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Dealing with the financial mistakes of my past - Opening up credit under my name for relatives

executivedealer 373 June 12, 2012 at 06:51 AM
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As some of you may or may not remember, I came here not too long ago asking for suggestions on my goal towards paying off my student loan. Anyways, long story cut short - I'm on track and everything is going better than expected. I ended up taking a bit of a risk and shaving off 5k off my emergency savings fund which currently has 11k left on it to put towards my student loan. So right now, I only have about 4.5k left with my student loan. I figured with all the interests I had, it was better paying a big chunk it off then continue to face the reprucussions of having a high balance and paying the beautiful Sallie Mae the profits it makes off of interests fees. I'm basically going to put 1k each month until I pay it off whole.

Anyways, the point of me posting here is not so much my student loan. I've been checking my credit score every now and then with creditsesame. Everything looks good up until to the point where I get to some of the past mistakes I've made. About 7-8 years ago, back when I used to live with my parents and had pretty much no clue into the world of finance AT ALL - I opened up a credit card under my name for my dad who at the time said it would help my credit. The second mistake around that same year was opening up a credit card for my sister and brother in law to help them open up a store credit card. They (sister) said it was a small $500 purchase and they would pay it off. Fast forward 8 years later, I'm on track with everything I have under my own belt - Paid off nearly all my student loan and all that is left is my car loan which is a 2k loan. I checked my credit score and history with credit sesame, I see the huge balance that my dad still has yet to pay off - about 10k and my sister who now has 4k on the credit card. I've been telling them for 2-3 years now to pay it off and with all the financial drama that's been going on with them, that never ceases to finish, it has not gotten any better. I made some huge decisions in my life, mostly sacrifices to get to where I am now in life. I'm much more happier and settled with where I am then where I was years ago. I'm also absolutely distant from how my family is in the financial sector. They are good about paying off the "minimum" balance and not being late; as I've brought this up many times to not to be late on payments. They are able to commit to at least that, which I'm thankful I guess. But it does not seem to have gotten any better. My sister's husband got laid off and he's on unemployment. My sister does not have a job. My dad is also struggling with his house mortgage and other bills.

This was my mistake, so I accept all responsibility; but I'm asking here to see if there is anything I can do to expedite this process or if I can get any suggestions to see if it is even possible to get the two cards completely off my name and transferred to them so I don't have to worry about liability / late payments / etc. I'd like to have and maintain a good credit, build it up so I can eventually get as good deal as possible with future purchases such as a house, but these extra balances are hampering my progress and just annoying the hell out of me. I know I'll probably just have to deal with it, so be it, but again if there are any suggestions for someone who has been in a similiar situation, especially family, please let me know.

59 Comments

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#2
It sucks that you have been used by your family and they have no respect for your credit. Are they still using these cards that are in your name? If they haven't paid them off in the 7-8 years that they have had them and have not made a dent in the balances in the past 2-3 years then you're probably gonna be stuck paying them off yourself if you want those balances off your credit report. You need to get the cards back from them if they still have them to prevent future purchases or if it's possible, freeze the accounts to prevent additional use. With them just paying the minimal amounts the cards will never be paid off.

Maybe you can set up a payment plan with them where they can pay you directly a set amount each month until they've paid off the balances that you have paid off early. Hopefully that way you won't be out the full 14K yourself, but will slowly get it back over time. Otherwise your gonna have to consider it a lesson learned.... never give credit cards or $ to family unless it's amount you're willing to never get back.
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#3
You need to close the accounts. Not just freeze them.
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#4
You need to cut up those cards. There is a reason why they do not teach Personal Finance and Budget 101 in colleges, and have credit card representatives handling out *free* t-shirts if you sign up for credit card. PROFIT..
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#5
if they are still using the cards for some god-knows-what reason, request a new card to your address, and render the old card unusable (although in 7-8 years I would imagine it has expired..)

or you can try asking the credit card company to raise the minimum payment, I don't know if they will but it wouldn't hurt
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#6
Am I correct in reading that you have 11k in savings now? If that’s the case I wouldn’t touch it to pay off the credit cards.

Paying them off is risky, especially if your sister or father will have months where they "cannot" come up with the money. Asking for the minimum payment to be increased also puts you at greater risk they don't make a payment.

Closing the accounts so no additional charges can be made is a good idea, but I think you are trying to do this without causing family problems.

If it is possible, try to transfer the balances to a new card without your name on it. It’s a win-win as long as your family can get approval, OP’s name is off the card and the family will get a lower rate. If they are making minimum payments they could have a decent credit score.
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#7
Quote from reddem0n View Post :
I opened up a credit card under my name for my dad who at the time said it would help my credit. The second mistake around that same year was opening up a credit card for my sister and brother in law to help them open up a store credit card. They (sister) said it was a small $500 purchase and they would pay it off.
reminds me of a man named kenny powers Cool
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#8
freeze both accounts. Transfer balance to a new credit card under your name and hopefully 1 year 0% APR. Settle debt with sister for 50%. Ask them to pay 2000$ or in payments and pay off the additional 2000$ yourself. Consider it a 2000$ credit/finance lesson.

Ultimately, it appears as if you will be the one paying off the debt anyways. Atleast try to collect some of the money back and save your family some interest payments. maybe ask for 100$/mo for 2 years and you will forgive the remaining balance. Even if you collect 600$ (6 months) before they default, they are probably only making minimum payments ($30-50$) which is about 12-20 months.

As for your dad, that is a tough one. I would close the account and assume that the entire 10k is going to be yours in the future. Hopefully you can use your good/average credit to leverage more 0% APR credit cards to help lessen this load. Once all debt is paid off, throw him 100-300$/mo for mortgage, food, etc.

As their child, your responsibility for your father ends after providing them a roof and food. The rest of their debt is their choice. If you cant afford mortgage, maybe its time to rent/senior housing/low income housing etc. Your sisters life is her choice, her doing. She did not bring you into this world or raise you.

Also Student loan interest you can deduct from taxes. CC interest you cannot. Plus CC interest is higher. Might be best to use the 1k per month to pay off CC first then student loan.

I would just accept the fact that the debt is yours. Dont loan money or open credit unless you are willing to accept that the debt will be yours.

I was/am in a similar situation myself. It sucks for you and your family, but everything comes down to life choices. Everyone has made theirs, you have to do whats best for you....before you can begin taking care of them.
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#9
Another thought, depending on your housing situation and work/tax situation.

Why not buy the house from your father/or transfer ownership to you. You will need some tax write offs. Assuming the house isnt underwater, you like the home (location/size), and your current job can cover the mortgage. If your dad has equity in the house, he can sell it and keep that money to pay off his debts. Or sell it to you at his cost and you forgive his debt, keep the "lower payment" and provide him "free housing"
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#10
I offered to buy my parents house to puta roof over their heads and as an investment/place to live/tax write off; however, we lived in a nice house in a ghetto city. Something that I would never want to own. Additionally, my parents owed much more than the house was worth.

We (my parents) forclosed on our childhood house, and I found them a rental for 40% less than their mortgage. It was a change in lifestyle for them, but they have learned to adjust.
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#11
I still say try to transfer whatever balance possible to a new card in just your father's name, and the same for your sister. If they have other credit cards, you could also do partial transfers with each one.

I did this before in a similar situation (unfortunately I was the one assuming all the debt), but it worked fine. At the time, I transferred from a "joint account" to a new card with only my name on it. It was from Capital One (joint account) to Citibank (just me) and neither company had a problem doing it.

I would suggest you offer to pay the balance transfer fee, it's worth getting the debt out of your name. I don't see it putting any strain on your relationships either, just tell them the truth - you need it for your credit score and future purchases. If you offer to help find new balance transfer credit cards and pay the balance transfer fee for them, and then show them a lower rate and how they'll save cash as a result, you would be doing them a favor.

Whatever you do, make sure to monitor the cards for a little while after closing them to make sure no other charges or fees pop-up, and your sister/father hasn't used their joint card one last time. Good luck.
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#12
Quote from nav001 View Post :
I still say try to transfer whatever balance possible to a new card in just your father's name, and the same for your sister. If they have other credit cards, you could also do partial transfers with each one.

I did this before in a similar situation (unfortunately I was the one assuming all the debt), but it worked fine. At the time, I transferred from a "joint account" to a new card with only my name on it. It was from Capital One (joint account) to Citibank (just me) and neither company had a problem doing it.

I would suggest you offer to pay the balance transfer fee, it's worth getting the debt out of your name. I don't see it putting any strain on your relationships either, just tell them the truth - you need it for your credit score and future purchases. If you offer to help find new balance transfer credit cards and pay the balance transfer fee for them, and then show them a lower rate and how they'll save cash as a result, you would be doing them a favor.

Whatever you do, make sure to monitor the cards for a little while after closing them to make sure no other charges or fees pop-up, and your sister/father hasn't used their joint card one last time. Good luck.
I think this is the most feasible option for me at the time being. I will have to talk to them and see what they say, my parents have never been smart financially; especially my dad. I know he filed bankruptcy a decade ago, but looks like he never learned his lesson. As hardworking as he is (hes always held 2 jobs almost his entire life), he puts him self in that situation and same goes for my sister side too. I believe transferring the balance with my sister is more likely, given shes much younger with my brother in law and better chance of having a good enough credit to be eligible for new card balance transfers. If anyone could recommend any specific card, please feel free to PM me. They are not looking for air miles or anything, I think cash back card would benefit them the most.

Jaqnabox, as much as I would like to follow your advice, I'm not entirely too confident with my career right now. Things do not seem too stable, I'll have to see how things go before I can set forth towards a decision as big as that. If I remember correctly, the house is at least 300k+.
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#13
Quote from reddem0n View Post :
I think this is the most feasible option for me at the time being. I will have to talk to them and see what they say, my parents have never been smart financially; especially my dad. I know he filed bankruptcy a decade ago, but looks like he never learned his lesson. As hardworking as he is (hes always held 2 jobs almost his entire life), he puts him self in that situation and same goes for my sister side too. I believe transferring the balance with my sister is more likely, given shes much younger with my brother in law and better chance of having a good enough credit to be eligible for new card balance transfers. If anyone could recommend any specific card, please feel free to PM me. They are not looking for air miles or anything, I think cash back card would benefit them the most.

Jaqnabox, as much as I would like to follow your advice, I'm not entirely too confident with my career right now. Things do not seem too stable, I'll have to see how things go before I can set forth towards a decision as big as that. If I remember correctly, the house is at least 300k+.
Transferring the credit over to them (and you paying the fees) seems the best course of action. Unfortunately, all these family members could have trashed their own credit and may not be able to qualify for their own cards.

Get a back up plan. I like some of the other poster's ideas of taking 50 cents on the dollar. They owe 4K - give you 2k and you pay off all the debt.

I know you want to help your family (especially your parents) but you can't let their poor planning and bad financial decisions ruin your life and credit. Don't cosign for them or try to save their home. Just be warned it may happen. Things could get really bad and they will come knocking for you to cosign more loans/cards. Just be prepared. Decide beforehand what you are willing (and able) to do.
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2 tickets to the gun show
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#14
Quote from StarNova View Post :
Get a back up plan. I like some of the other poster's ideas of taking 50 cents on the dollar. They owe 4K - give you 2k and you pay off all the debt.
Screw that.

If they won't/can't get new cards in their name to shut down the current card, then the OP should close the accounts anyway. Either way, the current accounts are turned off for new purchases.

If the account gets closed but still in the OP's name, then I don't see a whole lot of difference between OP taking 50 cents on the dollar or whatever and having them make payments vs. the OP not taking 50 cents on the dollar -- except that the OP is out a lot of money.

Maybe at some point in the future if the OP is settled in and has cash to spare OP can forgive the rest of the debt. But until then, it's on the people who spent it.

Here's something to think about if the OP forgives part or all of the debt: what's going to happen if six months or a year or whenever later the owers who no longer owe say, "Hey, check out my new big-screen TV," or new barbecue grill, or new car, or can you watch my dog while I take a trip to Italy, or whatever else.
Quote from reddem0n View Post :
This was my mistake, so I accept all responsibility;
It's not your mistake, and it's not your responsibility. I mean, it is your responsibility because your name is on the accounts, and it apparently was a mistake to do that, but the real mistakes and responsibility are on the people who racked up the debt.

And if they don't take full responsibility, whether immediately or eventually, then their taking advantage of you is on them too.
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#15
Quote from Deusxmachina View Post :
Screw that.

If they won't/can't get new cards in their name to shut down the current card, then the OP should close the accounts anyway. Either way, the current accounts are turned off for new purchases. He should have already stopped the line of credit so they can't purchase any more. That's a given. Cancel the card if he has to.

If the account gets closed but still in the OP's name, then I don't see a whole lot of difference between OP taking 50 cents on the dollar or whatever and having them make payments vs. the OP not taking 50 cents on the dollar -- except that the OP is out a lot of money.

Maybe at some point in the future if the OP is settled in and has cash to spare OP can forgive the rest of the debt. But until then, it's on the people who spent it.

Here's something to think about if the OP forgives part or all of the debt: what's going to happen if six months or a year or whenever later the owers who no longer owe say, "Hey, check out my new big-screen TV," or new barbecue grill, or new car, or can you watch my dog while I take a trip to Italy, or whatever else.

It's not your mistake, and it's not your responsibility. I mean, it is your responsibility because your name is on the accounts, and it apparently was a mistake to do that, but the real mistakes and responsibility are on the people who racked up the debt.

And if they don't take full responsibility, whether immediately or eventually, then their taking advantage of you is on them too.
I agree to disagree. Many times these cases end badly. OP may have to pay the entire debt and write it off as a learning experience. Half the debt may be better than nothing. At least it's an option for him to consider.

Legally, it is OP's responsibility. It was a mistake to cosign his family's loans. Bad move on his part but now he is trying to make it right. He should have already stopped the line of credit - that's a given. They (his family) don't need to charge anymore. They needed to step up and pay their debts but they obviously haven't and it doesn't look like they will.

Best plan is to transfer the debt over to the family. But they may have screwed up their own credit so badly, they can't get a card to transfer to.

What option would you have OP do then?

OP, good luck. Transfer is the best option for you but you need to have an idea of what to do if your family can't get credit on their own or they refuse to transfer the debt into their own names. Cancel the cards if you have to.
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