My Friend Owes Me Money and Won't Pay!
7th February 2024 | ⏰ 00:06:55
My Friend Owes Me Money and Won't Pay!
TLDR: Stephen, a 28-year-old man, signed a lease with two roommates in August 2018. One of the roommates fell behind on rent and eventually moved out, owing five months' rent. Stephen tried to help her find a job but was unsuccessful. He kicked her out, but she didn't remove her name from the lease. Stephen's landlord is willing to let him out of the lease if he finds new tenants, but he's struggling to find qualified candidates. Stephen is considering taking a hardship withdrawal from his 401k to pay the landlord, but Dave Ramsey advises against it and suggests he apply for a credit card or borrow from a local credit union instead. Stephen plans to work out a payment plan with the landlord and become a handyman for the property until it's rented out.
Navigating a Complex Financial Situation: Stephen's Story
Stephen, a 28-year-old resident of Maryland, found himself in a challenging financial predicament due to a failed roommate situation and the looming threat of eviction. He reached out to Dave Ramsey's show, seeking guidance and advice on how to navigate his circumstances effectively.
The Roommate Conundrum: A Lease Gone Awry
In August 2018, Stephen entered into a lease agreement with individuals he considered long-time friends. One of these roommates, unfortunately, fell behind on her rent payments, leaving Stephen to bear the financial burden alone. Despite attempts to help her find a job and resolve the situation amicably, the roommate accumulated five months of unpaid rent. Stephen eventually made the difficult decision to remove her from the premises, but she neglected to remove her name from the lease, creating additional complications.
Seeking Legal Recourse: The Challenges of Collecting Rent
Stephen wondered if he had any legal recourse to collect the unpaid rent from his former roommate. Dave Ramsey, known for his practical financial advice, expressed skepticism about the possibility of successful legal action. He explained that pursuing legal avenues could be time-consuming and costly, and the likelihood of recovering the owed rent from an individual without financial means was slim.
Avoiding Bankruptcy and Eviction: Prioritizing Debt Management
Dave emphasized the importance of preventing bankruptcy and eviction, which could have severe consequences for Stephen's financial stability and future prospects. He advised Stephen to explore alternative options to avoid these detrimental outcomes.
Balancing Debt and Managing Expenses: Weighing the Options
When asked if taking a hardship withdrawal from his 401(k) retirement savings plan would be a prudent move to cover his landlord's dues, Dave expressed reservations. He advised Stephen to consider other options, such as borrowing the money from a credit card or a credit union, to avoid depleting his retirement funds. Dave stressed the significance of preserving retirement savings for long-term financial security.
Embracing Hard Work and Frugality: A Path to Recovery
Stephen revealed that he had worked hard to improve his financial situation by picking up a second job and diligently working towards getting out of debt. He explained that he had reverted from Baby Step 2 to Baby Step 0 due to the financial strain caused by his roommate's unpaid rent.
Dave acknowledged Stephen's efforts and encouraged him to continue working diligently to погасить его долги. He advised Stephen to focus on securing new tenants or roommates who could pass the landlord's background check to avoid a similar situation in the future.
Seeking Landlord Cooperation and Exploring Payment Plans
Stephen expressed his desire to avoid breaking the lease but negotiate a payment plan with his landlord. Dave encouraged him to communicate openly with the landlord and explore options such as working as a handyman during the interim period while the house remained unoccupied.
However, Dave cautioned Stephen that he would likely remain liable for the rent until November 15th, after which he would be released from the lease. He emphasized the importance of making arrangements to secure a new, more affordable place to live before that date.
Learning from Experience: Avoiding Similar Pitfalls
Stephen acknowledged the valuable lessons he had learned from this experience. He realized the importance of carefully selecting roommates and ensuring that he could afford the rent payments independently, without relying on others.
Dave commended Stephen's willingness to learn from his mistakes and encouraged him to avoid getting into similar situations in the future. He advised Stephen to consider moving into a less expensive place in the suburbs, where he could comfortably cover the rent on his own.
Moving Forward with Renewed Resilience
Despite the challenges he faced, Stephen remained determined to turn things around. He expressed his commitment to working hard, managing his finances diligently, and avoiding the pitfalls that had led to his current predicament.
Dave encouraged Stephen to stay focused on his financial goals and to seek support from friends, family, or financial advisors if needed. He reminded Stephen that setbacks are a part of life, and the key is to learn from them and move forward with renewed resilience.
With a renewed sense of purpose and a commitment to financial responsibility, Stephen embarked on a journey to overcome his debts, secure stable housing, and build a solid foundation for his financial future.
##FAQ: Q: What are Stephen's current financial circumstances?
A: Stephen is struggling financially due to a challenging situation with a former roommate. He signed a lease with individuals he considered longtime friends, one of whom fell behind on her rent payments. Stephen tried to help her find a job, but she eventually fell five months behind, leading to her eviction. Despite this, she never removed her name from the lease, leaving Stephen responsible for her rent payments. This situation has strained Stephen's finances, and he now faces eviction on the 1st of the month.
Q: What options does Stephen have to resolve his situation?
A: Stephen's options are limited due to his financial constraints and the difficulty in collecting rent from his former roommate. Taking legal action against her may not yield positive results as it is unlikely that she has the means to pay the outstanding rent. Stephen could consider taking a hardship withdrawal from his 401k to pay off his landlord and avoid eviction, but this is generally discouraged as it can have long-term financial consequences.
Q: What is Dave Ramsey's advice to Stephen?
A: Dave Ramsey suggests that Stephen explore other options before resorting to a 401k withdrawal. He advises Stephen to try borrowing money from a credit union or using a credit card to pay off the landlord debt. This approach would allow Stephen to avoid the penalties and potential tax implications associated with a 401k withdrawal. However, Ramsey emphasizes that Stephen should focus on getting out of debt rather than accumulating more.
Q: What are Stephen's plans to address his housing situation?
A: Stephen plans to work with his landlord to get out of the lease before pursuing legal action. He is actively seeking tenants who can pass the landlord's background check and is willing to serve as a handyman during the interim period while the house is unoccupied. Additionally, Stephen is working a second job to increase his income and cover his expenses.
Q: What lessons has Stephen learned from this experience?
A: Stephen has learned valuable lessons from this experience, particularly the importance of financial independence and the risks associated with relying on others to fulfill financial obligations. He plans to avoid co-signing leases or entering into similar financial arrangements in the future. He also recognizes the need to build up his savings and financial stability before committing to significant financial responsibilities.