Best way to pay off Legal Aid loan - loan to pay off?

scorpiana

Hi

I am querying for an retired gentleman that I care. He has an outstanding debt of £7,500 to Legal Aid following his divorce over 20 years ago. He has been gaining interest on this loan since then.
He has had a letter from legal aid saying that 'interest is currently being charge at 8% per annum and is added to the balance at the start of each month.'

My query is this - would it be worth his while getting a loan with an lower APR?
I am not sure which is lower and APR of say 4% on a new loan or the current interest he is paying.

He does have limited savings but if he paid it off in full he wouldn't have much left other than his pension.

Would it be better if he paid some off the balance and set up a repayment plan? if so is a low APR loan better than paying the interest rate he currently is?

Could someone help me so I can help him.

Thank you

sourcrates

Hi,

I would not take out any further borrowing to cover this debt.

I am not an expert on legal aid debts, and have looked everywhere but cant find a comprehensive answer, but its possible this debt may be subject to the limitations act 1980.

I assume you are aware of the limitations act and statute barred debts ?

The limitations period can be anything from 6 years for most consumer debts, 12 years for mortgage shortfalls, and 20 years for some DWP debts.

Given my limited knowledge on the subject my advice would be to contact National Debtline and ask them if legal aid debts are subject to the limitations act, and also post on Legal Beagles and ask them the same question :

http://legalbeagles.info/

What were the original repayment terms ?

Seems like a very long time to have a debt outstanding with no enforcement action been taken ?

Can you provide a little more information at all ?

scorpiana

Thank you for your response Sourcrates. The gentleman has never paid any money off his original amount. He had never had the means to do so.

The legal aid team have the deads of his house which he owns outright with no mortgage. If he doesn't pay of the debt before he dies then the Legal Aid will sell the house and give the proceeds to his daughter who is the beneficiary of his will.

I am not sure if this is the case but it is what i am presuming.

Thank you though I will try legal beagles.

Regards
Samantha

sourcrates

If they have a charge over his property then the limitations act won't apply.

fatbelly

scorpiana wrote: »

Hi

My query is this - would it be worth his while getting a loan with an lower APR?

Yes, it would also remove the charge from his house

Provided it's an unsecured loan, obviously

But he would have to make the contractual monthly payments.

On the face of it the daughter gains. He doesn't, particularly

macman

OP, I am not clear from your post if the current debt is £7.5k or the original loan was £7.5K? If the latter, with interest at 8% APR added monthly, the debt now will be just shy of £37K!
But if he hasn't had the income to pay off anything at all in the past twenty years, or even service the interest due, then how is he going to service a new loan, even at a lower APR?
The original loan must have been for a fixed period of less than 20 years.

AnotherJoe

Get the daughter to pay it off, it's in her interest, not his.

Tahlullah

Legal Aid don't give loans. It is a debt. He will have applied for Legal Aid to help fund the divorce. His income would have been too high so he was expected to pay a contribution to the cost. He will have failed to pay the contribution. The Legal Aid Agency will have put a charge on the house to recoup.