in the handling of their debts.
He can speak to a counselor by phone or in person, if he would prefer and a credit counseling office is convenient to him. His counselor will thoroughly review his financial situation and make recommendations giving him all his options. And yes, there will be a budget prepared that he might find useful (or not). In the final analysis, your father-in-law may not see anything wrong with the way he is handling his finances and may politely (or not) request that you and his daughter mind your own business.
However, if he sees value in making some changes in how he manages his finances, his counselor, as an unbiased third party, can point out some of the aspects of his spending and saving behaviors that might benefit from a minor (or major) tweak or two. As long as your father-in-law is serious about reducing his debts, is or is about to be experiencing a problem keeping up with payments and has enough income, it may make sense for him to consider a debt management plan that would pay off his unsecured debt in five years or less.
On the other hand, if your wife's assessment of the situation turns out to be correct and his expenses and income are totally out of line, the counselor may suggest that he seek legal counsel and learn what his options are under our bankruptcy system. Considering his age and already low credit score, a bankruptcy may well be an option for him. Only a qualified attorney can advise him for certain, however. If he does decide to check with a lawyer, I suggest he find one that does a lot of bankruptcies. A poorly advised filing can leave a person worse off than before. I expect that he will agree that in this situation experience really counts.
Whatever the outcome, the counselor will still have done a complete review of his finances and made suggestions on better ways to manage it. So, it is hoped, even if he ends up having to file for bankruptcy, he will have learned something from his counseling experience and you both can feel more at peace knowing you helped him in a caring and respectful way.
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