Helping Someone with Debt: Simple Rules to Follow

How to Help Someone in Debt

Perhaps you have an adult child, an elderly parent, a brother or sister, a parishioner, or a close friend or neighbor with crushing debt. It might be student loan debt, credit card debt, or old medical expenses now in collections. Regardless of the source of the debt, you care about this person and know they need help. You know you can’t help the person yourself, but you either don’t know how to suggest they get help, or you are unsure what help they might benefit from.

Seven steps you can take to help someone you care about when they struggle with debt:

  1. Recognize signs of burdensome debt

  2. Identify the emotional relationship to debt

  3. Understand the four basic options for getting out of debt

  4. Be prepared to have a serious conversation

  5. Help to identify a realistic future

  6. Get him or her involved in creating the solution

  7. Become an accountable supporter but not a bully

Recognize signs of burdensome debt

Every household is unique. The same can be said for consumer debt problems. However, household financial problems tend to display similar signs of trouble you can be on the watch for. Here are just a few that should move you from mild concern to take the next steps on our list to help:

  • The person states that they have absolutely no savings account or cannot even save $1 a month. The problem here is that the person has often demoted a habit of savings to come after paying for cable/satellite TV, paying for Netflix or other forms of entertainment, dining out once or twice a month (or week), a large car payment, a new iPhone, and other expenses. Even a minimal emergency savings fund of $500 would help most households avoid the dangers of excessive credit card debt, payday loans, rent-to-owns and other expensive options that come up when an appliance needs replacement, a piece of furniture breaks down, or a household member ends up in the emergency room with a large medical bill.

  • A pattern of declined credit card purchases indicates that the person is unaware of even their general account balance. One decline here or there is not necessarily of concern, but if you see the person going through three or four cards at the cashier, it is definitely time to mobilize and move to the next steps.

  • As soon as the person begins to access alternative banking products, it is time to start a conversation to offer support. Such products would include payday loans, car title loans, rent-to-own services, and check cashing services.

  • Has your friend or family member begun to work overtime just to pay living expenses? If you know that he or she also has credit card or student loan debts, such behavior is often a grasp of desperation to stay financially afloat.

  • It should, but doesn’t, go without saying that if the person asks you directly for a loan or for cash assistance, you should have a discussion with them about what is really going on financially.

  • If you learn that your family member or friend is routinely putting off basic medical care, necessary prescriptions or critical procedures, the cause may be that they are already dealing with significant medical debts.

You may notice many other signs that don’t “feel right” financially. If you truly care about the person, express your concern and your hope to be a resource and support to face and get through financial difficulties.

Identify the emotional relationship to debt

As with many personal challenges, human beings will not change or improve just because someone points out the problem. You must be ready and emotionally engaged in order to change. Watch and listen for these phases the person might be going through:

First comes Ignorance. The person may truly be unaware that their overspending or their credit card denials and missed payments are even a problem. If they grew up in a home where such behavior was commonplace, they may believe it is completely acceptable. Awareness will come from recognizing the short- and long-term consequences of their behavior when compared to the benefits of positive behavior.

Second comes Denial. Whether this phase lasts a few moments or a few decades, it is during this time that the person’s mind is coming to grips with the reality of their harmful attitudes and behaviors. Arguing and blaming will be completely unproductive at this time. The person’s ego is not ready to admit fault. Instead, provide support and express confidence in the person’s ability to address the problem when they are ready.

Third comes Resistance. During this time, the individual recognizes the problem before them but, because they have not yet identified an acceptable solution, they feel overwhelmed and will therefore continue to trust in their own ability to solve the problem. They may also be fearful of uncertain futures that reverberate with awful words like bankruptcy, being broke, and unbearably burdensome budgets. Sharing stories of other people’s successes in getting out of debt using different methods (following) can help the person come to grips with the possibilities of their own future success.

Fourth comes Superficiality. With expressions such as, “I’ve survived this far,” or “My folks dealt with it,” the debtor will dismiss the importance or possibility that solutions will work for him or her. What the person needs at this point is a frequent reminder that just because they struggled to get on track yesterday or fell off the bandwagon this morning doesn’t mean they can’t find success again. Your effective support at this point can be as simple as saying, “It sounds like you had a rough day. I’m here for you tomorrow when you want to try again.”

Fifth comes Acceptance. This phase, surprisingly, can be the most fraught with fear. Now that the person has come to grips with the problem and accepted the possible solutions, self-doubt and fear of failure will set in. You can be of most help by continuously expressing your confidence in his or her ability to succeed, offering your support during difficult times, and being available for them when they worry about having wandered off the path to debt freedom.

Finally comes Application. Whether the person is repaying his or her debts alone or has chosen a third-party to help, this phase involves action. To you, it may look like they are too busy to spend time with you or even speak on the phone. He or she may be meeting with debt counselors or spending entire evenings on the phone or chatting with creditors to work out repayment arrangements. Be careful not to take it too personally if your time together dips initially. Once the process is in full swing, your interactions may return to a degree of normalcy. Just make sure you are not placing your family member or friend in a position that tempts him or her to use a credit card (e.g. frequent dining out, movies, or shopping).

Understand the four basic options for getting out of debt

Credit Counseling & specifically the debt management plan can be an excellent tool to refer to when attempting to help someone with debt.

Credit Counseling & specifically the debt management plan can be an excellent tool to refer to when attempting to help someone with debt.

Before approaching the person in debt, review the four basic options for getting out of debt so you can demonstrate you are serious about supporting him or her to experience the hope of reality rather than the despair of illusion.

  • Repay debts on your own.

There is a lot of confusion about the possibilities and realities of debt consolidation. There are also many misconceptions about the benefits of debt transfer tools like credit card balance transfers, home equity lines of credit, and debt consolidation loans. Debt transfers address the symptoms of excessive debt but not the causes. If the debt sprang from overspending, then getting and using another credit card or new loan will never solve the problem. Instead, it will compound the issue.

There are four basic do-it-yourself debt repayment options that we’ve identified, including the Debt Avalanche, the Debt Cascade, the Debt Landslide and the Debt Snowball. Find details and tips at

Advantages: greater control, privacy, fewer fees

Disadvantages: likely takes longer, likely higher cost over time due to high interest rates, little to no support, requires great deal of discipline and organization.

  • Use a nonprofit credit counseling agency.

Clients of nonprofit credit counselors benefit from lower interest rates, repaying their debts in full in five years or less.

The credit counseling agencies work with their clients’ current creditors to lower the account interest rates, stop late and over-limit fees, and create a new repayment agreement so the lender will report future payments as “Paying as agreed.” This comes in form of a debt management plan. This should be your first step for third-party help. Even if it came to bankruptcy, you would have to meet with an approved credit counseling agency before filing. To find an agency you can trust, visit one of the two major industry trade groups, such as

Advantages: No direct impact on FICO score, automated once-a-month single payment, account closed to further usage to prevent additional debt, lower monthly payments

Disadvantages: capped enrollment and monthly fees (although monthly payment is still usually lower even with these fees), a few creditors do not update account status on credit reports until paid in full.

  • Consider settling your debt in one blow for less than what you owe.

In a very few instances, debt settlement may be the best option. Settlement means that the lender agrees to accept less than what is owed and cease additional collection activity. If debt elimination is the goal and credit building or protection is not a priority, this is a possible option. You can settle debts directly with your creditor by phone, mail or even email. Repaying 50% of the balance is a common goal. Collection agencies are more likely to accept such agreements, but credit card and medical debts are also frequently included in settlements. If you were to choose a third-party settlement company, they will require you have at least $10,000 of debt and will add 15% or more to your payment as their fee. It is difficult to find trustworthy settlement companies online.

  • Make an appointment with a bankruptcy attorney.

Bankruptcy is an emotionally and financially difficult process to go through. No one looks forward to or enjoys the process, but it exists for a reason. The purpose of bankruptcy is to protect a borrower’s assets (usually a home, retirement savings, and income) from creditors. About one in five bankruptcy filers do so without legal counsel, but we highly recommend you speak with an attorney for guidance.

Be prepared to have a serious conversation

You may be tempted to approach the subject of excessive consumer debt lightheartedly in order to avoid pain or fear on the part of the debtor, but he or she needs to understand the seriousness of the situation. If he or she were dealing with depression instead of debt, you would not joke about suicide. Do not make light of the pain of debt or the possibility of bankruptcy. Otherwise, he or she will receive the exact opposite impression of what you want to convey. You might find it helpful to invite him or her out to a sit-down lunch or dinner to give your time together a bit more of a formal feeling.

Taking the conversation seriously also means that you will keep your entire conversation confidential. State your intention to keep everything confidential. If your view of confidentiality means that you are likely to share the conversation with your spouse, ask permission first.

Your final piece of preparation will be the trickiest. Try to anticipate how the other person will react. Will he or she be defensive? If so, what arguments would you expect him or her to use to justify their own actions or to dismiss your concern? Consider concrete responses you might give. Avoid emotional outbursts. Think of specific actions that have concerned you and the explicit outcomes you have noticed.

Help to identify a realistic future

Change is a difficult process, regardless of where the person might be financially, logically or emotionally. To effect real change, your friend or family member must find purpose, will and motivation within. Adults will automatically reject other adults telling them how to live and what choices they should make. Instead of telling your family member or friend what he or she should stop doing, help him or her to envision a debt free future. If you two are close, you should be able to identify some important goals he or she has that will require significant savings. Ask questions that will help him or her come to realization on their own that their current behavior is taking them away from their goals. Remain supportive, though, as they come to such realizations. You might consider saying something like, “That sounds like some tough behavior to change, but I know you, and I know that you are strong and capable of doing hard things. Plus, I will always be available to support and encourage you.”

Going forward, be sensitive when asking about his or her progress toward the financial goal without sounding like you are harping or pointing out failure. It can help to remind your loved one of the emotional goals that will come with financial freedom. For example, “I know it’s been difficult, but I am sure the peace of mind you will experience when you are finally debt free will be worth all your efforts.”

Get him or her involved in creating the solution

As stated previously, your friend or family member does not want to be told how to live. Instead of giving the solution yourself, consider acting as a resource. Present options with their various challenges and advantages. Instead of saying, “I think you should do this or that,” consider asking something like, “Which of these options can you see being most effective in your situation?” or “Looking at your future challenges, which option do you think will be your best option?”

Before your conversation, make a list of questions that require thought to answer. Avoid “Yes/No” questions, unless you are struggling to get the conversation started. Move away from them as soon as you can.

Become a supporter, not a bully

Avoid finger pointing or fighting about money if possible. You may be able to use this moment as a learning experience.

Avoid finger pointing or fighting about money if possible. You may be able to use this moment as a learning experience.

Even before he or she begins to make the decision to change negative behaviors, be very clear that you are a very willing supporter. If you feel it appropriate, you can offer to make a phone call or two to help the person gather information on processes, fees and timelines. Share what you find, followed by questions such as, “What do you think?” While offering to make a phone call can be a kind act of service, requesting that you be allowed to make appointments, pick the person up and drive them, or gather their financial information and paperwork in advance of a counseling or service session will almost always feel overly intrusive to the individual. Exceptions, of course, include aging parents, very young adults, and adults with relevant disabilities. There is nothing wrong with literally “being there” for your family member or friend when they make phone calls if they would like some moral support, especially if they feel nervous or request your help.

Regardless of the signs of troublesome debt you noticed in the first place, now is the time to offer encouragement and support. Consumer debt will never resolve itself. If you are concerned your family member or friend who has too much debt is abusing credit cards or is otherwise heading toward a financial abyss, your intervention might be difficult and uncomfortable, but done with love and sincerity, it may also be just what the person needs to get back on track to reach his or her financial goals.