No. of Recommendations: 10

Let me express my opinion from someone who had unintentionally started down the path of your brother. I didn't go nearly as far, but I was on the road to screwing up big time. My wife and I way over-extended ourselves in buying a new house and didn't consider the other expenses in new houses (landscaping, furniture, etc.) and used credit cards to cover those expenses. Fortunately I realized it in time to stop digging the hole and we are close to being completely out of it.

What you plan to do is honorable and nice, but your planned methodology is wrong. Until your brother hits bottom and comes clean or can truly realizes the error of his ways, he will end up back in debt. I would suggest a combination of several of the other replies.

1) Why is he only earning $25K per year, working two part time jobs? I am assuming these are not jobs working for charities or some other good-works project that does not pay well monetarily. What can your family do to increase his earnings? Help him land a full-time job that pays commensurate with his education and skill levels. If he is just plain lazy there is not much you can do about it and bailing him out will fail.

2) Help him with financial counciling. This can take several routes, including CC counciling organizations, giving him books (test him and quiz him on the books to ensure that he at least reads them), to sitting down with him and doing a budget and providing him with advice and training him. Many people just haven't learned the skills yet and self-training can be expensive when you make mistakes. My brother is the controller for a company and he bluntly pointed out some of my stupider mistakes (using CCs instead of securing an FHA home improvement loan prior to doing an improvement). If your brother graduated from college, he can learn this.

3) Don't just give him the money. IF you are going to pay some of the debts, pay the creditor directly. Don't give the money to your brother since he may not be able to resist the temptation to spend some of it on other things. Also, IF (big IF) you pay anything, pay the student loans off for him, not the credit cards since that is his debt alone.

4) IF you want to help right away, establish a trust account for your brother, where you and your parents retain control of the money until he has proven his ability to manage it capably. After he is out of debt, he can roll this money into an IRA or use it for a downpayment on a house.

5) Consider the family impacts of bailing your brother out. Do you have a sister who will wonder why she is not helped in this way? Will it cause a strain in the family relations? If not, feel free to help him.

6) It is an old saying, but true. We learn more from our mistakes than our successes. Your brother must realize his mistakes and work to overcome them for the lessons to really sink in. In the long run he will be better off for feeling the pain now than ten years later when he could be married with kids and they all have to suffer.

Hope that all works out well.

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