.Mother in Law fell for "Pig Butchering" Scam, in a lot debt, little income, limited retirement, cant claim bankruptcy for another 3 years

General
1

I need some advice on how to create a plan to manage my mother-in-law’s (MIL) debt.

My MIL is 66 years old (she just turned 66 in June) and fell victim to a major scam. This scam involved flattering her and getting her to give away money, mostly through crypto investments. As a result, she lost $100,000 from her retirement savings, $40,000 from wire fraud, and about $20,000 on credit cards. Before this, she already struggled with managing her finances and had accrued additional debt from poor decisions.

When the scam was revealed, my wife, my brother-in-law, and I stepped in to support her while she looked for new employment. We covered her essential expenses—mortgage, car payment, car insurance, credit card bills, utilities, Medicare, and supplements—which totaled around $2,600 a month. She had to quit her job due to the scam but has now taken a position that pays $17 per hour for 30 hours a week while continuing to search for better-paying work. Unfortunately, we’re not very optimistic about this situation.

Here’s a snapshot of her financial situation:

Income:

  • About $120,000 in a 401(k).
  • $128,000 in a 7-year annuity, with 6 years remaining.
  • $400 a month from a military retirement from her ex-husband.
  • Job that pays $17/hour with some benefits.

Debt:

  • $32,000 from a checking account (due to wire fraud).
  • $37,700 for her car (worth about $28,000).
  • $10,500 for new windows for her condo (borrowed against her 401(k)).
  • $58,074 across 8 credit cards.
  • $2,700 owed to a cell carrier for 5 phones.
  • Approximately $105,000 mortgage balance on her condo.

Current Monthly Payments:

  • $940 for mortgage
  • $722 for car payment
  • $120 to the credit account associated with her bank
  • $95 for Medicare supplements (plus $600 every three months for Medicare)
  • $240 for HOA fees
  • $125 for cable and internet
  • $137 for auto insurance

Goal:

We want her to be able to retire comfortably at 70, which would maximize her Social Security benefits to around $3,400 a month. To achieve this, her retirement funds need to last until then.

Problems:

  • She has filed for Chapter 7 bankruptcy twice before, the latest being in 2019.
  • With her current income, she can’t keep up with her debt payments.

Actions Taken So Far:

  • The $32,000 in debt from the checking account has gone to collections.
  • We’re advising her to sell her current car, pay off the difference with her retirement funds, and use an additional $10,000 from retirement to buy a new car outright.
  • She has stopped paying other debts for now.
  • We’ve consulted a consumer lawyer but haven’t yet pursued legal action.
  • She is now on my cell phone plan to avoid having her phone shut off.

What’s the best way forward to manage her debt and ensure her retirement savings, combined with her income, last until she turns 70? Selling her condo isn’t an option because neither my brother-in-law nor I can accommodate her in our homes.
I understand this isn’t strictly our problem, but I want to ensure she has all the tools she needs (without providing direct financial support) to improve her situation.

2

Has she reported the fraud to the police? That’s the initial step. There is almost no likelihood that the deception will be pardoned or otherwise addressed in a way that is advantageous.

Secondly, stop floating her money. Less money, not more, will solve her problems. That is to say, she had less money available to just hand out to anyone who had even a little charm. Transfer all of her possessions to a trust, in which you serve as trustee and she as beneficiary. She has to receive an allowance so that, in the event of a fraud, the most it would affect is the remainder of the month and not her entire life.

3

Yes, I filed a police report right away. She was unable to understand the seriousness of anything, and she still isn’t, so I did it for her. Even though she had no idea what she was doing, she is regarded as a willing collaborator in this kind of deception.

My BIL informed her that this is the last month we would be able to support her since we need to save our finances and won’t be able to do so for years to come. She appeared to be very irate about this and to want us to keep her afloat till she could go to sleep.

4

You might need to consider a more creative solution here, like seeking guardianship due to financial incompetency. This wouldn’t imply that your MIL is mentally incapacitated, but rather that she struggles with making sound financial decisions. She would still be able to work and live independently, but she would not have the legal authority to handle her finances or make financial decisions. This approach could simplify managing her finances and ensuring her bills are paid, especially if she agrees to relinquish financial control voluntarily.

It’s worth noting that guardianship might not permit filing for another bankruptcy, but it would give the guardian the authority to negotiate with her creditors.

I suggest discussing this option with your MIL first to see if she would support having a trusted family member handle her finances, and then consult with an attorney to explore this possibility further.

5

I agree with Such-Sherbet-1015. You need to find a way to encourage her to let a trusted family member manage her finances. Start by making it clear that you won’t be able to provide financial support anymore. Next, arrange for her to meet with a financial advisor to discuss her retirement goals and what steps she needs to take to secure at least a modest retirement. Be prepared for a tough conversation, as the reality might be quite grim—she may face losing her home, having to move into low-income housing, or working longer than she planned, and she needs to understand what living on a very limited income could look like.

It’s important for her to realize that if she doesn’t address her financial situation, creditors could start garnishing her wages or putting liens on her condo, and bankruptcy might not be an option anymore. Without some form of legal intervention, like guardianship, she could lose everything.

She likely has reasons to be worried, and she might not even be thinking about the impact on her health and future work ability because she’s assuming you’ll take care of her.
You’ll need to show her what Medicaid and Social Security will actually cover, as she won’t be living with any of you. It’s time to be firm and make her face the reality of her situation.

6

Yes, I filed a police report right away. She was unable to understand the seriousness of anything, and she still isn’t, so I did it for her. Even though she had no idea what she was doing, she is regarded as a willing collaborator in this kind of deception.

My BIL informed her that this is the last month we would be able to support her since we need to save our finances and won’t be able to do so for years to come. She appeared to be very irate about this and to want us to keep her afloat till she could go to sleep.

7

This is more of a concern from my end than a solution to your debt problems.

How are you all aware that she is avoiding con artists and sex workers? Since they are aware that she is now a simple mark, they intend to attempt again.