Helping a friend

[mike42]

My wife and I have been approached by a friend (really my wife's friend and I've come to know her through my wife).

Anyway, our friend is going through a divorce. She has a young child (one and a half years) and money is tight (at the very least). Her soon-to-be ex-husband is not providing child support regularly (or spending much time with the child).

Our friend has reached out and asked us for help. We're going to visit her one night this week to talk through her finances with her and to help her set a budget. Also, our friend has mentioned to my wife that she is considering bankruptcy.

While I don't know the specifics of our friend's finances yet, I know roughly what she makes (like my wife, she's a teacher) and what some of her expenses are.

I don't know what the debt situation is. Since my wife and I live essentially debt free and have never considered bankruptcy, I'm not sure what to ask or think about when we meet with our friend. Any thoughts, comments, or suggestions?

Here's what I think the financial situation looks like (rough terms):

Post-tax monthly income: $2,700

Rent: $800
Utilities: $100
Cell phone: $100
Car payment: $400
Car insurance: $100
Gasoline: $100
Food: $450
Day care: $400
Cable: $50

Total expenses - $2,500

From that perspective, it's tight, but doable. But I haven't accounted for clothing, toys, etc for the little boy. And the above also assumed $0 debt, although I know there is debt.

Once the divorce is finalized, everyone expects that the husband will be paying $850 per month in child support.

At what debt level would she need to consider bankruptcy?

[bjl584]

I've tried to help out more than one person with financial matters before. That's great that you are willing to help them. I would say that you can expect to be met with some resistance after you lay it all out for her, so be prepared for that. No one likes to hear that they messed up even when they do come to you for help. I can't really comment on bankruptcy. You will have to find out more details. It depends if she is behind on any payments and how much so. From the list that you gave, it looks like she is living pretty close to the edge, but if she is able to make all of the payments, then she may not be eligible to file.

[mike42]

Thanks. I think she's living close to the edge, but I don't know what other stuff is hiding. I'm nearly certain there's credit card debt (just not sure if we're talking thousands or tens of thousands), plus some significant student loans.

I don't think she can get out of the student loans through bankruptcy. Maybe she can get rid of the CC debt that way (assuming it exists).

Part of me wonders if she has an income issue or a spending issue. I suppose I'll have a better handle on it soon enough.

[jIM_Ohio]

Bankruptcy stays with a person for 7 or 10 years? So my thought would be if getting debt free can be done in less than 7 years, it is better to pay off?

[Seeker]

Bankruptcy stays with a person for 7 or 10 years? So my thought would be if getting debt free can be done in less than 7 years, it is better to pay off?

10 years.


Some of the expenses seem high to me. $100 cell phone; $450 food may be places to begin. Cable is probably not basic service, and the costs of it really depends on location (probably has a computer that uses cable as well).

[maat55]

This may sound harsh but, I see her able to condense her bills to about 2000 per month. I give this answer as what I would do to get debt free.

800 rent
100 utilities
450 food
30 land line phone
100 gas
400 daycare

Sell car and get cheap car
50 ins. for cheap car

1930 total 850 + 700= 1500 extra 18,000 year for debt roughly

She may need some of this for cheap car

[myrdale]

The car payment does seem high. How much longer does she have left on the car? 6 months, 5 years, or somewhere inbetween? Personally I put alot of value in a good dependable car (truck in my case).

She can cut back on the cell phone for sure. I have the basic plan of 500 minutes per month at $50 total. $5 of that I am wasting on phone insurance every month. She should have per phone reduced for sure.

Any chance she could find a cheaper appartment? $900 per month utility and rent might be a deal where she is, but it is a bit for me. I lived in a slum for over a year at $600 / month with utilities included (no cable). I am not suggesting she do that, just find something cheaper.

Does she have any family who would let her move in? 6 months or a year long enough for her to get up and running again?

Lastly she should work on killing any existing debt forsure.

Best of luck!!

[Seeker]

Here's some info on student loans and bankruptcy...

Student loans in bankruptcy


I'm not sure where your friend stands as far as total amount , nor whether she's made a five-year good-faith effort to pay. If not, there's really no chance of discharging this debt via bankruptcy.

[maat55]

I myself am debtfree, but I have recently swithed to basic cable 13 form 45 and resigned my golf membership of 140 a month, lowered my food from 600 to 400 and stopped paying my daughters SL of 85 to save money for a specific future need. I also don't go out to eat or blow money unwisely. If I had debt, I would do much more.

People can pay their bills and be debt free if they truly want to be.

People, you can live without:

Cell phones
cable
financed cars
internet
dingdongs
rental movies
beer
ciggerettes
bar tabs
etc.

The neighbor boy nextdoor that i despised at one time was told by a teacher that he would never amount to nothing. He is close to becoming a doctor to prove them wrong.

[disneysteve]

As others have noted, there is plenty of room for improvement in the expenses you listed. But we really can't answer your question without knowing what debt exists. I'd also want to know how much time is left on that car loan. An extra $400/month free sometime soon would be a huge help. How soon will the divorce be final, and how likely is it that child support will actually be paid?

[Broken Arrow]

The husband really SHOULD have been paying child support this entire time. Why he isn't is a very serious matter in my opinion. Your friend may also need to beef up additional funds to cover expenses that may be involved in pursuing child enforcement.

[mike42]

Thanks for all of the great input everyone.

I agree about the expense cutting -- particularly with the car, cable, and cell phone.

I'm also in complete agreement with about the child support. But the wife just has issues being direct with the husband about the issue and he seems to live in little boy fantasy land (never having really accepted that the child's financial needs are a part of the reality he's created for himself).

I still don't know the debt situation as we haven't had a chance to sit down (the father of a close friend of all of ours passed away suddenly last week, so everyone has been tied up with that).

[Broken Arrow]

That's exactly why child enforcement is there, because there are women who have trouble confronting dead-beat, abusive, or just plain delusional ex-husbands. I have a good friend who is an Assistant DA and specializes in child-enforcement cases. She will tell you that their staff are very gentle and supportive of women who are in need of their help (or men, but it's almost always women in these cases). Please tell your friend that she need not be afraid of filing charges, if it comes to that. The City will do the enforcing for her. She only needs to come in and talk to someone.

[mike42]

Thanks - that's great advice. I'll ask my wife to call her tonight (that type of conversation will be better between the two of them, as they're closer).

Edit - can charges be filed (or the matter pressed legally) even before they're divorced? I get the feeling the husband is dragging out the divorce to make it easier for him to not pay child support.

[aevans1206]

Yes, and she should be owed back child support. Generally it's 25% of GROSS salary.