My sister is a single mom and can’t fully provide for her kids.  She
is receiving housing benefits where the government pays for most of
her rent.  She purchased a car with no money down. The payment with
insurance is about $500/mo.  When housing found out, she was told to
get rid of that car or she would lose her housing benefits.  She
asked me to put the car in my name which means that I would have to
put the financing in my name as well so it does not show on her
credit.  She would still drive the car. I’m afraid to make that kind
of commitment. She refuses to give the car back to the dealer because
it’s going to ruin her credit.  My other sister  gave her $4,000 to
buy a used car when returns her new car, but she does not want an old
car.  What should I do? My heart tells me help her, but my head tells
me NO!  I love her dearly, but she’s always broke and I am afraid
she’d get into an accident and I would be totally liable.
Confused Sister

Confused Sister must come from a very close and loving family. It’s
obvious that these three sisters care for each other. But, sometimes
you need to do what’s best for a person. Even if it’s different than
what they ask you to do. This is one of those situations.

If your three year-old takes a sharp knife from the dinner table
you’re going to take the knife away from him. Even if he cries and
doesn’t want to give it up. You know the danger even if he doesn’t.

Broke Sister is going to hurt herself (and her children) with the car
loan. That’s one reason why the housing authority doesn’t want her to
keep the car while she’s receiving rental assistance. They know that
she won’t be able to keep up with a car payment and continue to feed
her children.

So the best thing that you can do for your sister is to help her get
out of the new car and replace it with something she can afford.

Broke Sister has a couple of different possibilities for the new car.
If she can find someone to take over payments she could come out with
no bad marks on her credit. The key here is that the lender gets
their money on time.

It’s also possible that the housing authority could help. Most have
laws against ‘predatory lending’ practices. There’s a possibility
that the lender was taking advantage of Broke Sister. The housing
authority might be able to point her to a state agency that could
help her get out of the car loan.

A third option would be to contact the dealer and explain the
situation. They might be able to put her into an affordable car. The
original dealer should be Broke’s first stop since they’ll get the
best price for her now used new car. She will need to finance the
loss on the new car, but the money from Third Sister should help keep
the payment affordable.

The final method for returning the car is a ‘voluntary repossession’.
That’s where Broke Sister drives the car to the lender and turns over
the keys. They will sell the car. It will bring less than Broke
Sister owes on the loan. The lender will expect her to pay the
difference. She might have to use the $4,000 that the Third Sister is
offering to cover the loss. If she doesn’t repay the loss it will
affect her credit rating.

Ok, now that Broke Sister has a few options to put her into an
acceptable ride, let’s convince Confused Sister why she should avoid
Broke’s scheme.

First, it’s probably illegal. If Broke hides the car from the
government she’s lying to get financial aid. That’s illegal. Helping
Broke to lie is participating in the fraud. Not something that you
want to be involved in.

Next, you would be responsible for the financing. If your sister were
one day late with a payment, it could trigger penalty rates as high
as 30% on any credit card balances you have. Plus, it would affect
your ability to get your own car loan or a mortgage.

You would also be responsible for the car. Broke can’t insure a car
that she doesn’t own. So you would need to add it to your insurance
policy. You’d also need to let them know that your sister is a
regular driver on the car. If Broke Sister had an accident you would
be involved. It’s your car and your insurance company. You can guess
what will happen to your rates.

This is a case where you need to listen to your head. It would appear
that your sister is not grasping financial reality. She can’t afford
to care for herself and her kids. So the government is helping her.
It’s time for Broke to realize that paying for food and shelter is
more important than driving a new car. You can help lead her to do
what’s right for her kids.

Confused wants to help her sister. The best way to do that is to tell
her the truth. Broke needs to give up the new car and start being a
financially responsible parent for her children.
_________

Gary Foreman is a former financial planner who currently edits The
Dollar Stretcher.com website and newsletters. You’ll find hundreds of
articles to help you stretch your day and your dollar. Visit today!