Our Woodland Hills bankruptcy attorneys know that this is a time of year when we collectively open our hearts and wallets to those who are in need‚ especially if those individuals are family members. This is becoming a more common phenomenon‚ as credit providers tighten their restrictions.
A recent survey by Charles Schwab found that 2 out of 5 people expect to be providing financial support to their parents at some point. Another quarter of respondents said they figure they will be providing money to siblings.
The problem is that not only can such arrangements become toxic for the relationship if promises are not kept‚ there is always the potential for your own finances to take a hit.
Some things you should consider if you have been asked by a family member for monetary help:
- Figure out if you can afford it. A recent survey by Ameriprise indicated that many baby boomers didn’t realize how much their financial help to others was hurting their own retirement accounts. In fact‚ 30 percent said they had aided their adult children‚ but were not aware of how it had impacted their own finances. No matter what promises are made‚ assume you will not see that money again‚ and then base your decision to help on that premise.
- Know what‚ if anything‚ you will request in return. Will you expect interest? Is there a timeline for when you must be repaid? Make that clear in the beginning. It’s also not a bad idea to get that in writing‚ especially because gifts above a certain amount are going to be subject to taxes.
- Try to determine whether there is a way you can assist without actually providing money. For example‚ if the issue is that your relative doesn’t have a vehicle‚ do you have one you could loan until they can save up? Consider any possible alternatives before you hand over cold hard cash.
What you absolutely shouldn’t do is dip into your own savings – especially retirement or 401(k) accounts in order to rescue your loved one. The reason for this is that you may be jeopardizing your future for something that may in all likelihood be just a temporary fix.
That’s because if he or she is already fighting off debt collectors or trying to protect their home from foreclosure‚ any help you offer is likely to be just a temporary fix.
If your relative is fighting off debt collectors as it is‚ perhaps one of the kindest things you can do is refer him or her to a good bankruptcy attorney. If you lend money prior to this and they do later end up filing for bankruptcy protection‚ you become another creditor‚ and you legally can’t be paid any more or any faster than any other creditor.
So before you open your wallet‚ urge your a struggling relative relative to pick up the phone and seek help from an experienced bankruptcy lawyer.
If you are considering bankruptcy in Woodland Hills‚ contact Cal West Law
to schedule your free consultation. Call (818) 446-1334.