Morally complicated money/relationship question

[m741]

OK, financial/relationship wizards, I've got a question for you.

My girlfriend went the normal liberal arts/high student debt path. She seems to think it was worth it, and I'm not about to judge.

However, in addition to the normal federal loans, her mother took out a number of loans in her name, either "student loans," or loans where my gf was a co-signer but didn't know it. I don't have the exact number but I'd guess it was something like 40k or 50k worth. Some with interest up to 11% annually. I believe this was to do things like finance new cars, and general retail spending (restaurants, alcohol).

If that wasn't bad enough, her mother didn't tell my gf about this. Then when the gf found out, her mother agreed to pay down the loans... and didn't, letting interest accumulate. Then, when my gf asked if there were other loans, her mother said no. At my urging she did a credit check,found two more loans, asked her mother about them and heard they must be erroneous. Now, she found letters about these two loans the credit check turned up, and they are legit loans her mother also took out.

As an aside, her mother is 70, and is working as a manager in a large retail store. She makes OK money, but not great. She is extremely absent minded. I think she has no retirement savings. I don't want to discuss that now, but keep it in mind as a complicating factor.

Obviously there's a whole moral dimension here - what her mother did is really bad. My girlfriend is almost pathologically nice, and she otherwise gets along with her mother great - they're confidants, talk every other day, etc. She's frustrated about this, but from my perspective, doesn't really understand how bad it is.

As her loving and supportive boyfriend, and one with some money in the bank, I want to help out. It makes me extremely uncomfortable not to, I trust my gf will pay me back, and in the unlikely event she doesn't, I would not put more money out than I can accept losing. I have loaned her some money around June, she has been paying me back at a good rate, consistently. I can loan her a bit more. This saves the interest cost, which is substantial. So far, six months in from the first loan, there have been no adverse effects to our relationship and I'm willing to loan more.

Questions

1. My gfs credit rating is horrific, with various loans in debt collection. She has been paying down loans consistently for some time now, maybe a year. What are _her_ options to improve the situation, either to reduce overall debt or to improve her credit, which has various defaults, etc? Can she negotiate loans down, consolidate somehow, etc?
2. This is obviously a sensitive situation. I don't want to get between my gf and her mother, or destroy their relationship. But I think her mother has really exploited her. I'm concerned what could happen in the future, particularly as medical costs come up or she is forced to retire. Obviously, this is not directly my problem, and I know that I should probably detach. But it's probably easier said than done. How would _you_ handle this situation?

[stand@desk]

It's totally up to you, but your gf's mother is an extension of her for better or worse. It is what it is. If you are okay with contributing money to this situation and you think it's better to do that than invest it and compound it yourself and for your future it is totally your call. I would not do it. If someone can't be trusted I would not lend money to them. Actually I would not lend money to pretty much anybody. I've lost money before lending to friends and it makes me feel horrible to be taken for a sucker. You have not stated if you live with your gf and if you are already common law.

[m741]

Stand@desk - I have been dating my gf for three years and we have lived together for 13 months, but we are not domestic partners or anything.

[stand@desk]

Where I live if you live with your partner for 12 months it is considered common law where it is as good as married.

One wise quote from Warren B I just shared in the other thread: "It's easier to stay out of trouble than get out of trouble financially."

[Dragline]

This happened to a former girlfriend of mine, except her mother was even worse and ran up gambling debts in her name. Eventually, her only solution was to declare bankruptcy and start over and let mom hit rock bottom -- mom was an alcoholic too. That will not work for some of the debt, but may work for other parts of it.

Of course I know that is not the real problem, but I don't think you can solve the real problem, honestly. The mother is narcissistic/sociopathic and the daughter has serious doormat issues. She needs therapy and lots of it -- she actually does not see what is going on in the way most people would. Your gf thinks her mother is a normal mother and she is just not. I would guess that the mother is also pretty good at the "pity play" to guilt trip your gf. The "pity play" is the #1 marker of a sociopath. Unfortunately, you are probably the last person who could make her see the truth given your position (and you're too goddamn nice).

I would push for therapy. And keep all of my funds separate from the situation. You HAVE TO STOP LOANING MONEY TO HER, even if its costs the relationship. You are enabling this situation in such a way that it will never be resolved until mom dies. Gf needs therapy, not money. And mom may need to hit rock bottom before this is done.

Sorry to be so harsh/negative, but that's the way I see it from experience and personal research.

[halfmoon]

As her loving and supportive boyfriend, and one with some money in the bank, I want to help out. It makes me extremely uncomfortable not to, I trust my gf will pay me back, and in the unlikely event she doesn't, I would not put more money out than I can accept losing.

I'd suggest that you consider the possibility of losing not only your money but your girlfriend. As someone who has made the costly mistake, I can confidently say that lending money runs a huge risk of ruining relationships. Somehow, you will end up not as the savior but the villian -- and this scenario is complicated by her close relationship with her mother. There's also the question of how depleting your retirement savings helps your girlfriend's future if you do stay together. You might want to see a bankruptcy attorney together on her behalf, though if they're truly student loans, they might not be dischargeable.

If there's a pattern of loan default, you're throwing money into pit that has deep roots in financial dysfunction. Your gf might not understand this, but you need to.

The real mystery: how did your gf's mother take out loans in her name, or with her as a co-signer, if she didn't know about them? This sounds *extremely* odd to me, and is worth clarification/documentation. Again: I recommend an attorney, or at the very least an accountant. You should get an initital consultation for a few hundred dollars, which is a good investment in this situation.

[m741]

@Draglibe, @halfmoon - thanks for the advice. This is certainly something I had considered. It's good to know I wasn't thinking too harshly about the situation. I don't think things are as bad as you've inferred, but the more I think about things the worse it seems.

I was asking a bit about how my gf ended up in the loans, but haven't pried too much. I think she might have had a joint bank account with her mother. And I think she started college as a minor. I don't know if that covers it all. I don't think I can suggest getting a lawyer involved - too harsh, but I do hope to find a financial specialist who can protect against downside risk.

[BRUTE]

wtf is it even legal to take out loans in somebody else's name without their knowledge?

[C40]

I'll add basically a +1 to what Dragline said.

The mother is still a huge liability. If you give money to the girlfriend there's a VERY good chance it will mean nothing, or it will effectively go into the bucket that her mother will syphon more out of. You shouldn't help refill your girlfriend's bucket until you are absolutely sure that she's eliminated any chance of her mother sucking more out (or, maybe more importantly, until your girlfriend could no longer be convinced to pour out some when her mother finds herself in tough situations and your girlfriend feels that she must help)

Helping is good sometimes, and you would certainly know what's best from a numbers standpoint. But what if you help more and more and next year her mom fucks her over for $200,000, they both go bankrupt and you've wasted every cent you used to help? Putting your money in the right place is one thing when you know that you'll continue doing the right thing. But when it being the right choice in the long run also depends on other people - especially people like your girlfriend's mother, and your too-nice girlfriend, well, that's a whole different ball game.

I haven't gotten quite deep enough myself into situations like this to know exactly how it feels for you, or to have good advice on what to actually do. I will suggest that when it comes to the behavior and success of other people, I think the best thing you can usually do is set a good example, plant the right seeds (ideas, concepts, etc.), and highlight their successes as they have them.

[C40]

wtf is it even legal to take out loans in somebody else's name without their knowledge?

I think it's some kind of felony. Right?

[jennypenny]

If her credit is wrecked anyway, she might as well declare bankruptcy if it will shed enough of the debt. Can she get her name off of the remaining debt if mom agrees to it? Mom will never pay it back of course, but at least the debt would die with her someday and gf will be off the hook.

Don't lend any more money unless it's to pay for a bankruptcy lawyer to help gf get out of this mess.

Does Mom see you and/or gf as her retirement fund? Something to keep in mind when you feel guilty about the situation or need to convince gf to cut all financial ties no matter how difficult.

I hate to say it, but there are some red flags here.

[DutchGirl]

m741, I would have your girlfriend put a freeze on her credit report with each of the three credit reporting agencies. This is to prevent further abuse by your girlfriend's mother of your girlfriend's credit.

And yes, of course this is a criminal offense. And of course this means that your girlfriend's mother is a deplorable person who financially abused her own child. She can be nice and everything, but she did not hesitate to saddle her own daughter with tens of thousands of dollars of debt. To me, that cancels all possible positive points she might have.

Check out reddit as well: https://www.reddit.com/r/personalfinanc ... tity_theft

In some states of the US, children are obligated to take care of their parents when their parents can't take care of themselves anymore. This is called "filial responsibility law"; see whether this applies to your situation as well.

In all cases, I would try to keep your finances separate from your girlfriend's. Don't let your girlfriend's mother get to any of your money - and in particular if there are filial responsibility laws, make sure that your income doesn't count as potential source of income for your girlfriend's mother's expenses.

Therapy might indeed be required to have your girlfriend slowly understand that what her mother did to her is not normal behavior. Maybe there have been other types of abuse as well. I don't think therapy can solve everything, but it could help your girlfriend grow to become a more independent person who knows what she wants. That might help, later on.

Good luck to you, m471, and lots of wisdom in this difficult situation!

[James_0011]

I wouldn't get involved at all dude, sounds crazy. Also, consider that all relationships are transient, will you even be dating this girl in five years??

[RealPerson]

I hate to agree with all the posts above. I would not lend money to your GF to help pay off this debt. No matter what the circumstances are. GF apparently does not see that when her mom steals from her, something is really wrong with the relationship, with the mom and with her. Taking out a loan on somebody's credit and then not paying it all back yourself in a timely manner is a form of stealing IMO. GF not protecting herself from a (financially) abusive relationship may indeed suggest a need for therapy.

DutchGirl is right that there is a risk of new debt being established. A credit freeze to protect herself is an excellent idea.

Wanting to enable it seems like the best thing to do, but I think that it is the wrong approach. Best of luck to you. That is a tough situation.

[Ego]

This is a really terrible position for you to be in. I am sorry you are there.

Parent/child relationships are unimaginably complex and fraught with unexploded ordnance. Project yourself out into the future. Can you envision a path through the minefield that will get you somewhere you'd want to be? If you can't see the way then you may want to have an incredibly frank conversation with your girlfriend and see if she can help you to see a path though to the other side. If not, you are going to need help from someone with a metal detector.

These can be horribly painful conversations so it is easy to keep moving forward while ignoring the danger. Each step forward increases your risk.

[Chad]

That situation really sucks and is very tough. Sorry to hear it.

Kind of following along Dragline's advice. If you want to pay for anything pay for therapy. This would be the most helpful for everyone, including you. Of course, raising that possibility is difficult, but I don't have any good advice for how to bring it up.

[cmonkey]

Agree with everyone else, that is a horrible situation to be in. +1 to Draglines post, however. You are throwing money away!

I went through a similar situation, but I didn't have a girlfriend in the middle, it was my own mother and my brother as well. I thought I was helping them by giving them money but I wasn't. In my case, I paid off credit cards (10K) in my mom's name. For my brother I helped pay for his college loans (even after he dropped out ) and an auto loan (10k-20K I think) that I co-signed with him.

The entire time I was thinking that I was being responsible and that my actions would help them get to a better place financially. I was completely wrong! I'm pretty sure they both have a lot more debt now. I say 'pretty sure' because I severed ties with them a few years ago, realizing that I needed to do what was best for ME.

Even if you pay off all this money, more debt will just keep coming in.

[7Wannabe5]

I think the first thing you need to do is some research to determine what legal and/or practical boundaries you can put into place in order to create at least 3 distinct realms of financial operation with strong boundaries. Your own financial realm, a financial realm in which you interact with your girlfriend, and your girlfriend's own financial realm in which she can freely choose to continue to interact with her mother at her own detriment.

Clearly, you are the stronger financial player in your relationship with your GF, but since she isn't holding a gun to your head to keep you in the relationship, the reality must be that you are equal player in terms of the larger economic picture. Therefore, although it would be absolutely foolish to not strictly boundary this situation or throw good money after bad, it is my opinion that creating a shared equity pool between her hot financial mess and your cool financial reserve will prove to be of great and growing benefit.

[daylen]

I don't know anything about all this, but I do have a good hypothetical for the wise people of this thread.

What if everything was the same except they were married? I imagine that would further complicate things.

[jacob]

Maybe I missed it above, but did anyone suggest actually going full crowbar and having her pay those loans off? If it's 40-50k total, it could be done in a year or three of crash course living. 11% really means getting rid of it ASAP, no minimum payments but maximum payments. Also, no interest arbitrage from your side ... it sends the wrong message.

If it was me, I would say that something like
1) This stresses me out majorly (which it does) and I can't live having this debt hanging over us.
2) The debt is your problem. I'm okay with you supporting your mom but not via debt, so it has to be paid off.
3) I'm willing to dial down the budget and sacrifice with you. No cable, no fancy food, ... until this is taken care of.