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Michelle Singletary, "Big Mama used to say it's not how much money you make that matters, but how you make do with what you have"

Questions & Answers

Debt

Question:

Can you explain when one is responsible for others debt in death and when he/she is not? Does it depend on your relationship, i.e. spouse or parent, or type of debt? I'm so foggy on this issue and think it is important because I have heard that creditors will get you to pay if they know they can.

Answer:

Good question. And I don't mind answering it 100 times.

Folks you are not responsible for the debt of relatives -- mama, daddy, sis, brother, Peaches and them -- if you DID NOT CO-SIGN for the debt.

So unless when the relative checked into the hospital or nursing home or whatever, you signed some paperwork saying you would pay the bill, you are not responsible.

The same goes for a mortgage, credit card, and car loan. Unless you are on the note you don't have to pay it.

Now creditors will try to get you to pay it. They did when my brother died. But I simply sent them his death certificate. They could call all they wanted but I wasn't paying. The calls stop after I informed them he had passed away. Of course if the person has an estate (money, value in the home, car, etc.) the estate has to pay the debts with whatever money is left. Or the assets have to be sold to take care of the debts. But don't let a creditor guilt you into paying the debts of a deceased loved one.

Question:

My parents have been in IRS tax hell for over 15 years. They owe over $100,000. Sadly, Mom (the one who was actually taking care of this situation) passed away and Dad is in total denial about the debt. Dad isn't in a good financial place and has a hard time discussing his finances with me (never gives me the "full" state of affairs). I feel like the IRS can come at any time and wipe him out. What should I do?

Answer:

First, try as hard as you can to get your dad to come clean. Go through everything. You can't help if you don't know the full picture.

Then get some advice from a tax professional on how best to approach the IRS. If your dad's income is very low, he may qualify for a payment plan or an offer in compromise. There is a 10-year statute of limitations on tax debt collection so it MAY (and that is a huge MAY) be possible for him to get some of it discharged.

Honestly, you need to seek professional advice on this. That debt is indeed huge and I'm surprised the IRS hasn't already taken action. If you have a tax person, start there. But you will probably need to contact someone who deals with this type of problem specifically.

Question:

I have $14,400 in student loans at variable 6.82%. I have $40,000 in a 401(k) (I put in 5% to get the match) and $3,500 in emergency fund. Where should I put the extra money I have every month? I have roughly $2,000 extra every month.

Answer:

Seriously. You have $2,000 extra every month and you are unsure about paying off $14,400 in student loan debt? If that $3,500 covers a few months of living expenses, go for the student loan debt.

Question:

I have had a few family emergencies that required me to come up with money I didnít have. I borrowed money from four payday loan institutions and now I'm having problems paying them. All of my money is used for everyday living expenses. What can I do?

Answer:

Oh you poor dear. I'm so sorry. I would suggest you contact all the lenders and explain your situation. See if they can put you on a longer pay back plan.

If no, you may have to get another job to work your way out of this situation. This is yet another example of why I HATE payday loans. I mean if you don't have the money, how is pledging future pay, which is for most people already spoken for, going to help.

Unless otherwise noted the questions were answered by me in recent online discussions on www.washingtonpost.com.