Sister's financial situation - what to do?

krlyr

I think you have been given lots of fab advice on this thread that you are ignoring. And I know exactly why, because I have been in a very similar situation with my brother. But it took us following all the kind of advice you've been given to fix the situation - as tough as it was, I had to kick him out (he was living with me and my other brother) for non-payment of rent (he'd splashed it all on his then-girlfriend and a new car, knowing we relied on his rent rather than it being a nice bonus), despite knowing he had nowhere else to go (well, he had the option of moving in with my mum but being a few towns away he didn't want to take that option). It was tough, and I won't lie, things got worse before they got better. It took a few wakeup calls for him - getting in with the wrong crowd, getting into a bit of trouble with the police, then getting turned down from the army (which he was looking forward to) because of outstanding court fees. I think it was at that point he realised he had to sort things out, and he moved back in with my mum, sorted out payment plans for his debts, signed up for job agencies and took jobs, no matter how rubbish, to get himself sorted. But it had to be on his terms - it had taken a couple of years, initially with us throwing money at the problem but all that just going to waste really as it was like trying to plug a leak with a sticky plaster. It wasn't just the financial situation that had to change but my brother's mindset towards money and sorting himself out.
Your sister needs to want to get out of debt and stay out of debt or she'll just continue the circle. It will probably require tough love - if she can get away with it she'll probably keep going, so paying off her debts for her may make things worse rather than better.
In this world, you need money to live, and maybe she needs a sharp lesson in that by having to find her own place and buy her own food. Not to say you can't help out at all - helping to find her a room in a houseshare or a cheap flat, perhaps, buying her some groceries or bits for the new flat, but I really wouldn't recommend just bailing her out with money.
If you do decide to go down your route I would make it conditional. She pays rent, but there has to be a consequence if she doesn't - i.e. she goes. My brother thought there would be no consequence to his not paying rent, which is why he didn't bother. As the situation was, it forced our hand as we could literally not afford to subsidise a third person, having chosen a three bedroom place because we had his contribution to afford it initially, so we had to get someone else in his place, but I think it surprised him a lot that we followed through with the threat.
If you pay off her debt, or help her, do it on a formal basis. Pay it off in installments that are conditional on her showing you her finances, or reliant on her being prompt with the rent to your mum, or on her showing she is getting a job/cutting down her spending. Or perhaps make it a formal loan with terms and conditions, if you're willing to follow through with any legal action to recoup it should she not pay up. You cannot just bail her out with no recourse because you will be doing it again and again, believe me, until it begins to affect your own life.

ddebski_us

krlyr wrote: »

I think you have been given lots of fab advice on this thread that you are ignoring. And I know exactly why, because I have been in a very similar situation with my brother. But it took us following all the kind of advice you've been given to fix the situation - as tough as it was, I had to kick him out (he was living with me and my other brother) for non-payment of rent (he'd splashed it all on his then-girlfriend and a new car, knowing we relied on his rent rather than it being a nice bonus), despite knowing he had nowhere else to go (well, he had the option of moving in with my mum but being a few towns away he didn't want to take that option). It was tough, and I won't lie, things got worse before they got better. It took a few wakeup calls for him - getting in with the wrong crowd, getting into a bit of trouble with the police, then getting turned down from the army (which he was looking forward to) because of outstanding court fees. I think it was at that point he realised he had to sort things out, and he moved back in with my mum, sorted out payment plans for his debts, signed up for job agencies and took jobs, no matter how rubbish, to get himself sorted. But it had to be on his terms - it had taken a couple of years, initially with us throwing money at the problem but all that just going to waste really as it was like trying to plug a leak with a sticky plaster. It wasn't just the financial situation that had to change but my brother's mindset towards money and sorting himself out.
Your sister needs to want to get out of debt and stay out of debt or she'll just continue the circle. It will probably require tough love - if she can get away with it she'll probably keep going, so paying off her debts for her may make things worse rather than better.
In this world, you need money to live, and maybe she needs a sharp lesson in that by having to find her own place and buy her own food. Not to say you can't help out at all - helping to find her a room in a houseshare or a cheap flat, perhaps, buying her some groceries or bits for the new flat, but I really wouldn't recommend just bailing her out with money.

Thanks for this; but I think I haven't ignored all the advice if you read my last post?

krlyr

Sorry, was editing my post as you posted

Mojisola

ddebski_us wrote: »

I do agree mum needs to decide what action to take, but she has categorically asked me what she should do as she doesn't know. When my sister does borrow cash from mum (which both has told me has happened recently), I ask my sister if it has been repaid (yes) and my mum (don't know). Mum is so rubbish with money that she can't even remember if my sister has repaid £30!

I have slept on it overnight, and mulled over all the answers on here (even the ones I didn't like - sorry!) and I have come up with an action plan.

My sister started a new job yesterday. I am going to speak to mum about charging my sister board (say £250 pcm? - sound fair?) and having it set up as a standing order into mum's account. I'll help set up a separate savings account to keep it all in. Then, although it should be spent helping pay household bills, if the day ever comes, it is there to help with debt repayments.

I am also going to 'fess up on seeing the HMR&C demand letter. I'll say it was an accident (I'm doing Dad's probate at the moment and so reasonable that I may have thought a HMR&C brown envelope in a pile with other post may have been for Dad) and by the time I realised I had seen what was on it. I will offer to help her sort this out.

This will then give her a blatant opportunity to tell me about anything else (as she has lied in the past about having no outstanding tax returns). If she doesn't, fine. I know not to trust her as far as I can throw her.

So, does the above sound like a plan? I feel daft posting all this on a public forum, but I'm emotionally involved in this situation and so outside views are very useful!

I would have a go at what you're doing, keeping in the back of my mind that it won't work unless 1 - mother really starts to stand her ground and 2 - unless sister owns up to her debts and starts to deal with the problem.

getmore4less

ONe issue you maght fase is that sis does not know what debt she has.

get her to agree to getting the credit agies files so you can find out how bad things are(£2 each x 3)

without know how bad things are you can't decide the correct action, it may be that bankruptcy is allready best.


Is she a benifitiary of your dads estate that could be important.

ddebski_us

getmore4less wrote: »

ONe issue you maght fase is that sis does not know what debt she has.

get her to agree to getting the credit agies files so you can find out how bad things are(£2 each x 3)

without know how bad things are you can't decide the correct action, it may be that bankruptcy is allready best.


Is she a benifitiary of your dads estate that could be important.

She's not a beneficiary of dad's estate, but she will be of mum's.

I think we are a long way from her to agreeing to me doing a credit check on her at the moment, but a good idea for the future.

xDx

zzzLazyDaisy

Well done! It's a good place to start. As others have said HMRC will reduce the fines if they are higher than the tax due. So you could get a large chunk of the debt wiped off at a stroke.

Since she was paid cash in hand with no paper trail, she will have a problem satisfying HMRC of her earnings. But this *may* not matter.

I suggest that the way forward is to ask HMRC to assess the employment relationship on the basis that in law, her status was an employee, and not self-employed. If HMRC agree, this will shift the tax burden to the employer. This is because if an employer is found to be using the 'self-employed' card on its workers, when they are actually employees for HMRC purposes, any tax liability rests with the employer (for failing to deduct tax from the employee's wages and remit it to HMRC as they are required to do) and cannot be reclaimed from the employee.

If you can help her out of this hole and she sees that you do have her best interests at heart and are not judging her, she may be more willing to discuss her other financial problems.

I agree also that she should be paying board, and she should not be borrowing money.

10987654321

If she owes money to HMRC and does not pay it, they will bankrupt her - that is their policy. Perhaps tell her this so that she knows she either has to face the music now - with the possibility of getting out of it - or later (probably this year or next) and the possibility of her dealing with it will be much more difficult. It only takes about 6 weeks to bankrupt someone.

ddebski_us

10987654321 wrote: »

If she owes money to HMRC and does not pay it, they will bankrupt her - that is their policy. Perhaps tell her this so that she knows she either has to face the music now - with the possibility of getting out of it - or later (probably this year or next) and the possibility of her dealing with it will be much more difficult. It only takes about 6 weeks to bankrupt someone.

Would you not have expected this to have happened already? She's not filed any returns since 2004/05 tax year and has been accruing fines and penalties since? Can't understand why HMR&C have not acted already?

xDx

zzzLazyDaisy

ddebski_us wrote: »

Would you not have expected this to have happened already? She's not filed any returns since 2004/05 tax year and has been accruing fines and penalties since? Can't understand why HMR&C have not acted already?

xDx

These letters are computer generated, so it is entirely possible that her file is not on anyone's desk.... at the moment...

It only takes HMRC to have a crackdown and she would be in the mire.

On the other hand, if she contacts them, and explains the situation, they are normally very helpful. My cousin stuck her head in the sand because she was completely terrified by the HMRC letters after her husband's business ceased trading (she was employed as a director but in reality knew nothing about the company and was not receiving any income. He disappeared with the secretary and all the company funds). Anyway, by the time she owed about £2000 in fines and penalties I persuaded her to contact HMRC, and it was literally sorted out within a week or two. Admittedly her position was different as she'd had no earnings, but they were incredibly helpful and sympathetic. I am sure they come across this sort of thing a lot.