My Adult Child Is in Credit Card Debt and Struggling. Should I Pay It Off?

A very famous Shakespeare line is essential when dealing with family and credit: “Neither a borrower nor a lender be, for a loan oft loses both itself and friend.”

This does not mean don’t ever use credit. In the play, Lord Polonius refers to borrowing or lending to friends, and he’s right. Trust me, I’ve lost friends over money being lent, and when that money takes the form of a credit card, it’s even worse.

Mix family relations into the situation, and you have a very delicate situation. We can’t just avoid the topic, so let’s face it: What do you do when you are a parent, and your adult child is in serious trouble with respect to credit card debt? Specifically, let’s assume your child is asking you to pay off the debts.

Seek full disclosure

Your first obligation is to yourself, particularly if you have limited assets and are living on limited income. Before you get involved financially, you must get involved personally. This is your child, and regardless of your history, they are seeking help. That help must come with a price, however. It entitles you to tear into their credit history and finances. They must be prepared to offer you full disclosure.

You should get a copy of their credit report and a personal balance sheet — a list of assets and debts — complete with supporting documentation. Like it or not, you are going to be like a bank underwriter.

» MORE: How to pay off debt

Have a "heart-to-heart"

Once you have a clear picture, have a heart-to-heart with your child. What’s going on with them? How did they end up in debt? The two most likely scenarios are that 1) they are a responsible individual who fell on hard times, didn’t want to tell anyone of their troubles, and hit a wall; or 2) they are totally irresponsible and either never bothered to learn about credit or simply don’t care.

In both cases, you must set up clear rules regarding the debt. First, you should visit a credit counselor together and work out a plan for handling the debt with the child’s own assets. Then you’ll need to decide how much of the debt you are willing and able to pay off. More than likely, this will be a gift and not a loan. If they couldn’t pay the credit card off, they’ll never be able to pay you off.

Two different paths to help

The responsible child will likely have learned their lesson. Let them know this was a one-time offer for help, but you can’t do it again. You don’t want them thinking you will always bail them out. With the debt counselor, work out a plan on how to handle credit going forward.

In the case of the irresponsible child, the situation is dicey. You will be helping the child more by giving them tough love. If you choose to pay off the debt, then you will have to make it clear this will never happen again. And you’ll need to stick to it. A better situation would be to only pay off the high-interest debt and leave them to handle the rest, based on a plan the debt counselor creates. That way, it isn’t a free ride. It requires them to demonstrate responsibility. If they fail, then the sad news is that nothing you do is going to help them.