Help...my inlaws are a mess...

[Diesel73L]

As some of you no doubt remember my wife and filed for CH7 back in December and were discharged in March. Since then our situation has improved dramatically. My wife now has a steady job, we're building an emergency fund, bolstering our retirement accounts, etc... Then there's my in-laws... They filed for CH7 back in the 1980s when my FIL's business (home building) tanked. They were able to keep their house, my FIL was able to find work, and they started over again, but managed to get themselves back into debt. Fast forward to yesterday. FIL was laid off from his job where he had been a project manager for a custom homebuilder. He was making about $70K a year. My MIL is a healthcare aid at a local hospital and only makes about $30K a year, but they get their benefits through her, so that's covered at least.

The question is what do they do now. I will start off by saying that neither of them make good financial decisions-they are very "live for the moment" (they have practically no retirement savings whatsoever) and impulsive. As an example, my FIL had a company truck as part of his compensation-it was his only vehicle. My MIL put it in his head that he needed reliable transportation in order to look for a job since they now had only one car. A few hours after he was laid off they went to a car dealer and leased a BRAND NEW PICKUP FOR $400 A MONTH!!! Oh, and the $1500 down they put on it was on a credit card... My wife has two siblings-each of which are completely independent of their parents and off on their own, but we have all agreed that we need to have an "intervention" of sorts with them this weekend before they make any other bad decisions. Since my wife and her siblings are open with each other and have quite frankly learned from their parents' mistakes, they all know about our BK and how it helped us a great deal, so they are looking to us for advice, but our situation was much different. Here is a rundown:

FIL - 56, unemployed as of yesterday-no retirement savings at all.

MIL - 53, healthcare aid-makes about $30K-has a 401K with about $30K in it.

House - 4 bedroom/2 bath raised ranch in Northwest NJ. They owe about $50K on it. Zillow says its worth $225K-I know that's not very reliable, but its what I have to go on right now. Not sure what the mortgage payment is, but I think it's less than $1500 with P&I, homeowners, and property taxes.

Debt - Besides the house, CCs are their only debt-they owe about $50K and minimum payments will crush them with the loss of income. MIL was telling my wife last night that she wants to take out a HELOC and pay off the cards Luckily I don't think there is a bank on earth that would approve them.

Cars - Both leased-one payment is $350 a month, the new truck is $400 a month.

Basically they were living paycheck to paycheck so the max benefit on unemployment is going to give them half of what my FIL was bringing in previously, so they are going to have to come up with a plan quickly. The way I see it there are a few options:

Option 1: Put the house up for sale. If they were able to sell it for even $150K, they could pay off all of their debt, walk away with $100K in cash, downsize to a smaller house or a condo, and live within their means as my FIL looks for a job (his prospects are not good-more on that later) and collects unemployment. At this point I believe the maximum period for benefits in NJ is 62 weeks.

Option 2: Enter into a CH13 with the intention of keeping the house. I really don't know a lot about CH13 so if someone can look at this through that lens and give me some feedback that would be great.

Option 3: Default on the cards and the house (maybe if they have no luck selling it after months and months) and try to stay as long as possible (NJ is a judicial state so foreclosure would be 2+ years away), while socking away as much money as possible. They could file CH7 in order to avoid any deficiency judgements, etc...and then pursue a plan similar to Option 1 (downsize to a small rental property).

Part of the reason this situation is so dire is that the job my FIL lost was one he was quite frankly lucky to have. He has been in the construction business all his life and knows the industry well, but for whatever reason just never gave any effort to keeping up with technology. He was hired by this company eight years ago because he had great credentials and skills, but they quickly became frustrated with the fact that he used his Blackberry as a paperweight, and couldn't produce typed reports in the office because he barely knows how to perform basic functions on a computer. In addition, his health is declining-he has Type II Diabetes and high blood pressure and is on medication for both, so it's not like a manual labor construction job would work either. Whatever happens with them financially, my wife and I are going to help him find a computer class at the community college that he can enroll in while he's collecting in an effort to update his skills. Regardless, I don't see him getting hired in the construction industry again with the industry in such terrible shape, especially at his age. I'm hoping that he can get a job at a Home Depot or Lowes and that he and my MIL can downsize their lives in a way that will allow them to be self sufficient, at least while they are still able to work. I'd appreciate any and all feedback.

[Diesel73L]

Eek...55 views and no suggestions-guess its worse than I thought... Another new wrinkle just came up. Apparently when he lost the business in the previous CH7, he owed something like $13K in state taxes. When he went to unemployment today during the automated sign up (they basically sit you down at a computer and you sign up that way), a question popped up about his former business. Something like "Are you, or have you ever been associated with the following company:" and the name of his old business appeared with a check box next to it. He checked yes and went onto the next screen. Nothing was said to him and the counselor told him that he would start receiving unemployment next week, but now he believes that it will either be withheld or garnished. Does anyone know how garnishment of unemployment works? After pressing my MIL for answers I found out that his wages have never been garnished, but that every couple of years they'll get notices from the state about the back taxes but that they just tossed them in the trash...

[AngelinaCat]

Hi Diesel: It's more like we're trying to figure out what to say....

How good is the relationship that you, your wife and her siblings family members have with your inlaws?

Realize that no matter the good intentions that you all have, most likely the inlaws are going to be defensive, and all of you are going to be WRONG.

Certainly there is denial going on with MIL persuading FIL into a $400 a month lease on a truck just hours after he lost his job.

[Diesel73L]

Hi Diesel: It's more like we're trying to figure out what to say....

Fair point...LOL

How good is the relationship that you, your wife and her siblings family members have with your inlaws?

It's complicated (as you might imagine)...

Realize that no matter the good intentions that you all have, most likely the inlaws are going to be defensive, and all of you are going to be WRONG. Certainly there is denial going on with MIL persuading FIL into a $400 a month lease on a truck just hours after he lost his job.

We're prepared for this not to be easy, however, we're can't sit by and let them destroy themselves, for a few reasons. The first is obvious, that they are family. The next is that we're all they have and we want to get them on some kind of path to self sufficiency because we don't want them to become even more of a burden in 20 years. The one thing we have going for us (thought it makes me a little uncomfortable) is that weirdly, they listen to me. There is a lot of interfamily conflict with my in-laws, my wife, and her sister and brother, but for the most part I'm left out it. I don't really want to be in the hot seat, but if helps them get back on track I'll be there.

[AngelinaCat]

Some reality checks here:

1. Don't let MIL touch that 401K--but you probably already know that.

2. Dump the $400 lease truck. If he can scrape together some cash, there are nice vehicles to be found sitting in someone's yard. Perhaps all the family members can help with that.

3. FIL has got to start learning and using the technology. Otherwise he is considered a dinosaur.

FIL needs to understand that age 56 it is unlikely that he will get another FT job in this economy. I was 56 when I lost my FT job. I have been passed over for FIVE good FT jobs. Although they aren't allowed to say so, I know it is because of my age. Employers don't want to pay me what my age and experience dictates, when they can hire someone half my age for a lot less. This after I told all these prospective employers that I was willing to work for minimum wage and NO benefits.

So he MUST bone up on the technology and make himself as attractive to prospective employers as he can. That he is in the construction industry is good, as when the end of this current cycle end, he might find something when construction picks up more.

Now, they have to adopt a more realistic lifestyle. In that MIL talked FIL into that lease indicates that she is accustomed to a certain lifestyle. That has to be scaled back.

They need to get together all of the paperwork regarding those back taxes and all of the other pertinent paperwork and start preparing to interview several attorneys.

I have some more things I can probably say, but I'll let you chew on the above for a while....

[Diesel73L]

1. Don't let MIL touch that 401K--but you probably already know that.

Yep, that was the next impulsive decision... "Well I have 30K in my 401K so we'll use that..." I disabused them of that notion already.

2. Dump the $400 lease truck. If he can scrape together some cash, there are nice vehicles to be found sitting in someone's yard. Perhaps all the family members can help with that.

I know nothing about leased vehicles-any idea if there might be some kind of clause that allows you to return the thing within a certain amount of days? I'm good with cars and am confident we could get him a $2000 beater that would serve the purpose of getting him to and from interviews.

3. FIL has got to start learning and using the technology. Otherwise he is considered a dinosaur.

Wife is already looking at community college classes so we're working on that.

FIL needs to understand that age 56 it is unlikely that he will get another FT job in this economy. I was 56 when I lost my FT job. I have been passed over for FIVE good FT jobs. Although they aren't allowed to say so, I know it is because of my age. Employers don't want to pay me what my age and experience dictates, when they can hire someone half my age for a lot less. This after I told all these prospective employers that I was willing to work for minimum wage and NO benefits.

Right-like I said, I'm hoping he can get something with one of the home improvement stores-they're everywhere around here and seem like they're always hiring.

In that MIL talked FIL into that lease indicates that she is accustomed to a certain lifestyle. That has to be scaled back.

That is going to be the toughest part. A HUGE portion of their CC debt is vacations, dinners out (not TGIFridays either-places with $30 entrees and $10 glasses of wine), and other frivolous things.

[AngelinaCat]

That is going to be the toughest part. A HUGE portion of their CC debt is vacations, dinners out (not TGIFridays either-places with $30 entrees and $10 glasses of wine), and other frivolous things.

That's what I thought. We used to do that all the time. Even though we pretty much knocked all of that out, I still miss going out to eat now and again.

Also, I have a hard time reigning in 'Hub. When a chunk of money lands in our account, he pipes up with "we NEED..." And I try to put brakes on it by saying: "It's got to wait until the next paycheck..."

[AngelinaCat]

I know nothing about leased vehicles-any idea if there might be some kind of clause that allows you to return the thing within a certain amount of days? I'm good with cars and am confident we could get him a $2000 beater that would serve the purpose of getting him to and from interviews.

I know nothing about vehicle leases, either, except that Consumer Advocate Clark Howard, thinks they are overrated and huge drains on the pocket-book [my wording] except in very rare cases. You might try going through his website and see what you can find about leases:

http://clarkhoward.com/

My thought is that every month you are paying out money for a vehicle, and turning it in every three years or so for another, and you never ever gain the satisfaction of having a paid for car. And NOT having that monthly payment!!

Although, something else always seems to come along to fill that void...

[Drazil65]

Hi, check with the unemployment commission for classes that would be free to fil because of his employment situation. Also see what the commission has for outsourcing resources. FIL may be able to get free schooling to be retrained in another industry, may open some new opportunities. He has to be willing to explore everything. Its tough out there and he will have to be diligent and keep an open mind. Also, your FIL may be able to get part time work as project manager in the building industry and maybe approaches potential employers with that suggestion (5 or 6 hours a day on jobsite) sometimes they are looking to cut costs to the point where someone with a lot of experience would be worth having on the job for a shorter workday. He will have to be creative and not wait too long to get back out there knocking on doors.

I think it may be a good idea to put the house up for sale and test the market, if they get a bite then by all means go for the downsize and pay off all debt. Maybe MIL can pick up some overtime at her job. Their biggest obstacle may be to learn to live within their means (their new means) and that is where you may have to step in and show them the way a little. Absolutely get rid of the new truck, bad decision for sure.

[AngelinaCat]

Hi, check with the unemployment commission for classes that would be free to fil because of his employment situation. Also see what the commission has for outsourcing resources. FIL may be able to get free schooling to be retrained in another industry, may open some new opportunities. He has to be willing to explore everything. Its tough out there and he will have to be diligent and keep an open mind.

Also, your FIL may be able to get part time work as project manager in the building industry and maybe approaches potential employers with that suggestion (5 or 6 hours a day on jobsite) sometimes they are looking to cut costs to the point where someone with a lot of experience would be worth having on the job for a shorter workday. He will have to be creative and not wait too long to get back out there knocking on doors.

These are all good suggestions. Also, with a PT job, FIL can still draw UC. It will be offset by whatever he makes weekly in the PT job.

For example, here in Florida, the maximum you can get in UC is $275.00 a week, if you were in a fairly good midsize to higher paying job. When I lost my FT job, I was entitled to the $275.00 a week. But in my PT job, I earned $120.00 a week. So that offset my UC by $120, and I got $155.00 a week.

It still was a long way from making up for the salary I lost, but something was better than nothing.

[tobee43]

Diesel73L so sorry to hear all this! i know and understand this is "panic" mode right now.

first, if they only owe 50k on the house do not be hasty, as why would one want to sell it with such a low balance and with equity? maybe refin it at a lower rate if possible, but when you say living beyond their means. why PMI with a 50k balance? usually PMI is for a few years and then removed. i would attempt a refi. 1500.00 sounds so off base for a 50k mortgage doesn't it? i know you are just guestamating the amount. i'm not thinking there would be a deficiency judgement on that small of amount.

it's the cars oh my, as you are point out who and why would someone go out and buy a truck when they lost their job. why? it's a way that some people's psychology works right now they have no filters between what has happened to them and how it will affect their future hasn't hit them yet.

they have to get rid of the truck!! also nj pays high unemployment insurance, especially if he was getting paid 70k per year. i know we rec'd it for almost 2 years, enough time to get it together. how long does he have until he hits the age for SS??

they are really going to need to know what exactly is going to be their true income to make sound decisions. we know unemployment is only temporary, we know it's impossible to live on 30k. i also don't much about 13's other than one needs a steady income to be able to successfully meet the payment plan.

i wasn't much help, but i wish them and your family the best. i'm sure something will work out. also nj unemployment use to have free training programs where he can learn the computer and get some tech knowledge all for free.

[tobee43]

Diesel73L, ha...i was writing while you were posting about the classes.

angelinacat, your right. i had a part time job for a bit while on unemployment and they just paid the difference. i think our EI max was close to $500 weekly, but we contribute to the funds while we work all those years.

[Diesel73L]

A point of clarification to tobee-I meant Principal and Interest (P&I)-not PMI-whoops! Also, I'm realizing now that any speculation about what to do at this point is moot because in talking with my wife and sister today I got two different amounts owed on the house (my wife was told $50K by my MIL and her sister was told $80K). One of the things I am going to stress to them is that they have going to have to be brutally honest with themselves and with us in all of this. They also need to confront all of the things they have been avoiding all of these years. Apparently they've been throwing notices about back taxes due from the NJ Department of Treasury in the trash since they last filed BK back in the 1980s. How the hell my FIL's wages weren't garnished all those years I'll never know. In any event, I'm hoping that the fact that my wife and I have been through this (and come out on top) will help them see that they need to listen to us.

On another note, UI in New Jersey is $650 a week, but it remains to be seen how much of that will be shaved off the top in order to satisfy the tax debt.

[tobee43]

A point of clarification to tobee-I meant Principal and Interest (P&I)-not PMI-whoops! Also, I'm realizing now that any speculation about what to do at this point is moot because in talking with my wife and sister today I got two different amounts owed on the house (my wife was told $50K by my MIL and her sister was told $80K). One of the things I am going to stress to them is that they have going to have to be brutally honest with themselves and with us in all of this. They also need to confront all of the things they have been avoiding all of these years. Apparently they've been throwing notices about back taxes due from the NJ Department of Treasury in the trash since they last filed BK back in the 1980s. How the hell my FIL's wages weren't garnished all those years I'll never know. In any event, I'm hoping that the fact that my wife and I have been through this (and come out on top) will help them see that they need to listen to us.

On another note, UI in New Jersey is $650 a week, but it remains to be seen how much of that will be shaved off the top in order to satisfy the tax debt.

wow it's up to $650!! hopefully he'll get a nice chunk of funds for 99 weeks! that would good, of course not as much as 70k . the first thing to try and pin down is what is a solid dollar amount they will be working with. go to the creditors and tell them work with me or i will have to file bk and they will get nothing.

what is really important now that they purchased that car (YIKES) is to wait a bit for the dust to settle. that move is usually not something someone does right after they get laid off, but on the other hand if they needed a good car, its good to get it before all you credit is down the tubes?

[Diesel73L]

wow it's up to $650!! hopefully he'll get a nice chunk of funds for 99 weeks!

$650 a week is not bad but they've cut benefits to a total of 62 weeks-that will still get him to the last week of December 2014 though. The question is how much will the state garnish for the back taxes.

what is really important now that they purchased that car (YIKES) is to wait a bit for the dust to settle. that move is usually not something someone does right after they get laid off, but on the other hand if they needed a good car, its good to get it before all you credit is down the tubes?

They leased it-I'm going to recommend that they do a voluntary repo (basically return it to the dealer-it will hurt their credit, but so what at this point) and we'll figure out basic transportation for him some other way.