Debt help - thanks

rachaelsmith82

Hi,

I wanted some advice for a friend who is not very computer literate. They have appointment with citizen’s advice in a couple of weeks but are quite worried so wanted any info.

They have been self employed for a decade – making barely any money and literally scraping by, hardly affording to even feed themselves. They live in rented flat from sister at extremely low rent cost. Their debt has been increasing over years and with overdraft fees / credit cards it has all become to much for them. They have started communicating with citizens advice and as mentioned have a meeting scheduled. They live in Scotland so was thinking either trust deed or bankruptcy. They are going to look for employed work in coming months as being self employed is not providing enough income for them.

Their grandparent has recently passed and they have found out they may receive an inheritance amount from them. As nice as this will be they now do not know what to do ? if / when they get this how would this work? Are they not able to proceed with trust deed / bankruptcy ? I assume they cannot keep any money if they are going through any of these processes? Do they have to wait to see what happens with inheritance before starting anything?

As bad as it sounds it seems a shame for them – this is the only time they would get any kind of windfall and its seeming to be a spanner in the works for them trying to sort out their finances promptly !

Many Thanks in advance

Rachael

Dell2u

Hi. Though I'm no expert I don't think there will be any way to keep that inheritance if your friend goes bankrupt or enters Trust Deed.? Is she named in the will, as she could possibly get round this by someone else holding the windfall until discharged (eg sister) , which might be after only a year.

TheGardener

Hi and welcome. My knowledge about the Scottish system is very limited and your friend will be best speaking to the CAB. However, a basic principle is that any financial assets the person in debt has would need to be taken account of. In some respects is very unfortunate that the legacy has come now but yes, there would be an expectation that any windfall is used to clear debts. On the bright side (if there is ever one in these situations) the legacy may be that their relative threw them a lifeline at a time of need.
Your friend needs to look to a debt free future and this might be one element of that.

rachaelsmith82

Hi,

Thanks for replies !

The money has been put into my friends sisters account. None is in his - i was unsure if any of this has a bearing ? should he get his sister to keep in her account just now ? or does it really make any difference?

Thanks again - really appreciate all the advice on here

Dell2u

I think the key thing is, was your friend named in the will as receiving this bequest? If so then I'm afraid it will be taken into account as an asset and could be taken by AiB but as TheGardener says, this could be considered as a positive not negative....
If sequestered your friend may find a more stress-free existence, with more financial security (ie no debt). They may even find themselves with more disposable income than before as I think the allowances for food etc are quite generous. You say he let's sisters property at reduced rate, but in bankruptcy he might as well pay going rate for the rent, as any excess income will go to AiB. Sister could choose to set this aside for her brother if she wishes.. Just a thought.

I think when your friend gets CAB advice it will become clearer.

coolcait

If your friend goes into bankruptcy or a Trust Deed, I'm afraid the inheritance goes too.

Can they use the money to offer full and final settlements to their creditors and get rid of the debt that way? CAB might be able to help.

A lot depends on how much debt they have and how much the inheritance is.

rachaelsmith82

Thanks again -

Guess it hinges on if he was named in inheritance by the sound of it.

He has meeting this week with CAB so guess if he just has honest talk with them they can advise what is best to do !

Pixie5740

If your friend is self employed he should contact Business Debtline for advice. If he makes such little money through self employment would he be financially better of finding employment? Is he entitled to any tax credits as a low earner?

https://www.businessdebtline.org/S/Pages/default.aspx

https://www.turn2us.org.uk

rachaelsmith82

Thanks for reply. Yeah he is currently trying to find a part time job as his self employment has left him so broke for so many years ! Think he still wants to do some self employed but a guaranteed part time would be very helpful to have a stable income every month !

He has never looked into benefits - he's not very pro active when it comes to this kind of thing

rachaelsmith82

Hi,

My friend just got back from CAB , unfortunately he's more confused than ever ! As in Scotland she said some differences in laws etc.

He has equipment for his self employed work - She said she could not guarantee under bankruptcy this would not be taken ? Sorry I am naive I thought equipment for work would be allowed to be kept. is this incorrect?

The lady at Cab said as he does not have regular income a trust deed is a no go unfortunately. She did say kinda off the record I think ( hard to tell from my friends description that he could just not pay the debt ? he has a credit card and overdraft with the same bank - Lloyds. This is 90% of his debt. Not sure what would happen in this scenario - CAB told him a month ago to set up a brand new account to use which he has done so his old account with lloyds is not being used at the moment - just in credit with overdraft and as mentioned his credit card for about £7000.00 . What would be the implications of not paying? Would bailiffs come round and take his stuff?

Any help much appreciated - He has just called me so confused and upset as he really wanted to kinda have a plan after this meeting !

Thanks so much in advance !!

National_Debtline

Hi Rachael


Are you any clearer as to what the size of any inheritance may be? Was it taken into account by the lady at Citizens Advice, do you know? It's always going to be hard to identify the best way forward without knowing that information.


Re: equipment used for self-employment work - there is not a blanket exemption on that in bankruptcy. Items needed to earn a living (for example, tools and books) can be excluded up to a total value of £1,000. If worth more than that, they may be sold by the bankruptcy trustee even if they are needed by him to carry out that work. In these circumstances he would normally be allowed to buy cheaper replacements, but it comes down to whether they are deemed to provide him with any income at all.


Good to hear at least that he has acted on the earlier advice to set up an alternative bank account. Debts like those owed to Lloyds can't just go straight to bailiffs (or the Scottish equivalent of "sheriff officers") - there would have to be court action first just as here in England. So he shouldn't anticipate matters escalating dramatically overnight - standard reminder/demand letters are much more likely at this stage.


Dennis
@natdebtline