Should You Let A Family Member Pay Off Your Debt?

An interesting piece of a thought that have recently came through my mind, should a family member pay off your debt? In what circumstances and why would they actually do it?

young couple looking through their debt’s obligations photo taken from pexels by MIkhail

Due to a number of circumstances, people are usually getting into some form of the debt, whether it is financial or physical debts by owning one, and the question is at which point of time the person should seek help within the family ties and see what else can be done and achieved.

  • Should a family member pay off your debt?
  • Should you as a family member consider bailing someone’s debt out?
  • What are the consequences for looking after someone?
  • What are the benefits?

In this article, we will just briefly touch on all of the points

Let’s start by defining a family member

first of all, I would like to define what the family would mean in this context as for the Western Cultures, generally speaking, a family is the immediate siblings and the parents, while in Asia/South America it could also include the uncles, aunties, grandparents and cousins, while the African/Middle Eastern countries are looking at the complex environment of an extended family which could include 3rd/4th ties with cousins etc.

There are some examples in the remote cultures where the monogamous relationships are non-existent and in this case the relationship is more tribal rather than a traditional understanding of what the singular family would actually mean. Their understanding of debt would be different to what we know about it.

What is a debt?

In the case of the help with debts, let’s start looking at the student debt in the circumstances where the parents can actually afford they will put the kids through the education debt free or encourage the kids to seek some sort of financial aid/assistance (scholarships), therefore the student debt that has incurred on a student could be simply based that either the family cannot afford to support the student or the student has some type of estranged ties with the family, so in this case, therefore the repayment would be based on the changes in the financial situation or the family ties have been repaired.

Therefore, we could easily assume that the debts are what the individuals have either a legal or a moral tie to repay (or not) sometimes in the future or in the agreed schedule.

the debtors are shackled to their debts photo taken from pexels by Monstera
Getting in trouble

Most often the kids do get into some sort of trouble knowingly or unknowingly and this is the time when the relatives/immediate family can have their own say in saving “the family name, or prevent the embarrassment” alternatively they just want to squash a type of misbehavior / mishap that may have taken place, let’s assume that it was a good idea to steal an apple and now got caught and potential legal consequences, the family would get involved either with the shop owner to repay the stolen apple + goodwill 

Family Inheritance

The most interesting case for me is the inheritance, it could be very beneficial for some family members if they have received some sort of financial assistance through inheritance to pay of whatever the debts that they may have had, I personally (through professional services) know quite a few families that have paid off their mortgages and immediate debts and moved into property investing through the inheritance that they have received upon their grandparents’ wills.

Most often than not, grandparents do get involved in helping out the grandkids in either paying off the immediate debts (short term loans such as credit cards) or provide financial assistance towards the first home deposit 

Anecdote of family’s misuse of accounts

One of the odd cases that I have come across was when the couple were going through the rough time and they were going through the divorce component and the lady’s ex-husband walked in and bought out the house making sure that his kids and his ex-wife had a place to live, so therefore for the ex-wife it was a debt free house and the new ex walked out with his cash that he put in 

So, should a family member bail out/ help with the debts?

The rule of thumb would say, yes, the family members should help each other out in the worst circumstances. Also, it helps build a better bonding experience or the help around as tit-for-tat scenario. Most importantly it would depend on what is the acceptable component of the cultural acceptance, the family ties and the relationship within the family.

If you are a family member, should you help the other family member?

Now, we are coming a tricky part of the conversation, would you open your wallet and help someone? In the case of my family, we have some relatives that are living one day at the time. They have gotten used to not working or trying not to work hard, and every time when they get themselves into financial trouble, they are asking us to bail them out. Interestingly that over the years the sum of zeros has significantly increased, it went up from a mere help with $1000 or less to now getting into six figure sums. Although, at the beginning it was easily understood that we can help and should, now with the increased sums, it only begs a question at which point would they stop.

What are the consequences of looking after someone?

As the above example, of personal experience with the relatives and friends, the direct consequences come from the loss of significant of personal net worth and the financial burden that it has brought out. Therefore, this needs to be done at the slower pace while listening to professional services as a confirmation of the second opinion that would never hurt as they are related by any family ties or have any interest but yours.

the debtor will get you, illustration by Monstera taken from Pexels
Here are the 3 main reasons why a family member should not pay off the debts of another family member
Reason 1:

Typically, under some specific rules and laws another relative or another person is not responsible for another person’s wrong doings. Therefore, do not need to actually step the foot forward towards the person that made the bad decision.

Reason 2:

Money is the cause of all of the misfortunes which then creates an argument and unnecessary tension for all of the immediately involved people and their relatives.

Reason 3:

This situation and expectation could make the whole heap of trouble and make the situation worst for the original borrower and the person that have bailed them out.

What are the possible alternatives to paying off the debts?

First and foremost, is learning what the debts actually entail, there are accidental debts or the ones that are taken on purpose. The first step would be to improve financial literacy which would help budget the money accordingly. Then start looking into own steps without relying on anyone else and be happy about the opportunities that you have rather than the debt that you carry. Lastly, stay focused on the goals, we only have 24 hours in a day and use it wisely and appropriately, rather than wasting on chasing the wild goose, learn how to manage finances and get out of the hole that you dig yourself in.

If you liked this article and would like to discuss any of the points, feel free to reach out to me, add me on social media or learn a little bit more about me.

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