Posted on 04/03/2013 8:19:06 AM PDT by Altariel
Dear Dave,
My younger sister moved to Atlanta, and she came to live with my husband and me a few months ago. She’s 19, has a job, and is attending a local college. But even though she’s working, she hasn’t said anything about helping out with utilities or paying rent. We don’t need the money, but do you think it’s time for us to push her out of the nest so she can start living as an adult?
Molly
Dear Molly,
The way you’ve described your little sister makes me think she’s a pretty good kid. She’s doing all the right things for someone her age, and it doesn’t sound like you’ve got a party animal or drug addict in your home. In my mind, this is the kind of person you want to help.
In a sense, you’re acting as surrogate parentsto this young lady. If it were my little sister, I’d let her live in the house without paying rent as long as she was living smart and moving in a positive direction. To me, this includes working, saving money, and going to college. At the moment, you’re enabling good, positive behavior. You have a chance to be her biggest cheerleader and prepare her for the future.
But if things change and she starts behaving irresponsibly or living a lifestyle you don’t approve of, then it’ll be time to put the brakes on the deal. But right now this kid’s a rock star. Thanks to the generosity and support shown by you and your husband, she can gain traction for a successful launch into the world as a smart, responsible adult. I think it’s awesome!
—Dave
Dear Dave,
I have some old debts that have been forgiven. Should I still pay these if and when I have the money?
Matt
Dear Matt,
First, you need to double-check and make sure the debts have been officially forgiven. Commercial debts, such as old credit card debt, are almost never forgiven. They might be in default, or it may be that the company has written it off, but that’s not the same as being forgiven.
Years ago, my grandfather loaned me money when I was in college to pay for part of my tuition. He forgave that debt not long after, so I didn’t owe him the money morally, legally or in any other way. But in a commercial setting, meaning you’re dealing with a bank or other lender, that doesn’t happen.
If a credit card company decides to take less than the original amount owed, that’s a business decision that has changed the terms of the deal, both morally and legally. Sometimes they’d rather have a bird in the hand rather than promises in the bush. You don’t have an obligation to pay the original amount because the terms of the deal have been altered.
Forgiven is forgiven. That means the deal and any obligation is completely wiped out and gone. But chances are, Chase or MasterCard aren’t going to call you up and forgive the debt.
—Dave
*Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Timesbest-selling books: Financial Peace, More Than Enough,The Total Money Makeover andEntreLeadership. The Dave Ramsey Showis heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
Dave Ramsey ping
Depending on the age of the debt, and the period of last activity, the debt may be legally unenforceable, which is not the same as forgiven, but should have been mentioned.
Dave is right, but be aware of these credit card companies selling the “forgiven” balance.
My wife and I had two credit cards with the same company. We got behind on payments and ultimately they offered a reduction in the total debt if we paid 80% of the total due. We did that, but then they sold the remaining balance to a collection agency.
So, be aware of that crap!
Hopefully, you had that offer in writing.
If their lips are moving without said offer, they’re lying.
My wife and I had two credit cards with the same company. We got behind on payments and ultimately they offered a reduction in the total debt if we paid 80% of the total due. We did that, but then they sold the remaining balance to a collection agency.
Assuming you responded to a written offer, the company can not sell the remaining debt to a collection agency because you no longer owe it. Show their settlement offer and proof of payment of 80% and ask (politely the first time) that they cease attempting to collect money you do not owe.
I think Ramsey's answer is off-base. Credit companies do make settlement offers to accounts that are in default, and will forgive any remaining debt. Unfortunately for a lot of people, the forgiven debt gets counted as income to the IRS, giving them an unexpectedly high tax bill.
OH, yeah! I got it in writing and when the collection agencies started mailing me bills, I would send them a copy of the agreement and they then sold the “debt” to a different agency.
About every four to six months I would get a new bill from a new collection agency; that all started about five years ago. I don’t think I have seen a single collection letter for these cards in about a year - maybe they finally all realized that I am NOT going to pay this forgiven balance.
Besides, in Texas, after four years of non-payment, the debt becomes unenforceable, so they may be looking at the date of the debt and realize that legally they can’t do anything.
Not to be cynical but, to the lady of the house: you need to get your little sister out of there ASAP, for reasons I can’t suggest without being cynical.
So I’ll go with the practical. If the girl’s not offering to pay for her share of the living expenses, you’re teaching her something she should not be learning, and which will be hard to unlearn when she finally moves on.
But get her gone before YOU learn something hard to unlearn.
Acting our wage ping.
Besides, I believe that they report this to the IRS as income to you, so you can't very well go back and pay it later, once you've already paid taxes on the amount they let you off as if it were income. You'd end up having paid taxes on money you never earned.
Thank you for keeping this up.
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