Family Member in financial trouble

Charterhouse

Hi,

A family member has run into some trouble, she only told us very recently, but she owes around £6,000 to a variety of sources, very roughly as follows:-

£700 bank overdrafts (I suspect unauthorised/exceeded)
£1500 some catalogue that comes through the door
£500 store card
£2200 sub-prime credit cards
£1500ish rising rapidly door to door sub-prime lenders which appear to have APRs of 200%+

She does not have a lot of money as you can imagine, around £100 a month free after all commitments paid. She is on a variety of benefits but did used to work many years ago and will have a pension coming to her at some stage in the next few years.

Am I right in thinking the best bet is to try and get all these negotiated down as far as possible and then enter into an IVA to gradually pay them down? The family is prepared to help out with some cash upfront but clearly she is a terrible credit risk and we don't really want to throw good money after bad.

sillystudent_2

Umm I'm no expert on this stuff by any means - but I would've thought bankruptcy would be an infinitely better solution. IVAs are generally designed for people on high incomes who have assets to protect, i.e. a house.

If this woman has no job and no real assets (I presume she doesn't own a house?) then by going bankrupt she would get all the debt wiped, the only downside being that she wouldn't be able to borrow any real credit for the next 6 years. Additionally if she gets any large windfall/inheritance in the next few years this will go automatically into repaying her debts, so this is something to consider.

Essentially, is there any prospect of her earning significant income (i.e. job, inheritance etc.) in the next few years? If unlikely, then I would've thought bankruptcy would be by far the best route as the debts will be written off and there are no assets to take - although wait for the experts to come on here, it isn't something to be entered into lightly.

Hope this helps

Charterhouse

Bankruptcy over £6k just seems crazy, that's the only thing stopping me agreeing really. She has very few assets outside of stuff used by the kids which I presume would be excluded. A car that is not worth much. She lives in a council house and there is little prospect of any significant inheritance in the next few years.

Charco_2

You cant really have an IVA for £6k either.

A DMP might be her best option but she should really look at ways to reduce some of the balances as quickly as possible... cash in the attic?

Perhaps concentrate on the higher interest rates? Consider a consolidation loan PROPERLY MANAGED WITH PLENTY OF DISCIPLINE! Balance transfers to 0% cards?

Charterhouse

Charco wrote: »

You cant really have an IVA for £6k either.

A DMP might be her best option but she should really look at ways to reduce some of the balances as quickly as possible... cash in the attic?

Perhaps concentrate on the higher interest rates? Consider a consolidation loan PROPERLY MANAGED WITH PLENTY OF DISCIPLINE! Balance transfers to 0% cards?

She can't get credit any way. No loans, no credit cards, no nothing. She has asked the bank for a loan of this type and been knocked back.

There is no cash in the attic either, I think there may have been but it has all been run down now, hence her panic.

Some of these lenders are real scum, charging like 250% - 500% APR - is there any comeback against these chumps?

Charco_2

Scum indeed!

If she has nothing to lose and you don't fear that they might call round to beat her up then do nothing! She can't afford to pay so she can't pay...
Is there any way to suggest that she was taken advantage of? Pressurised by strong arm sales or shouldn't have been entering agreements of this nature anyway?

A DMP might be the only option if she is not willing to look into bankruptcy (but BR might be the better option)

Choo_Choo_4

It's scandalous what some companies charge and get away with it - their skill is preying on vulnerable people who have nowhere else to turn and take what they can get quickly regardless of the fact that it will cost an arm and a leg to repay.

These debts need to be tackled first if at all possible. You're saying that the family are prepared to offer some cash to help her out - call THESE companies first and get SETTLEMENT figures from them - if you can manage to clear these first then the rest should be a little more manageable ...

Otherwise bankruptcy may well be the option ... with 250-500% APR it won't be £6k debt for too long ...
Sounds like she doesn't have any assets - car (you've said already low value), household goods etc all exempt in bankruptcy anyway and presumably she'd be glad to clear the debt with any windfall or inheritance (unlikely as it might seem just now)

Good Luck!

debtinator_2

Something nobody seems to have noticed is that this lady would appear to be a suitable candidate for a Debt Relief Order

The criteria for which are;
1. less than £15,000 debt
2. assets of less then £300 (car of less than £1000)
3. Less than £50 p/mth disposable income
4. No pension and not a home owner

REMEMBER this is still a bankruptcy in everything but name

I'm surprised it's not been mentioned

Another way to look at this is to get some family money together and deal with the £1500 "scum" lender, they may even accept a reduced sum settlement when faced with the prospect of getting nothing from the O/R. Then try to negotiate with others to pay a reduced sum (your own DMP)

Is there any mileage in trying to prove the catalogue agreement doest stack up with CCA 1974? often with this type of debt they never actually get people to sign a contract.

With the bank O/D, are there any unfair charges? I know it's a hot potato but the argument is still rumbling on (thanks Martin)

Charco_2

Very good Debtinator, one I often forget about - bankruptcy's forgotten little brother! Probably wasn't mentioned because the poster had indicated that BR seemed ridiculous but a DRO could be quite apt and worth looking into. This is a good post!

Think we'd kinda already skipped onto other letter-writing and dig your heels in tactics.