Are you helping someone with debt?
Do you have a debt-ridden child, a senior parent, a brother or sister, a client, or a personal friend or colleague?
It might be school loan debt, credit card debt, or old medical bills that have gone unpaid. You obviously care about this person and see that they need the help, regardless of the source of the debt.
Maybe at this point, you’ve realized you can’t help them yourself, but you’re not sure how to recommend they get help or what kind of aid they might need.
Let’s take a look at six different options if you find yourself faced in this position.
The 6 Rules to Follow if You’re Helping Someone With Debt
1. Recognize the signs of a debt problem.
Every person is distinct. In the case of consumer debt, the same may be true. Household financial issues, on the other hand, tend to show similar indicators of danger that you should be aware of.
There are a few signs that should prompt you to go from moderate worry to taking the following actions on our list to assist you:
a. They claim to have no savings account and are unable to save even $10 each month.
The issue is that the individual has frequently ignored saving to instead pay for:
- Streaming subscriptions
- Eating out once or twice per month (or week),
- A hefty vehicle purchase
- The latest phone, etc.
Even a $300 emergency savings fund would assist most people to avoid the threat of extreme consumer debt, unsecured loans, lease, and other costly options that arise when a device breaks down, a sofa breaks down, or a family member ends up in the hospital with a huge medical bill.
b. A record of denied credit card transactions suggests that they’re ignorant of their bank account in general.
One or two declines aren’t particularly alarming, but if they go through two or five cards at the counter, it’s time to react and move on to the following stages.
It’s time to start a dialogue to give help as soon as the person begins to use alternative banking solutions. Some examples to watch out for are:
- payday loans
- vehicle title loans
- rent-to-own services
- check cashing services
c. Has a family member or friend started working more to make ends meet?
If you know they have debit card or student loan obligations, this could point to a desperate attempt to remain afloat financially.
It should go without saying, but it doesn’t. If someone approaches you for a loan or monetary help, you should have a conversation with them about their financial situation.
If you see that a family member or acquaintance is putting off essential medical care, prescriptions, or vital operations, the reason might be because they are already saddled with large medical bills.
One may discover a slew of additional indicators that something doesn’t “make sense” financially. If you genuinely care about the individual, convey your worry and your desire to be a resource and aid for them while they encounter and overcome financial challenges.
2. Determine their emotional attachment to debt.
Humans rarely change just because someone points out a problem, as they do with many other personal difficulties. To actually change, you must be prepared and emotionally invested.
Keep an eye out for the following stages that the individual may be passing through:
a. Ignorance comes first.
The person may be completely unaware that their excessive spending, credit card denials, and missing payments are even an issue. They may actually think it’s not a problem at all if they grew up in a family where this was normal.
Helping them understand the short- and long-term repercussions of their habits in comparison to the advantages of positive behavior will provide awareness.
b. Denial is the next step.
Whether this phase lasts a few minutes or a few decades, the person’s mind is coming to terms with the truth of their detrimental views and actions throughout this period. At this point, arguing and accusing will be ineffective.
Ego may keep them from being able to accept any wrongdoing. Instead, encourage them, letting them know you trust in their capacity to solve the situation when the time comes.
c. Resistance is the third step.
During this moment, they acknowledge the problem in front of them, but are probably overwhelmed since they don’t yet have an acceptable solution.
As a result, they will continue to rely upon their abilities to fix the problem. They may also be afraid of unforeseeable futures that come with scary terms like “bankruptcy”, “insolvency”, and “unsustainable budgets”.
Sharing the success stories of others who have gotten out of debt through various techniques might help them come to terms with their future success prospects.
d. Superficiality is the fourth element.
The debtor will downplay the relevance or likelihood of remedies working for him or her by using phrases like “I’ve made it this far,” or “Our parents dealt with that as well.”
At this point, all they really need is a constant reminder that though they battled to get back on track yesterday or went off the wagon this morning, it doesn’t mean they can’t succeed again.
At this stage, your helpful assistance might be as easy as stating, “It seems like you had a hard day. I’ll be here for you if you’d like to attempt again tomorrow.”
e. Acceptance is the fifth step.
Surprisingly, this stage might be the scariest.
Self-doubt and fear of failure will set in now that they’ve recognized the problem and accepted the available options.
In this case, you can probably help by:
- continually expressing your belief in their capacity to achieve
- providing your support during difficult times
- being accessible for them when they are concerned about getting off the debt-free road
f. Then, there’s the application.
This phase requires action, whether they’re repaying their obligations on their own or with the assistance of a third party.
To you, they may appear to be too preoccupied to spend time with you rather than even pick up the phone. He or she could be engaging with loan advisors or spending full evenings on the phone or speaking with creditors to figure out repayment plans.
If your time together suffers at first, try not to take it too personally. Your encounters may return to normal after the procedure is well underway. Just make sure you’re not putting a family member or acquaintance in a situation where they’ll be tempted to use a debit card.
3. Consider paying off their debt in one fell swoop for a fraction of what they owe.
Another way of helping someone with debt is to gauge if debt settlement may be the best solution.
Settlement implies the lender agrees to accept less than the full amount owing and to stop further collection efforts. This is a viable alternative if debt reduction is the primary aim and credit building or protection is not a concern.
You can resolve debts with your creditor over the telephone, or even via email. A frequent aim is to pay off half of your debt. Settlements are more likely to be accepted by collection agencies, however, credit card and medical debts are commonly included in settlements.
4. Prepare to have a serious discussion.
You could be tempted to take the issue of heavy personal debt lightly to spare the debtor any anguish or anxiety, but as uncomfortable as it can be, it’s so important that they understand the gravity of the problem.
You wouldn’t make a joke about depression if they were battling with sadness rather than debt. Make no jokes about the misery of debt or the prospect of bankruptcy. If you don’t, he or she will get the exact opposite idea of what you’re trying to say.
To make it more official, you could invite them out for a sit-down dinner or lunch to make your time together more focused.
Taking the talk seriously also entails maintaining the confidentiality of the whole chat. Tell them clearly that you intend to keep everything private – and stick to that.
The last part of your preparation will be the most difficult.
Try to predict the other person’s reaction.
- Is he or she going to be confrontational?
- If that’s the case, what reasons do you think they would use to explain their conduct or reject your concerns?
Consider the specific replies you may provide. Keep emotional outbursts to a minimum. Consider particular behaviors that have bothered you and the clear consequences you’ve observed.
5. Help them see what a debt-free future looks like.
Regardless of where someone is financially, intellectually, or emotionally, change is a challenging problem.
Your friend or close relative must discover the reason, will, and drive inside themselves to make genuine change. Adults will instinctively reject advice on how to live and what decisions to make.
Rather than telling them what they should quit doing, help them visualize a debt-free future. If you’re close, you should be able to establish some major goals that will result in considerable savings.
Ask questions that will help them realize on their own that their current conduct is keeping them from achieving their goals. But, when people come to such realizations, make sure to be supportive.
“That seems like a difficult behavior to change,” you may reply, “but I know you, and I know you are powerful and able to achieve difficult things.”
To avoid sounding like you’re harping or pointing out failure, be sensitive when asking about their progress toward the future financial goals.
It may be beneficial to remind your loved one of the emotional benefits that come with financial independence.
6. Involve them in developing the solution.
Look, no one wants to be told how to live – even if it’s something that could help them.
Consider serving as a resource instead of providing the answer.
Present many alternatives, each with its own set of problems and benefits.
Instead of saying,
“I believe you should do this or that,” ask, “Which of these choices do you think will be most beneficial in your situation?”
or “With your known obstacles, which do you think is your best choice?”
Make a list of questions that will need reflection to answer before you begin your chat. Unless you’re having trouble starting a discussion, avoid using “Yes/No” inquiries.
Helping Someone With Debt: Final Thoughts
No matter how you initially became aware of the signs of difficult debt, now is the moment to give your encouragement and support.
Consumer debt is never going to go away. If you’re worried that a family member or friend who has too much debt, is abusing credit cards or is otherwise on the verge of financial disaster, your intervention may be difficult and uncomfortable.
But if done with love and sincerity, it could be exactly what the person needs to get back on track and achieve their goals.
Editor’s note: This article was originally published Oct 12, 2021 and has been updated to improve reader experience.
