Friends are in trouble

petetidball

Just had some friend visit us this week and we've been chatting about stuff and it's come to light that they have got themselves into some serious financial trouble. Neither of them work (one due to illness, the other due to children) and they are surviving on tax credits, disability living allowance, and credit cards. Their house is mortgaged to the max and they have several loans, the least of which is just getting to £5000 balance. They pay nearly £300 a month for a car on five years hp and their last credit card with any credit left is down to the last £2k which at the rate they're going might last them four months. I want to help them and they know they need to sort something out but I don't really know a huge amount about things like DMPs and IVAs. So I've got a few questions and any help would be great.

1. Can a DMP or IVA cover secured debts or is it just for unsecured?
2. If they go for either a DMP or IVA could they lose the house or car?
3. Could they go for bankruptcy and still keep the house and car?
4. How easy is it to organise a DMP/IVA/Bankruptcy?
5. How can I talk to them without sounding self righteous or like I'm interfering?

They don't have internet so can't do this themselves. They have said it's a problem but just seem to think it'll all work out and that they can't lose much as they don't have much. I just want to have some more information so I can go to them and show them their (realistic) options. My biggest worry is that they'll just try for a debtbuster style loan and end up worse off. They had good credit but over the last two years it's gone to pot. They've had defaults and arrears all over the place and the credit cards are just increasing in interest every couple of months. I don't want to see them lose everything but the only way I can help is to try and help them see the situation they are in and possible ways out of it. Thanks for your help!

beentherewornthetshirt

Have messaged you.

CLAPTON

we need to see their SOA to give any real advice except to say they ought to contact CCCS, Payplan, CAB which provide free debt management help.

Storm

In this sort of situation I start the conversation by talking about my debts, how I'm trying to pay them off etc, and that I've found this website and how useful its been to me. I've found that this eases people into talking about money in general, and you can always say that you've considered a DMP/IVA or found talking to the CAB/CCCS/Payplan useful.

You could also download the spreadsheet that's in the resource bar to give to them so they can work out their expenditure more accurately, and that might be enough to jolt them into a LBM (which it doesn't sound like they've had yet)

I would ask the questions on bankrupcy over on the bankrupcy board, as people there will know far more. I'm afraid I don't know much about IVAs, but I'm sure someone will be along soon who does!

petetidball

Thanks for your replies so far. Don't know all the details for the SOA but I know they're using around £500 of credit a month just to get by.

OberonSH

Tell them to get themselves off to the library and make use of the free interent access that some provide and check out this place. Then perhaps they won;t feel alone. You could also pass on the number for one of the debt charities who they can talk to, and maybe get some help that way, without having to take over their financial affairs.

tomterm8

CAB, PayPlan, CCCS etc all give free advice. If they are considering bankruptcy or an IVA they MUST get impartial professional advice.

Hard to give any more useful advice without a SoA, and a list of debts / APRs.

I will note that if the debts are made up from credit card / bank charges, these may be recoverable.

Broken_hearted

Get rid of the car they can't afford it next contact creditors explain the situation. The mortgage should get the interest paid by benefits office but not any loans secured on it.

chevalier

With bankruptcy I THINK that if they have any equity in a house say, then they may be forced to sell it. They might also lose the car if it is new enough

With an IVA 75% of the creditors have to agree to it, and they CAN'T default on it. They would also be expected to release equity in the house in year 4 or 5 to pay their creditors more. On the other hand a lot of the debt is written off.

With a DMP it is more informal, but I am unsure if CCCS or Payplan will take anyone on who is solely on benefits.

A couple of things they can do is to check that they are in the correct banding for council tax. If they are in the wrong (ie higher) band then they can reclaim the difference back for all the years they have lived in the house.

Do they have any charges they can reclaim from banks and credit cards?

best of luck
chev

Broken_hearted

I'm not sure but they refused to help us.