It’s A Family Affair: Multi-generational Financial Distress
At the bankruptcy court hearing called the First Meeting of Creditors, the Trustee, an attorney assigned to oversee your bankruptcy case, will typically ask whether you expect to receive an inheritance in the next six months. Almost every person responds with a laugh followed by a brief “no” or “I hope not.”
Most people find it incredulous or hard to believe that they’d be the recipient of any inheritance. An many hope that no one that they are close to passes away anytime soon.
In that first response there is an anecdotal message, a common story that many bankruptcy filers do not have family with any wealth to transfer upon death. We have the baby boomers that have to take care of parents who are outliving their retirement savings and children who are saddled with student loan debt. Millennials will be first generation to do financially worse than their parents. Americans do not save enough money, which will create a bit of a crisis as more baby-boomers retire. This is all happening even though unemployment is low and the economy is doing pretty well.
On several occasions, I have represented different generations of the same family who have had to file bankruptcy to resolve debt-driven financial distress when the collection funds and resources run out. When a significant life event occurs, most of us turn towards our main support system, our families. As previously stated, many Americans have little to no money in savings. What they do have can be gone in an instant helping out a son, daughter, mother, father, etc.
For example: Son and daughter-in-law fall behind on their mortgage, owing $5,000 in arrears, and face a pending foreclosure. Parents agree to use all their money in savings to bring the mortgage current and save the home from foreclosure. In the meantime, the parents turn to credit cards to pay unexpected expenses. The son and daughter-in-law fall behind on the mortgage payments again because the underlying cause of financial distress is still lingering.
It is possible that the son and daughter-in-law could have sought another alternative such as a loan modification or a Chapter 13 bankruptcy where a mortgage can be brought current through a plan that lasts 3-5 years. The parents could have then instead used the money in savings to cover the unexpected expenses or to pay the Chapter 13 bankruptcy filing fee of $310. For most of us, we want to help our family avoid disaster. However, there may be ways to provide support that you are not aware of.