Suze's Payback Plan

Q: My soon-to-be-ex daughter-in-law has left my husband and me with a debt of $18,000 on two cards. I know it was foolish, but we took out cash advances to help her start a business while our son was serving in Iraq. For three years while she and my son were together, she faithfully paid us back each month. In April 2008, she closed her business, left the state, and stopped making payments because she said she had no money coming in. Now she lives with her mother and won't look for a job. Her reason? Because she's pregnant—with another man's child. She did sign a promissory note before she left my son, but as her mother likes to tell us, "You can't squeeze blood out of a turnip." My husband and I live paycheck to paycheck. Do we count this as a loss or take her to court?

A: I am sorry to hear that you have paid such a steep price for your kindness. The sad fact is that if your daughter-in-law has no income or assets, going to court is unlikely to produce any money for you. You can sue her, but what do you expect to be repaid with? I would instead focus on the fact that she signed a promissory note. You can claim this money as a short-term capital loss by filing a Schedule D with your tax return. This will offset income (thus lowering your tax bill). While you can claim only up to $3,000 a year, you get to keep claiming up to $3,000 every year until you have accounted for your entire loss.

If your credit card debt is becoming overwhelming, I recommend contacting the National Foundation for Credit Counseling (NFCC.org; 800-388-2227). This network of nonprofit organizations helps people sort through their options for dealing with unaffordable debt. And for those of you considering loaning money to friends or family, please see my advice in When Lending Money Doesn't Pay .

Suze Orman's latest book is her 2009 Action Plan: Keeping Your Money Safe & Sound (Spiegel & Grau).