Your Parents and Preventing Bankruptcy
About seven years ago my father passed away and left my mother with the responsibility of managing her finances for the first time, at the age of 60. She had never balanced a checkbook, paid the monthly bills or had to worry about her investment portfolio. My father handled everything because that’s what men did in their generation. When he died, my mother found herself overwhelmed with financial decisions.
At first, she tried to handle everything herself. But as bills mounted, my mother came very close to losing not only her home but facing bankruptcy as well. Luckily, I got wind of my mother’s financial troubles before it got to the point of no return, but many of the elderly are not so lucky. Over the last two decades, bankruptcies for the elderly have grown from 2.1% in 1991 to 7% in 2007. It’s still too early to tell how many bankruptcies will occur from the recent Recession.
While talking to your parents about their finances might seem taboo, it’s important to take preventative measures before a financial or medical disaster forces you to intercede. A death of a spouse, bad investment decisions, poor retirement planning, theft, fraud or even illness can have a substantial financial impact. And don’t expect your parents to ask you for help. Only 35.2% of seniors asked their family and friends for financial assistance before filing bankruptcy. Because they’re used to taking care of you, they may not want to burden you with their troubles or ask for the money back that they loaned you.
Instead, many seniors are depending on credit cards to float them through tough times. The Consumer Bankruptcy Project found that four out of ten seniors who go through bankruptcy had five or more credit cards, and carried a median credit card debt of $27,213. Many of them don’t even bother to contact their creditors to try to work out a deal. One of the clues that I found during a visit was a stack of unopened bills sitting on my mother’s desk. Because she didn’t have the money to pay her bills, she was just ignoring them. It was just by chance that I was searching for a pen when I noticed them. I used that sign to start the conversation about her finances.
It took time, patience and understanding to work through her finances, but we were able to sell her home and get a condo. We sold off investment property to pay off some outstanding debts. I had to put down some hard rules about gift giving to my kids. Finally, we worked out a budget that would fit within her monthly income. My mother was able to avoid bankruptcy; however, that was because we were able to fix her finances before they got to the point of no return.
Don’t let a financial crisis prompt this conversation. Talk to your aging parents about money, and setup a plan to help them enjoy their golden years within their budget.
About the Author
The following post is from Kathryn Katz, a Certified Personal Finance Counselor who works for Consolidated Credit in Ft. Lauderdale, Florida. Their non-profit agency helps families through financial crisis using credit counseling, debt consolidation and financial education.