How do I explain why debt on debt is bad to my brother?
"I wouldn't try to tell him what he should do, nor would I provide any financial assistance. Invite him over and tell him how a Dave Ramsey book changed your life or something so that you aren't the one telling him what to do. People in fundamentally and persistently bad situations are like people with addiction problems... they tend to end up ""killing the messenger"" before internalizing that they are in a bad situation. They need to hit rock bottom before you can really help." Talk about opportunity cost. Show a rope, and put a tag with him on the end of it.  Explain that since he has max out his credit, he can no longer get more.  Without more credit here are the things he can't have The key to illustrate is that all the money he makes, for the next several years is obligated to the people he has already borrowed it from.  Try to have him imagine giving his entire paycheck to a bank, and then doing that for the next five years.  To drive it home, point out that there are 5 super bowls, 5 college championship games, 5 final fours, 5 annual concerts he likes, 5 model years of cars, 5 or more iPhone versions in those five years.  Or whatever he is into.  5 years of laptops, 5 years of fishing trips. These things are not affordable to him right now.  He has already spent his money for the next 5 years, and those are the things he cannot have because he is, in fact, out of cash. Furthermore, if he continues, the credit will dry up completely and his 5 year horizon could easily become ten. To illustrate how long 5 or 10 years is, have him remember that 10 years ago he might have been in college or the military.  That 5 years ago Facebook was no big thing.  That 5 years ago the Razr was an awesome phone.  That 5 years ago we had a different president. The key idea he should focus on is that every debt includes interest - the money he didn't borrow, but now owes. The interest goes straight to the lender pocket and the debtor has to get money somewhere for that interest. That's the key reason of why getting another loan only increases pressure on the debtor - with the new loan he owes new interest in addition to what he already owed. "Two suggestions: I don't know if you have them in South Africa, but here we have some TV reality shows where a credit consultant visits a family that is deeply in debt and advises them on how to get out of it. The advice isn't very sophisticated, but it does show the personal impact on a family and what is likely to happen to them in the future. ""All Maxed Out"" is the name of the one I remember. ""Till Debt Us Do Part"" is another, which focusses on married couples and the stress debt puts on a marriage. If you can find a similar one, loan him a few episodes. Alternatively, how about getting him to a professional debt counsellor?" "If you're looking for an analogy or exercise, I saw a personal finance show that had people climb stairs, with the debt as weight. Every flight of stairs more ""interest"" and loans to cover income gaps have to be added to the total debt they carry up the stairs. Can't find the video online though. But I think you need to ask your brother what he thinks his problem is, that will be solved with more loans. It's likely that your brother's problem can't be solved with advice. Since he's not spending rationally, rational arguments have no sway. I suspect he'll tell you his problem is one or two angry creditors, perhaps even ones you don't know about, rather than a fundamental imbalance between income and expenses. Robbing Peter to pay Paul, or moving weights from one backpack compartment to another, doesn't solve the underlying problems. Whatever you do, another loan from you should be off the table. He's an adult now, with problems the size of which you can't help with. We both know how his story ends: all creditors cut him off, and he's in court over garnished wages and creditors fighting over his assets. Reality is the only argument that will have any sway. He's far too personally invested in his scheme to admit defeat, which is why neither words not images nor moving pictures will help him with this learning disability." How about doing some calculations and show him how much he is paying for things he is buying on credit.Mix in some big and small purchases to show how silly it is on both. Some examples: What really made the debt issue hit home for me (no pun intended) was when I bought my first house and read the truth in lending disclosure statements to find that a $70K house (those were the days) was going to cost me over $200K by the time I had paid off a 30 year note. I'm not good at persuasion, and I'm not an expert at any of this, but here's what I've been thinking. Rather than telling him that he shouldn't rack up more debt, I'd ask him whether he's planning for his debt levels to increase, remain static, or decrease over the next five years. Try to make it feel like he's the one reaching the conclusion that he should be decreasing his debt load. If he says that he's fine with his debt levels remaining static or increasing, then I don't have any further advice. If he says he's trying to decrease his debt level, but it's actually increasing, then maybe he's in denial. The only thing that comes to mind is a recent HBO Real Sports segment (http://www.youtube.com/watch?v=WDjkbgrgcmo) on a couple of NFL players who blew all of their money.  Seeing how they've ended up might make the right impression, but given that your brother ran up $148K in debt, I'm not optimistic. This is not the case with your brother only. There are many business which run on this premise. It goes till the time all the conditions are in control and get busted when things goes out of way.  You have mentioned the loan amount and not the monthly repayment amount. Even if you say, a new loan will not solve his problem, what are the way out ? Telling things nicely sometime does not work especially when facts are otherwise. Hence you need to make a compete case study which should also consider his capacity to pay. As of now it seems he has debts of around 20 months of his earning, which can be considered high, depending upon the terms of major loan such as car loan and personal loan. A case study is way out. You can explain him with such case study that he should not go for further loans. I'm not sure how much living expenses are there but half of $12,600 in the US would be a decent monthly income.   I agree that debt on debt would just add to his problems, sort of like quicksand, the interest will just makes a person sink deeper and deeper.  It seems like it might take some more radical options here to pay off the debt. Like, could he move into a much smaller home or get a roommate? How expensive was that vehicle? Could he sell it and pay cash for a much cheaper used one and use the difference toward his debt? How much does he work? Could he get a second job for just a few hours to help make extra money? Is he willing to speak with a debt counselor?
The only fair thing to do is to let each of you pay their own loans. That way, your brother will probably get out of debt faster and starts saving or investing (assuming equal down payments), while you'll be stuck with your loan for a while longer. If you want to minimize the interests you have to pay, you could simply borrow money from your brother. That way, he'll contribute towards your loans, and you will know exactly how much you owe him. Your brother may lend you money interest-free, or you could agree on an interest rate which is lower than what you pay on your loans, which will somewhat compensate your brother and still be beneficial to you. It still won't be fair though, because your brother might be able to invest his extra money with better interest rate, and lending money to you would prevent that. It boils down to this:  Who, or what, would you want to take care of financially if you were to die tomorrow? That's why you need life insurance. I'm pretty sure that your creditors would line up to receive payment from the life insurance check, so that's part of figuring out how much coverage you should have. The life insurance premiums are another monthly payment, of course, but every day there is a small chance that you could die.  Insuring against that small chance vs. paying down your debt faster is a decision that needs to be made, and you (or your brother) are the ones that will make it. I didn't like it very much, because he's confusing money with credit. Money is accumulated work, not debt.  Suppose the farmer has apples and wants meat, but the hunter doesn't want apples. The farmer exchanges some apples for the miner's gold and barters that gold for the hunter's meat.  All three of them have already worked to produce what they have. There's no debt involved, only the accumulated product of work.  An economy cannot function on credit alone. The existence of accumulated work that somebody did before is essential for the existence of credit.  Suppose the farmer promises a bushel of apples to the hunter and the hunter promises to get a deer for the farmer. Now the farmer needs a barrel to collect the apples and he promises to give some apples to the cooper. The cooper promises to make the barrel for the farmer.  All we have up to this point are promises, but no one has done any work yet. Things won't start happening until the cooper does the work needed to make a barrel.   The economy functions on work, not promises. The farmer may promise a million bushels of apples and the hunter may promise a million deer, but that's just fantasy.  Now suppose the cooper dies. The farmer will have to get barrels from the neighboring town, so now he must give some apples to the carter who brings the barrel. The hunter will not get his full bushel of apples, he's experiencing inflation, the cost of apples has gone up.  No matter what the farmer and the hunter promise to each other, the fact remains that the barrels must be brought from the other town.  Economists like Paul Krugman seem to believe that everything can be fixed by increasing demand, but they totally ignore the costs of production. There exists plenty of demand in the US economy right now, but the cooper has died, the barrels must be brought from China. "My suggestion would be that you're looking at this the wrong way, though for good reasons.  Once you are a family, you should - and, in most cases I've seen, will - think of things differently than you do now. Right now, your post above is written from a selfish perspective.  Not to be insulting, and not implying selfish is a bad thing - I don't mean it negatively.  But it is how you're defining this problem: from a self-interested, selfish point of view.  ""Fair"" and ""unfair"" only have meaning from this point of view; something can only be unfair to you if you come from a self-centered viewpoint. Try to think of this from a family-centric viewpoint, and from your significant other's point of view. You're absolutely right to want both of you to be independent financially as far as is possible; but think about what that means from all three points of view (your family's, yours, and hers)? Exactly what it means will depend on the two of you separately and together, but I would encourage you to start with a few basics that make it likely you'll find a common ground: First of all, ensure your significant other has a retirement account of her own that is funded as well as yours is.  This will both make life easier if you split up, and give her a safety net if something happens to you than if you have all of the retirement savings.  I don't know how your country manages pensions or retirement accounts, but figure out how to get her into something that is as close to equal to yours as possible. Make sure both of you have similar quality credit histories.  You should both have credit cards in your own names (or be true joint owners of the accounts, not just authorized users, where that is possible), and both be on the mortgage/etc. when possible.  This is a common issue for women whose spouse dies young and who have no credit history.  (Thanks @KateGregory for reminding me on this one) Beyond that, work out how much your budget allows for in spending money for the two of you, and split that equally.  This spending money (i.e., ""fun money"" or money you can do whatever you like with) is what is fundamentally important in terms of financial independence: if you control most of the extra money, then you're the one who ultimately has control over much (vacations, eating out, etc.) and things will be strained.  This money should be equal - whether it is literally apportioned directly (each of you has 200 a month in an account) or simply budgeted for with a common account is up to you, whatever works best for your personal habits; separate accounts works well for many here to keep things honest. When that money is accounted for, whatever it is, split the rest of the bills up so that she pays some of them from her income.  If she wants to be independent, some of that is being in the habit of paying bills on time.  One of you paying all of the bills is not optimal since it means the other will not build good habits.  For example, my wife pays the warehouse club credit card and the cell phone bill, while I pay the gas/electric utilities. Whatever doesn't go to spending money and doesn't go to the bills she's personally responsible for or you're responsible for (from your paycheck) should go to a joint account.  That joint account should pay the larger bills - mortgage/rent, in particular - and common household expenses, and both of you should have visibility on it.  For example, our mortgage, day-care costs, major credit card (which includes most of our groceries and other household expenses) come from that joint account. This kind of system, where you each have equal money to spend and each have some household responsibilities, seems the most reasonable to me: it incurs the least friction over money, assuming everyone sticks to their budgeted amounts, and prevents one party from being able to hold power over another. It's a system that seems likely to be best for the family as a unit.  It's not ""fair"" from a self-centered point of view, but is quite fair from a family-centered point of view, and that is the right point of view when you are a family, in my opinion. I'll emphasize here also that it is important that no one party hold the power, and this is set up to avoid that, but it's also important that you not use your earning power as a major arguing point in this system.  You're not ""funding her lifestyle"" or anything like that: you're supporting your family, just as she is.  If she were earning more than you, would you cut your hours and stay at home?  Trick question, as it happens; regardless of your answer to that question, you're still at the same point: both of you are doing the thing you're best suited for (or, the thing you prefer).  You're both supporting the family, just in different ways, and suggesting that your contribution is more valuable than hers is a great way to head down the road to divorce: it's also just plain incorrect.  My wife and I are in almost the identical situation - 2 kids, she works part time in the biological sciences while spending plenty of time with the kids, I'm a programmer outearning her significantly - and I can tell you that I'd more than happily switch roles if she were the bread earner, and would feel just as satisfied if not more doing so. And, I can imagine myself in that position, so I can also imagine how I'd feel in that position as far as how I value my contribution." It's perfectly legal for your brother to make a loan to you.  However those two transactions are separate.  If he defaults on the LC loan because you didn't pay him, it's his responsibility.  If you default on your loan with him, you've got big problems.  Money + family/friends = scary. &gt;In addition, US debt is the safest debt.  I am really sick of this argument. The U.S. is believed to be the safest debt at this point in time, but that won't necessarily always be the case. We have been taking on debt for 30 fucking years and at some point investors are going to see us as a risky investment and stop lending. At some point we are going to have abused our global reserve status to the point the world doesn't want to extend it to us anymore. How do people not get this? "good vs ""bad"" debt in the context of that post. At least in the UK this can be a good tactic to reduce the cost of credit card debt. Some things to consider" I think that he means that gold is debt the same way that money is debt, because gold for the longest time literally was money.  Yes it is also a commodity, but it and silver were the only commodity universally accepted in exchange for promissory notes. There was no apple reserve, shoe reserve or deer reserve as in OP's explanation, that the town priest held on to in which to make those notes credible for tender around town.  So basically everyone decided that instead of trading a bushel for apples for some deer meat, they decided they would trade the apples for gold, then they would trade that gold for the deer meat. They used the gold because they knew it was a real, tangible thing that was safely tucked away. No bad deer season or bad harvest would affect the actual gold itself, which is why it was used as the middleman in the transaction. What he is saying is, you borrow lots of money and put it into my business and my business will go up in value and therefore between us we are richer.  What he doesn't say is, if his business profits are going to pay off the debt you have accrued. We all know the answer to this but his supporters are so blind in their loyalty that they will miss it. Also known as corporate welfare. Hire a lawyer familiar with transactional law and they will have a examples in house. Any debt that large will have nuances that Google or Reddit can't help you with.   A term sheet is a term sheet but you will want it to be substantial and air tight. It doesn't really make sense to cure indebtedness with more debt.  This is why your friend is having trouble finding someone to loan him money.  If he can't borrow at a lower rate then he should probably focus on paying down some of his debt. "Short answer: don't do it. Unless you know something that the bank doesn't, it's safe to assume that banks are a lot better at assessing risk than you are. If they think he can't afford it, odds are he can't afford it regardless of what he might say to the contrary. In this case, the best answer may be ""sorry for your luck;"" you could recommend that he comes up with a larger down payment to reduce his monthly payment (or that he find a way to get some extra income) rather than getting you to cosign. Please also see this article by Dave Ramsey on why you should never cosign loans." "Personally, I avoid making business deals with friends and relatives. There's just too much of a possibility that things can go wrong.  Let's assume that you're honest people and you have no intention of cheating your mother-in-law. Still, all sorts of things could happen that could make it difficult for you to repay the loan. You could lose your job. You could get some big medical expense. Etc. Then what happens? Then your financial problems become family problems. There's a strong temptation when people borrow from relatives to make paying the loan the lowest priority in their budget. ""I know I promised to pay \$X per month, but things are really tight right now and Mom should understand."" Maybe she does understand and can manage without it. But maybe not. And then it becomes a family fight. ""You promised you'd pay it back."" ""And we will, we're having a hard time right now. Can't you just give us a break?"" Etc. Or she might have some extra expense, and say, ""Hey, can't you pay a little more this month? I really need some extra cash."" ""I'm sorry, we're struggling just to make the regular payments, we can't."" ""Well I was willing to loan you all this money. The least you could do is pay me back when I need it."" Etc. You can end up ruining family relationships over money. Your wife can find herself in the position of having to choose whether to side with her mother or her husband. Etc. I'm sure plenty of people do things like this and it works out just great. But there are big risks. And by the way, apparently this was your idea, not your mother-in-laws. I wonder what her reaction is. Is she eager to help out her daughter and son-in-law and had nothing in particular to do with the money anyway? Or is she feeling very imposed on? It's one thing to ask relatives to let you borrow their car for the weekend. Asking someone to loan you $50,000 is a very big request. If one of my kids asked me to loan them $50,000 from my retirement fund, I'd consider that a very presumptuous request. (Unless they needed the money for life-saving surgery for my grandchild or some such.)" The biggest issue with personal bankruptcy is the guilt.  We generally are brought up to believe that we should be responsible for our debts.  Bankruptcy is a direct contradiction to that concept.  Once a debtor realizes that corporations don't necessarily view bankruptcy as failure, but merely a financial tool, that makes it a lot easier to let go of the guilt.  Once that happens, all a debtor needs to get used to is the idea that s/he'll be dealing with a cash economy for a while.  Which isn't a particularly bad thing at all.  Inconvenient at times, but that's about it. I came across such a situation and I am still facing it. My friend borrowed my credit card for his expenses as he had misplaced his debit card and for the time being had asked for my credit card to handle the expenses he does. He paid for initial 2 months and then was not able to make payments, mainly due to not being able to arrange money or if it was a contri party, he would collect cash from friends but again spend the same. Months passes by... the bill had come upto 65k and calls from bank and other respective organizations Finally my dad came into picture and slowly the issue is resolving he has paid 50K remaining is still pending.   So basically, the reason I shared this part of story was he is my Best friend and in order to not spoil our friendship I did not want to take any such step which would later on affect our friendship. This completely depends on the individuals how they react to the situation. Keeping Ego, superiority, favour sort of feelings and words apart things can be resolved between friends. You do not know what is the situation on the other side.  Probably you can connect with him ask him to explain you why is not able to pay the debts and take action accordingly. If he is not able to provide a proper reason then you may take some actions like mentioned in initial answers, run after the assets he own or anything else.Stay Calm and patient. Do not take any such step which you would regret later on...!