Helping My Friend (Addiction, Depression)

AnInkling

My friend was made redundant just over a year ago, and since then has suffered from depression and alcohol addiction. He is now an in-patient in an addiction unit and has entrusted me to help him sort out his finances, which are frankly in an awful mess.

His only income is £65 per week ESA. He has an 'unarranged overdraft' on a Halifax bank account of around £2,000. They are currently charging his account £150 per month (meaning that over half of his ESA income would have to go on this just to pay the charges). He has another Halifax account which is also overdrawn but only by around £200, but there are some smaller charges being added to this each month as well. He also has a Monument credit card with a balance of -£3,000.

Do you have any advice for me on how to help him out? He is not in a position to negotiate with banks and credit card companies at present, but the charges are mounting up day by day.

GeorgeUK

Do you know if he has any assets?
Do you know if he might be able to reclaim any of the charges or if there is payment protection insurance on any of the accounts? If so, did these pay out when he was made redundant?

Not sure if an IVA may be an option.

joedenise

The first thing he needs to do is open a basic account and have his money paid into that. Might be worth asking Halifax to freeze the interest on the overdraft.

Don't think an IVA would be anygood as he doesn't have enough money coming in to pay his debts. Not even sure CCCS or Payplan would be any good but might be worth talking to them. Bancruptcy may be the answer.

AnInkling

I did advise him to open a basic bank account at a different bank and get the ESA paid into that, so it doesn't all just get devoured by the Halifax; he did so.

He doesn't have any real assets; he lives in rented accommodation (housing association) and doesn't have a car. The only things he has of real monetary value are a bicycle and a laptop, and together they probably wouldn't sell for much more than £200. He does have a pension fund from his old job, but he's far from pension age. I don't know if that complicates matters if he's thinking about bankruptcy?

I don't know anything about whether or not the accounts had payment protection insurance.

GeorgeUK

Sorry, my idle wonderings may have confused the issue a little.

Can you give a very accurate breakdown of his debts? The amount is quite important. The IVA musing came about as i was trying to think of how we might freeze the interest and charges. There is no set is stone minimum payment for IVA's, but Joedenise is right that what he could offer would probably not be accepted.

The reason i ask is incase he can get an Administration Order. The problem here is that there is a maximum of 5k debt allowed and it sounds like your friend is very close to this.

I would contact one of the free debt charities such as CCCS or Payplan - while they may not be able to set up a plan for him because of his low income, they may be able to offer advice of how to go about it and what other option may be available.

There's plenty of help here too and i'm sure others will be along soon with other suggestions.

pixiechick_2

George, I'm no expert as you know, but as the OP's friend is on benefits, has debts of just over £5000 and no assets, would he not be suitable for a DRO?

I would definitely try to get Halifax to stop adding charges/interest until you can get his debts sorted.

GeorgeUK

I did think about a Debt Relief Order, but after what Niddy said about them, not sure what to make of them. They're better than bankruptcy, but only just by the sound of it - although the debt would be wiped out after 12 months.

I think you can have £300 worth of assets and the pension would probably count towards this. Definately worth asking one of the debt charities about it though as they will have more info to hand.

RecoveringAlcoholic

More information on debt and mental health issues can be found here:

http://www.moneyadvicetrust.org/section.asp?sid=12


.

AnInkling

I'll try to find out a more precise figure next time I get the chance (hopefully today or tomorrow). It is over £5k in total, but I'm not sure by how much.

Would I be able to contact the Halifax on his behalf and explain the situation, or would he have to do it as he is the account holder?

GeorgeUK

It may be worth calling the bank to explain the situation and ask what they erquire for you to deal with someone elses accounts. Not sure if power of attorney is required, but they should be able to tell you so there's no confusion.

If it's over 5k then the Administration Order can't be used. Probably best to write to all his creditors explaining the situation and that he is unable to pay. Pay £1 to each creditor and hopefully he'll be able to get himself sorted out. With a bit of luck the banks will freeze interest and charges and possibly even sell the debt on to a Debt Collection Agency (DCA). If this happened then the DCA couldn't add interest or charges, but they might be able to if they are just acting on behalf of the original creditor.

Not sure what occupation he has/had so don't want to advise a DRO as this could muddy the waters a bit later on.

AnInkling

GeorgeUK wrote: »

Can you give a very accurate breakdown of his debts? The amount is quite important. The IVA musing came about as i was trying to think of how we might freeze the interest and charges...

These are the amounts (rounded to the nearest £5):

Bank accounts
Halifax account 1: -£1,155 (overdraft limit is £1,000)
Halifax account 2: -£125 (overdraft limit is £100)
Co-Operative: -£200 (overdraft limit is £200)

Credit cards
Barclaycard: -£325 (credit limit is £260)
Monument: -£3,015 (credit limit is £3,000; arrears £255 according to latest letter)

Other stuff
Water Bill (final demand rec'd): £175
Vodafone (overdue demand): £25

Approximate total debt: £5,020

There is also rent and council tax, but he's claimed for housing and council tax benefit and this claim has been accepted subject to some additional paperwork being sent (copies of bank statements mainly) so hopefully that won't be a problem.