Need Some Advice On Bad Debt...

EvilSanta

Hi-ho all

So you'll see that I'm new around here - I'm one of those apathetic consumers who needed a book shaped kick in the pants to get himself sorted out - thanks to my wife's inspired choice of Xmas pressie and Martin's advice, I'm on my way.

But this isn't about me, it's about my parents.

They just got landed with a 16k tax bill 'out of the blue' - in a fit of panic (partly due to the fact that they go away on hols Wednesday next week) they immediately got onto that bastion of consumer lending, Barclays and were 'advised' to... and get ready for it... 'consolidate all their loans onto a secured loan' - this from their business manager of seven years.

That's where I came into the story.

Now, I'm not really any good at this sort of thing, but I've read the book and browsed the site and come to the conclusion that secured loans and barclays are two consumer swear words.

Anyway, to cut a long story short (probably too late) I've spent some time here this morning trying to get to a plan of action.

Total Debt:

Personal loan - Barclays - 10k
Tax Bill - HRMC - 16k
Credit Cards - 20k (egg, MBNA & CapitalOne)

Total: 45k.

Income last year: £58k
Mortgage remaining £180k, house value - £350k

Parents plan: Stick the whole lot with Barclays at £555 a month for 12 years(including protection which, if they don't claim at the end of 5 years the bank will refund the premiums or something), secured against their house

My Plan:

1. Get an unsecured loan with Post Office for five years to repay tax bill - roughly £320 a month
2. Consolidate credit cards to low balance card (Amex?) and repay as priority, using £200 saving on loan plus whatever else is available)
2. In five years when the fixed term on their mortgage (care to guess who with) ends, renegotiate whatever outstanding debts there are onto the Mortgage.

Your Plan?

As I say, I'm new to all this and know there are some clever clogs out there who can help... I hope... and I'd really appreciate it.

Thanks in advance

ES
PS: Mines a beer and money sandwich. Hold the bread

Xbigman

There's a lot of 'borrow this' and 'consolidate that' in your plan (which in fairness is an improvement on their plan). Clang, clang, clang (alarm bells ringing).

Questions.
How have these debts built up? If business expences why are they on credit cards, if not has the overspending been stopped?

Where has this tax bill come from? Have they paid their usual tax bill on time and this is extra or some adjustment?

Plans.
Cancel the holiday. Get a refund if possible, if not write it off. Any refund plus spending money use to pay some of the tax demand. If they are reluctant then point out their debts now almost equal their yearly income and that is serious debt territory. Cut back & pay off is the way to go.

With an income of 53k they should be able to pay some big chunks off that tax bill so talk to IR and try to negotiate some payment plan. If their tax affairs are in good order over a number of years then the IR should be willing to give them some time.

With their income this should be sortable in 3 or 4 years.

And tell them you never go to your bank for financial advice.
Regards




X

BobProperty

Big first question: Are you/they sure the tax bill is correct? The revenue are fond of finding something out, backdating, assuming, adding interest and sending out an estimated bill. If their accountant says yes it's true and there's no way of avoiding it, then I think even the IR might deal to get the tax paid over a period of time.
I'm with xbigman in that there's maybe more to it than just a tax bill relating to the business. What format do they trade as? Any chance of re-arranging borrowing so that the business is picking up the bill?