Settling outsourced debt / family member / living abroad

Tergat

Hi,

I have a strange scenario here that touches across a few different issues and hoping someone can help.

Background:
My sister took out a few credit cards when younger (acknowledges it was stupid, naive etc) and racked up some debt she couldn'y pay back to the banks. The debt stands at about £12k which has been taken on by debt collectors to which she is paying down. Naturally, the interest rate is high which is crippling her and so I am looking at an option to help.

My sister lives in England and I live in Ireland (was born in England, still have my UK bank accounts etc) but have lived in Ireland since I was 18 which is now 15 years ago. I have plenty of repayment capacity to be able to take out a loan to help her.


Questions:
- is it likely that debt agencies will settle debt with her if she makes an offer? from peoples experience, what sort of % would they accept in full and final settlement? What form does the contract with the agency in settlements usually take?

- if doing the above, I'm not sure on how it works in the UK in terms of credit history. Will that show as partially settled from the date the final amount is paid? The debt was outsourced to an agency a long time ago and she has been making the agreed repayments ever since so techincally now in contract with that agencies debt. I've read conflictings things on this piece.

- is there any chance she would get a loan from a bank with me as guarantor? i.e. would a UK bank accept a personal guarantee from someone outside the UK but from the UK? I'd think it's unlikely to be a runner with the banks given credit history but perhaps this is a timing thing given debts with the bank would have been gone some time ago and thus history of this lending would be gone?

- if guarantee option is not a runner, I would be able to take out a loan in Ireland to give to her which she can pay me back. I know that interest rates here for personal loans are much higher than in the UK so wondering what the chances are of me being able to take out a loan in the UK in my name?

- gift tax. appreciate this is really for an accountant but assume given that she would be paying back a lump sum from me with interest (effectively paying the loan herself) it would not constitute a gift and so not liable to gift tax?


Appreciate there is a good bit in that but would appreciate any fundamental advice before I take it any further.

Thanks.

Ben8282

If accounts are defaulted and she is making repayments to a DCA there should be no interest.
To answer your questions:
- probably not as she is paying
- no
- UK banks don't give guarantor loans-
- If you are not UK resident you will not be able to take out a loan in the UK
- She would not be liable for tax

Tergat

Ben8282 wrote: »

If accounts are defaulted and she is making repayments to a DCA there should be no interest.
To answer your questions:
- probably not as she is paying
- no
- UK banks don't give guarantor loans-
- If you are not UK resident you will not be able to take out a loan in the UK
- She would not be liable for tax

Thanks Ben - a debt collector doesn't charge any interest in the UK????

Do peope strategically default to get a deal?

[Deleted User]

Tergat wrote: »

Naturally, the interest rate is high which is crippling her

She can't have defaulted yet if the loan is attracting a high interest rate and it almost certainly won't have been passed to an external DCA.

Rather than debt collectors, does she mean she's just getting letters from the lender?

You need to ask her exactly what the status of these account are. Age, defaults, interest and so on. She needs to check her three credit files to get an accurate picture if she's confused about what she owes.

sourcrates

Tergat wrote: »

Thanks Ben - a debt collector doesn't charge any interest in the UK????

Debt collectors/buyers are forbidden from adding interest and charges to any defaulted debt, unless the original agreement allows them to do so.
The majority of loans/cards etc in the UK are covered by the consumer credit act, which forbits extra charges.

The exception is when a non defaulted debt is sold, the new owner can continue charging interest as per the original agreement.

So you first need to assertain the status of each account, as old defaulted debts can be settled for a lot less than the outstanding balance.