My mom has been in a financial downfall, should she file for bankruptcy?

Question

Hi, my dad past away 3 years ago and my mom never worked, so when he died (he was 46) only had 100k for her and an annuity. She spent all the money on fixing the house, like my dad wanted, and paid off all the debt they had. The annuity brings in $900 and her bills are triple that! She's financially dumb! She listens to nothing we say. She does have a job now, but only pays 5.50/hr.

She also has 2 vehicles, one leased and one on a loan, fully financed. She has come to the point of them sending the repo papers, but she pays them eventually, she asks for money from family.

Should she file for bankruptcy?

Thanks for all the advice so far....
To answer some of the questions.....

1. she has two vehicles because my sister is in the same situation (spending more than she makes), newlyweds and already having trouble, so my sister has one of the cars!

2. I have bought books for her, but she'll read maybe 10 pages! She does not want to sit down and see the whole picture, she use to do that with my dad.

3. She owns the home, she paid off a HELOC after my dad died.

4. She has canceled her sat., cell, pest control and is on a basic land line service. All she has is her debt.

5. She's living off of her CC's because she uses her $900 to pay the car bills and maybe part of the care insurance. My grandmother gave her $1,000 last month and paid maybe 4 bills, including the cars, and still ended up over drafting $800 because she ate out too.

6. I've told her to sell, i've even posted an ad in craigslist myself, but she says she can't sell because she needs a car! So frustraiting.

Answer 1

Much depends on the financial situation, what are the debts and income. You may not have given all relevant information.

That said, she must sit down and look at her situation. In normal people, their income should be enough to meet the living expenses, plus a little in savings for emergencies and old age. If she is not saving, she is living beyond her means.

I met somebody like that once. She never wanted to think of the future, only of her present needs. She wanted to live well, but she could not afford it. She used family and friends to bail her out when the bills came. Finally, a day came when they would bail her no more. Then it came to her as a shock that she would have to cut down expenses. I think this is what alcoholics call to reach bottom. Today, some family members still keep a distance.

Sounds like your mother is headed in the same way. As for you, I would suggest not to bail her out anymore. It is not merely money going down the drain, it also postpones the day of reckoning.

As for your mother, bankruptcy is a serious choice, not done merely to escape the debts. Do you have any idea how many drug addicts, gamblers and such have tried to use bankruptcy to escape obligations ? I am sure banks have bitter memories of their dealings.

The best thing for your mother is to try to pay the debts on her own, without declaring bankruptcy. This will mean cutting expenses, at least for a while, perhaps permanently. If she declares bankruptcy, she would be yielding control of her finances to others, who, thinking she may be a closeted drug addict, gambler, or such, may put restrictions she may find unreasonable.

Of course, much depends on her situation. A conversation with a financial advisor may be in order, so she can measure her options.

Answer 2

It doesn't sound like she would qualify for bankruptcy.

She needs to learn how to handle her money. With a $900 annuity plus a job, she should be able to live just fine.

She needs a budget. Buy her some books on simply budgeting. Get her to write down everything she spends for a week or two, so she can see how much money she is wasting.

Why does she have two vehicles? Sell off the financed one.

Answer 3

If your mom does not pay attention to you with respect to your advice, in the past, what makes you think she will pay attention to you in the future.

So sad that she has gone thru 100k in 3 years ... that's 33k a year, which is more money than some people earn in a year.

Bankrupsy may be neccessary, but it can make her situation much worse. The Bankrupsy laws have been amended by Congress recently to put bankrupt people in much worse condition than they would have been under the old rules. Something to study.

So how do you know that's what dad wanted ... if that's what he wanted, why did he not do it when he was alive?

A loan fully financed is an oxymoron.

Answer 4

I don't think she would qualify and it's only a temporary solution at best. Sounds like she needs someone to show her how to live within the income she has. Get rid of one of the cars - there is no need for two.
See if you can get a financial councillor to help her understand how to live with her means - that way she is not hearing it from her family.
There is a show here in Canada called 'Til Debt Do Us Part' which showcases couples and debt. However, it's not just for couples as I've learned a thing or two from it as well. The site is located at: http://www.slice.ca/Shows/ShowsPage.aspx?Root_Title_ID=93097
And this part of the site might be useful as well: http://www.slice.ca/Explore/CareerAndMoney/

Good Luck.

Answer 5

This is simple. On seperate sheets of paper write the following:
Income- what money is comming in?
Expenses- what money is going out?
Needs- what is needed to live ( bare necessities)?
Wants- what things we can do without (this won't kill you)
then on another sheet list the things that can't be compromised like electricity, water, gas, food, taxes and insurance. On the wants page cross out the things that will not cause you to be on the streets and sacrafice them. On the needs remove emotions and stick to the things that are on the survival level like food clothing shelter etc. and contact me after you list your income and expences. Maybe I can help you create a realistic budget [e-mail]

Answer 6

No.

However, I suggest you to get a job and use it to buy life insurance for your mother so you can get $100,000.00 after she dies just like her.

You will get your chance to manage $100,000.00 and you can prove you are not as finacially dumb as her.