Partial settlement/benefits advice

Brodiebobs · 11 August 2016 at 9:39PM

I'm helping a family member who took a secured loan in 2004, they haven't made payments since 2013 and the company are pushing for a court appearance, just over £17,000 o/s including their ridiculous £50pm default as well as numerous other charges. The original loan was £15,000.

After speaking to a debt charity equity release was suggested as best option, during the application its come out the person wasn't claiming their state pension, they thought they had 'opted out' and weren't entitled but its looking like this wasn't the case. An application has gone in for pension and the debt charity have advised HMRC may offer a lump sum, which in turn could be offered to the company and equity release avoided.

Quick calculations have lead us to believe it will be around £10,000.

1)should we tell the debtor this is potentially happening (they have asked for proof of the equity release, although it was started we've asked them to hold fire until we hear about the pension)
2) are they likely to accept this lower amount, potentially want to offer less as there are other unsecured debts?
3)will the lump sum need to be declared and affect other benefits (has custody of a minor who they claim child benefit & tax credits for)
4) They also I believe would have a case for missold PPI, it was paid bundled in with the loan & when they could no longer afford the repayments tried to claim, but were told they could only do this by confirming they were claiming JSA, they weren't working and claiming income support when the loan was taken out. Should we deal with separately or as part of the negotiations for settlement?

sourcrates · 12 August 2016 at 10:11AM

Hi,

Quite a few questions there.

Ok, as the debt is secured, this should be a priority debt.
If HMRC do provide a lump sum, there is no harm in writing and asking if they will accept that amount as full and final settlement, unfortunatly there is no way of knowing how they will respond to that.

You don't normally pay tax on the state pension, however on a lump sum payment, different rules may apply.

I would get a seperate claim put in for the PPI as soon as you can, there's more info on this, and a template letter, on the reclaiming section of this website.

Brodiebobs · 12 August 2016 at 1:10PM

Thanks Sourcrates,

In your experience are they likely to consider a partial offer of settlement?

I will get onto the PPI now.

sourcrates · 12 August 2016 at 3:11PM

Brodiebobs wrote: »

Thanks Sourcrates,

In your experience are they likely to consider a partial offer of settlement?
.

It's anyone's guess really, I'm sure they would concider it, if it would be accepted or not is another matter.

All I'd say is try it and see what they say.

dancingfairy · 13 August 2016 at 11:24AM

What is the creditor trying to achieve? You say they are pushing for a court appearance? What does this mean? They've written a few stroppy letters or court proceedings have been started or what? Are they trying to push for bankruptcy or are they trying to force a sale?
Is there a first cgarge/ mortgage on the property?
Is there much equity in the property?
Personally I would not go down the equity release route as I believe it's largely unregulated, there can be extortionate interest and charges and it can eat up all equity.
When the pension is sorted can the person afford repayments? If no, are they paying any other debts?
Perhaps the company would be happy to accept x ount repayment per month plus y amount towards the arrears? Has this option been explored?
Also it may be worth contacting national debtline or stepchange as they may have slightly different suggestions.
Regards
Df

dancingfairy · 13 August 2016 at 11:29AM

Have just had a thought - depending on levels of debt and how it's made up -secured or unsecured etc it might be worth considering a lump sum iva? With a pension reclaim, a PPI claim and a complaint against unnecessary/ unfair charges you could potentially have a chunk to offer as a lump sum iva?
I'm not sure how long the pension back claim, PPI claims etc will take but if push came to shove ( ie a bankruptcy petition landed on their doormat) would a close family member be able to help them out with a lump.sum ?
Df

Brodiebobs · 16 August 2016 at 11:34AM

Thanks Everyone.

To answer a few queries.
The loan is secured on the property (no other mortgage or anything but they property is worth at very best £60k)
The court proceedings were stopped when we heard about the situation and stepped in, I believe they want to force a sale, but they don't really commit to anything just keep pushing for the money 'or will go to court' although a housing officer at local council said no judge would find in their favour for such a low amount.
The equity release was suggested as a solution by Step change as we got in touch with them, and went through the details.
We suggested setting up a payment schedule but they want over £250 a month which is the normal payment plus an amount towards the arrears, which the person cannot afford.

Brodiebobs · 16 August 2016 at 11:39AM

Sorry I don't know what a lump sum IVA is?

fatbelly · 16 August 2016 at 12:03PM

Brodiebobs wrote: »

The loan is secured on the property (no other mortgage or anything but they property is worth at very best £60k)
The court proceedings were stopped when we heard about the situation and stepped in, I believe they want to force a sale, but they don't really commit to anything just keep pushing for the money 'or will go to court' although a housing officer at local council said no judge would find in their favour for such a low amount.
The equity release was suggested as a solution by Step change as we got in touch with them, and went through the details.
We suggested setting up a payment schedule but they want over £250 a month which is the normal payment plus an amount towards the arrears, which the person cannot afford.

Equity release may work here

The lender will be looking for a 28-day possession order, followed by a warrant of eviction and the house sold. From your figures, there is enough equity to cover this.

If their paperwork is in order the judge ultimately cannot resist this (housing officer is wrong) though he/she can adjourn and (if there is enough income) suspend a possession order on payment of the contractual amount plus something to the arrears.

P.S. An IVA won't work on a secured loan, again assuming the original agreement is correctly constructed.

Brodiebobs · 16 August 2016 at 2:54PM

The amount which was bandied about for equity release was 15% so if their valuation matches the 'desktop valuation' your talking £9000 so only almost half of the outstanding, and the pension maybe £10,000 so not whats owed. Could they push for him to do both?

fatbelly · 16 August 2016 at 3:46PM

The lender won't care where the money comes from - they can always get it from sale of the house if he doesn't pay.

Clearly he should claim everything he is entitled to (state pension, pension credit, council tax support, attendance allowance if disabled all come to mind). Are there any occupational pensions lurking from the past?

For equity release, I understood that 30% was standard for single people over 65 and that the existing charges have to be paid off as part of the process, so the equity release company has a first charge. He might want to shop around and do some more research. AgeUK has a department dedicated to this - they know more that I do about financial products.

Partial settlement/benefits advice

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