How to Help a Family Member Out of Debt

Developing a Plan

1). Encourage your family members to consult a financial professional. Initially, offer advice not money to your family member.
2). Request the family member obtain a recent copy of their credit report from all three credit reporting agencies. Free copies are available annually. Meet once the credit report copies are available. (See Resources)
3). Review each report for accuracy. If you find inaccuracies within the credit reports use the dispute process with each of the credit bureaus and follow the directions specific to each reporting agency. Results from the disputes can take up to 30 days, be patient.
4). Assume the debts are valid and discuss with your family member each debt's priority level in their daily lives. Mortgages, car loans and insurance payments take priority over department store credit cards.
5). Negotiate with your family member a reasonable payment plan and budget. Encourage them to write out their budget and evaluate plans to decrease debt.

1). Decide together the best course of action in regards to establishing a budget. List the immediate needs of the family member. Locate areas within their current lifestyle where costs could be cut immediately.
2). Do an audit of their current and expected monthly expenses. Write out a reasonable monthly budget for the next 12 months. Factor in holidays, birthdays and special occasions when writing out an annual plan.
3). Discuss the necessity of a monetary loan. Allow the family member to use their new budget a minimum of 2 months before offering financial rescue.
4). Let the family member make the request monetary relief, if necessary. Set clear conditions on a personal loan and when the funds are available. Create a payback schedule and add that payment into their monthly budget.
5). Sign a promissory note with the signatures of all involved. If a monetary loan is made to bail out a family member, resist foregoing repayment to you as a means to salvage the budget.
6). Follow up monthly with your family members to discuss the progress of the set budget. Stay on top of their budgetary successes and failures. Make adjustments as needed.