Over the last several months, I’ve have met a number of parents seeking advice about bankruptcy. While every family has its own unique set of circumstances, all of these people I’m referring to are homeowners, and all have been struggling making mortgage payments. All have adult kids living at home. And let’s face it – if they are sitting across the table from me – a bankruptcy attorney – things aren’t going so well.
Some have kids who have graduated from high school, college or graduate school, and they are still living at home. Some are working, some are not. Some kids are working, while going to school part time. Others cannot find employment or are under employed.
I will inevitably ask one question: “Is [the adult child who is working full time or even part time] contributing to the household income?” If, the answer is “no”, there might be some bigger problems.
First, let’s look at the basic problem: Mom and Dad are sitting in an attorney’s office kicking around the idea of having to file bankruptcy – and quite possibly facing foreclosure as well – and an adult child who is working and not attending school is not contributing to the household operating expenses. At all. At first glance, there is something fundamentally wrong with this picture.
I ask this question: “Why isn’t [the adult child who is working full time or even part time] contributing to the household operating expenses?” Sometimes, I hear a good answer: “the kids are working and saving up for rent deposits for when they eventually will move out.” It then turns to laughter because they earnestly tell me how much they love their kids but they really want them to move out.
But more often than not, one parent will turn to the other and say something along the lines of “go ahead, tell him why they are not contributing…”. It then becomes obvious that by my asking an otherwise routine question, I’ve touched on a nerve, and the family is not in agreement.
I’ve heard some really bad reasons: “the kids don’t have any money to pay us because by the time they pay their cell phone bills there’s nothing left. Plus, they are always going out every night.” Or this doozie: “well, they don’t contribute because they eat out all the time…so we don’t worry about food costs with them.”
When I hear the bad reasons, I remind them that I am a bankruptcy attorney, that they are sitting in the office of a bankruptcy attorney, and they are speaking to a bankruptcy attorney because they are considering, among other things, seeking bankruptcy protection. I also suggest that I would not have to worry about the costs of going out every night if I did not pay rent.
These family issues get all the more difficult if in seeking bankruptcy protection, there need to be some fundamental shifts in how the household spends the money that comes into it. In other words, there needs to be income to fund a chapter 13 plan, or expenses need to be cut to make things work. Life in this household has to change, and how this household operates has to change if the parents’ goals are to be met.
While it is a household, sometimes parents sometimes don’t think of it that way – they view their role as parental, with them assuming responsibility for the kids (either by default, or by their own volition). But if losing the home in foreclosure is a possibility, it’s not merely a parental issue. It’s an issue that will directly impact every person living under that roof. And that’s why I talk about it. And that’s why families need to as well.
As a postscript, while I was putting the finishing touches on this blog, a dear friend forwarded me this from Gawker.com: Why So Many Twentysomethings Live with Their Parents. What jumped out at me was this: “…statistics show that parents today spend 10 percent of their income supporting their adult children.” [emphasis added].
I really don’t care how parents spend their money. But it’s my job to advise them to care about it when they seek my counsel because they face the very real prospect of losing their home… and their dignity.
And again, that’s why I talk about it.
- When Parents are in Debt
- Talking to your Kids
- Unintended Consequences in Estate Planning
- Talking to the Kids: Dealing with Failure
- Families Fighting About Debt