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.