Guarantor advice needed!

Lady-glt

Earlier this year my husband (stupidly) agreed to stand guarantor on a 5k loan for a close friend. Things started off well but then the friend made a direct debit indemnity claim to reclaim ALL the payments he had made so far. This left the loan heavily in arrears. To cut a long story short he has since been sacked from his job, split from his partner and been made effectively homeless (sofa surfing thanks to his other friends kindness). He finally admitted to being bipolar (which we had no idea about previously), and after reading the debt and mental health guide on the website we asked him to contact the loan company and provide them with a completed debt and mental health evidence form. Shockingly the doctor declared the diagnosis as schizophrenia!

This has totally backfired on us as the loan company are now saying that we are 100% responsible for the loan as by law they cannot contact him. They have given us three options, repay the loan in full (without paying the interest), pay the arrears and take on the monthly payments OR be issued a ccj in one weeks time. We don't have the means to pay off in full & the monthly payments would cripple us yet we obviously don't want a ccj on our file!

We had no idea that this guy has mental health issues previously and would never have agreed to stand guarantor if we had. We are completely lost as to where to turn next.... and advice would be appreciated!

fatbelly

At this point it's just an unsecured non-priority debt.

It's also an object lesson on why you should never be a guarantor for a loan.

Anyway, you can go for fee-free debt management at Stepchange, Payplan, or CAB. If this is the only debt and there is not much available surplus income then CAB may be best. National Debtline can also help.

You would make an offer to pay what you can afford towards the debt. If that clears the debt in under 60 months, then it's by no means certain that the creditor would get more from a court claim.

Just because they've threatened it does not mean they have to do it.

sourcrates

There time scale of one weeks time for a CCJ is just the call handler reading from there prepared script.

Unfortunately you have been dropped in it by this person, and you are now stuck with it, but you don't have to dance to there tune, as Fatbelly says, you can make them an offer of payment that is affordable to you.

If it went to court, they would not expect you to pay more than you can afford, so there threat is a bit meaningless to be honest.

You may want to get some legal advice as to your position re : the mental health situation of the original debtor.

determined_new_ms

I agree get some advice from someone who specialises in debt and MH. I work with people with mental health problems and I was able to get debts of one of my clients' written off as he was clearly ill - he had schizophrenia and in a period of psychosis the banks kept lending him money. I was able to show he was clearly ill when they were lending him the money and it was written off.

National_Debtline

Hi there,


I agree with the points above about the negotiations and not to worry about court action. I also appreciate this is a very difficult situation for you as the guarantor. The issue is that as the guarantor you are agreeing to take on the payments should the 'primary borrower' be unable to. That is what has happened and, from the lenders perspective, the fact that the 'primary borrower' lacked the mental capacity to understand the contract does not mean that you also lacked capacity as the guarantor.


However, from what you have described, your argument could be that if you were aware of their mental capacity you would not have acted as the guarantor - and this is the grey area. You can complain to the bank and ask them to write it off, and highlight that if they (the bank) were unaware of the persons health issues at the time the loan was given, it could be reasonable to argue you were in the same position. Escalate the matter to the Financial Ombudsman if necessary.


Otherwise, you would need to argue the matter at court (if they go this far) and you would need legal advice to defend a claim on this basis. Good luck,


Laura
@natdebtline

fatbelly

This is absolutely correct - if you can demonstrate that the borrower lacked the mental capacity to enter into an agreement that agreement becomes unenforceable.

The question is whether that applies to a guarantor when the guarantor is of sound mind...and it might

I cannot find it explicitly in the guidance but technically the contract may be 'voidable' or 'void'. A 'void' contract is not actually a contract and cannot be enforced in law.

Sourcrates is right - You may want to get some legal advice as to your position re : the mental health situation of the original debtor.

Try MIND legal line:

We provide legal information and general advice on mental health related law covering:
•mental health
•mental capacity
•community care
•human rights and discrimination/equality related to mental health issues.

Contact us

You can call us between 11am and 2pm Monday to Friday (except Bank Holidays).


0300 466 6463

You can also write to us at:

Mind Legal Line
Unit 9
Cefn Coed Parc
Nantgarw
Cardiff
CF15 7QQ