Equity release to pay debt

billy2shots

I have an employee who is suffering desperately at the moment due to debt problems. I am not qualified in this subject and I have instructed her to contact people who deal with this day in day out for advice and guidance. I have also provided phone numbers and have clearly written down for her how best to describe her situation and the need to get the facts across as apposed to life long stories of how she ended up in the mess.

Unfortunately she will not call and speak to a third party.
I have offered to sit next to her whilst she does this but she still wont. She was originally from the Philippines and was married to a British man so is now a British citizen herself. She has no family in this country and her small friendship group either wont help or can't.

Her situation

2 personal loan debts totaling £9000
Overdraft debt around £3000

She has failed to make the payments on the personal loans twice. She is not making any inroads into the overdraft so that is growing each month.
Her gas has been cut off (possibly electric as well) as she wasn't paying the bills so she has no heating at home.

She has a £1300 service charge due next month for her flat. Last year she almost went to court for not paying it. And got into more debt borrowing for it.

She is 62

The good news is she owns her own flat as she bought this from the sale of the marital home when her husband died. Apart from the service charge she has no rent or mortgage.
i have been working with her to live within her means. £130 on mobile phone each month, taxis everywhere, eating out all the time for convenience.

Unfortunately this work although will help in the long term, is like shutting the gate after the horse has bolted. The debt is at a point where it is snowballing. I don't mind giving up my time to help and i have lent money in the past but I can't increase her wages as 27 other people are actually doing a better job and the reality is her performance this last year or two has been awful.

I was after some advice on whether releasing some equity (selling some? of her flat) could be the right solution in this circumstance. I feel if she could pay these debts then she should be able to stay on the straight and narrow going forward.

I don't think a straight sell to buy a cheaper property would work due to house values here on the south coast. By the time she pays EA fees, solicitor fees, stamp duty and pays off the debts I'm not sure what she could buy. Shes already in a 1 bed flat. I certainly don't think renting will help because I could see her quickly working her way through any money left from a sale then not being able to pay rent.

poppy10_2

billy2shots wrote: »

I was after some advice on whether releasing some equity (selling some? of her flat) could be the right solution in this circumstance.

This virtually never works.


First of all, equity release does not pay off debt - it just transfers unsecured debt to debt that is secured over her property
Secondly unless she addresses the overspending on iPhones, taxis, eating out etc she will rapidly build up the debt again, ending up in twice as bad a situation.



Although she is reluctant to speak to any helplines, they are her best port of call. You sound very kind but you are getting overinvolved especially if you have lent her money and were considering giving her a pay rise to help her out of her situation.



In the long term you will not be doing her any favours by bailing her out of the situation - she needs to make some changes, and any delay to that will make things worse. As long as she is in the mindset that her £130 iPhone bill is more important than paying for her gas and electricity then she will get deeper and deeper into trouble, even if you help her wipe the slate clean this one time.

sourcrates

Hi,

Equity release is something she would need very in depth conversations about with an adviser, as she appears unkeen to speak to anyone about her debt, how would she manage this ?

Its a very bad idea for only 12k, there are simple debt solutions she can do without any fuss whatsoever, all it takes is a few letters to creditors explaining the situation, she can then make reduced payments to her debts, that are more affordable, but for any solution to work, she has to engage with her creditors, you can do everything in writing, no need to speak to anyone on the phone, its called a debt management plan, or DMP, and can be set up for free by one of the debt charities.

The service charge is a priority debt, and needs to be paid before any credit debts.
A full statement of affairs would be nice to see, and an acknowledgement from her to stop overspending, and start living within her means would be even better, especially for her.

JCS1

If she won't phone for advice, would she work with someone face to face?

A debt adviser at CAB or CAP (you don't have to be religious to use them)

https://capuk.org/

Is there room for a lodger in the house to increase income?

fatbelly

billy2shots wrote: »

I have an employee who is suffering desperately at the moment due to debt problems. I am not qualified in this subject and I have instructed her to contact people who deal with this day in day out for advice and guidance. I have also provided phone numbers .

Who have you suggested?

billy2shots

fatbelly wrote: »

Who have you suggested?

CAB and Uk debt line.

fatbelly

billy2shots wrote: »

CAB and Uk debt line.

Cab are OK if you can find one with a specialist. Increasingly, FCA pressure means that that is more difficult. Experienced advisers are leaving and not replaced.

UK debtline may well be scammers.

I suggest National Debtline, Stepchange, Payplan - all phone based.

But there's an old English saying - you can lead a horse to water ...

billy2shots

fatbelly wrote: »

Cab are OK if you can find one with a specialist. Increasingly, FCA pressure means that that is more difficult. Experienced advisers are leaving and not replaced.

UK debtline may well be scammers.

I suggest National Debtline, Stepchange, Payplan - all phone based.

But there's an old English saying - you can lead a horse to water ...

That’s the exact problem. Burying her head in the sand has got her into this position and she would rather constantly borrow money from friends to live month to month.
When I realised the extent of the problem I refused to lend money again and instead offered my time.

sammyjammy

I helped someone in a similar situation, we dealt with Stepchange and did it all online, we explained that it wasn't possible for her to speak on the phone and could everything be done on their website and/or email, they were fine with this.


Got to agree with the comments around changing the debt to secured.

[Deleted User]

Equity release isn't going to help. It will only delay the inevitable but instead of defaulting on unsecured debts she will start defaulting debt secured against her home.

Give her the names of the debt organisations fatbelly provided and leave the offer of helping her contact them on the table, the rest is up to her.

Suseka97

I just wanted to jump in and echo much of the advice being offered here. It's a definite 'no' re equity release and the organisations fatbelly has listed are her best option. You sound like a very kind person and what you are doing is highly commendable - but I, like others, would say you've done all you can here. She can access help online without speaking to anyone and get this sorted - all you can do is support her if she asks for help with this. Beyond that you need to step away a little and let her take ownership of the problem Oh, and, she really does have to get that service charge paid as a matter of priority. I rather suspect that if her performance at work continues to drop, then she faces an even bleaker future... if she puts herself out of a job.

Edit: removing comment about DRO noting sourcrates correction