How can I help him clear his debt without doing it for him?

penguinpolo123

Hi everyone,

First post and I hope I'm posting in the right place. I've just found out my boyfriend is in 4k worth of debt - £3500 from his overdraft, the rest is to the council tax and water company. He lost his job a month before the pandemic  - very bad timing, and hasn't been able to get another yet so is on UC. I know this isn't an extreme amount of debt - but the charges on his overdraft are high and we're not sure what to do.

I don't want to pay it off for him because I've not been with him long and I've been down that road before!

Where should we start?

many thanks for any advice

fatbelly

Your attitude is very sensible. If you just pay it, he doesn't learn anything. Well what he learns if if it happens again you'll bail him out.

There is a priority debt there (Council tax) and two non-priorities. For the moment he shouldn't pay the non-priorities.

He will need a new bank account with a different bank for his UC to go into and essential payments (not water) to come out of.

The bank may be willing to freeze interest and charges if you ask them as it's covid-related. It's point one of Martin's guide

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

The water company may have schemes to write off debt but they will want payment of the ongoing use. That can be put on the back-burner if he can't afford that.

The council tax is important. Do you live with him? If not he needs to check he is getting his 25% discount and maximum council tax support. Then look on their website re hardship fund, and make an application.

If he wants to post a statement of affairs, we can go into more detail

penguinpolo123

Hi fatbelly,

Thanks a lot for your response.

I don't live with him - and to be honest getting him to even face up to the mess (or open the envelopes) if a bit tough as having worked all his life and never been in debt before, I think he's quite embarrassed about it.

I didn't know about the hardship fund so I'll certainly mention that.

Is it worth moving the debt at all, to something with a lower interest rate and then him paying it off that way? Can this be done with a credit card? Or is it likely he wouldn't be accepted for anything with a low interest rate until he pays the other bills?

Sorry for all the questions! Really appreciate people's time x

enthusiasticsaver

I thoroughly agree with you and fatbelly that you should not  pay his debt off for him.  He learns nothing by you paying it off for him and as you have not been together long the chances of him not repaying you are high. The chances are he may not get a decent interest rate if he is in default and of course overdrafts are an expensive way of borrowing. It is a shame he did not address this earlier when the overdraft was lower.   No way should he take out new borrowing to move the existing debt. You cannot borrow your way out of debt.  Is he exploring all options for  work?  Supermarkets, delivery drivers if he drives or any sort of warehouse work? 

My suggestion is much the same as fatbelly.  He needs to open up a new bank account with no overdraft for his benefits to go into, contact the council tax and water company to make an arrangement and default on the overdraft and ask the bank  to freeze the interest. He then has to live within his income until he finds work and then make an arrangement to repay the bank.  The council tax and water are priority lenders, the bank is not. 

fatbelly

I agree that moving debt around is not going to help if there is no surplus, and there is unlikely to be if his only income is UC. There may be a mark on his credit file eventually though it will probably take a few months.

Just to be clear on the water, it's not counted as a priority debt as they can't cut you off (since the 1990s). It is slightly unusual (some call it a square-peg debt) as you do have to have an ongoing relationship with your designated supplier - there's no opt-out or shop-around. Having said that, they do have a variety of schemes to help people, and they don't charge interest so that can slide a bit if necessary.

The main priorities are to avoid council tax enforcement action while trying to increase income. The good thing about UC compared with the old benefits like JSA is that you always get to keep a bit of any earnings you can get, whereas with JSA as a single person you got to keep £5 and then your benefits were deducted £1 for £1 until they went to zero.

sammyjammy

If he does indeed live alone then he should apply for council tax support otherwise that debt will keep rising.  That new bank account is a priority.

penguinpolo123

Thanks everyone - really helpful advice, much appreciated