For parents, it is sometimes difficult to know when to lend a helping hand and when to allow children to make their own mistakes and, hopefully, learn from them. This is particularly true of credit card debt, as many Michigan families are aware. It is important for parents to understand, however, that if they choose to help their children in a financial way to alleviate some of their accrued debt, there may be consequences for all involved.
It may be possible for a parent in good financial standing to simply loan the balance owed to the child in question. However, it may also be beneficial to consider signing a written contract with the child to ensure they are still accountable for the full amount. The same can be said of cosigning on a loan -- should a child default on that loan, a cosigner is held legally liable for the owed amount.
While bad credit can do long-term damage to a person's financial future, bad spending habits can be just as damaging if not more so. Depending upon the child in question, it may be more helpful to make them take accountability for their financial errors now in order to teach them the value of good spending habits for the future. Either way, it is helpful for parent and child alike to understand how credit card debt works and how best to discharge it.
For some families, the option to help may not be a reality. In cases like these, it may benefit both parent and child to talk about the possibility of bankruptcy as a way of clearing credit card debt early in life and setting the child on the path to financial responsibility. Michigan residents are urged to seek out additional information should they find themselves or their children in this compromising position.
Source: dailyfinance.com, "My Kid's Drowning in Credit Card Debt! What Do I Do?" Shelby Bremer, July 25, 2013