I've discovered my neighbours huge debts

Savedotmoney

Hi all, I wanted to write this post as a bit of an escape really and document the journey of helping my neighbour. I'd estimate I've discovered about £10k worth of debt so far and I haven't even looked at her credit rating yet.

I'm 30 and she's nearly 70, we are good friends and she has looked out for me in the past. 

However, I've recently discovered she has a huge issue. She has a spending problem and has never been in control of her finances, she has lived month to month with bouncing direct debits hiding from her issues.

She has debts spiralling out of control, she's just about to retire and this has only come to light because I've helped her with finding a new flat.

I downloaded her bank statements for her and she literally has nothing, here are a few things I discovered:

• Virgin Media taking £117 for BB that is 350MB and other unnecessary adding like movies, Netflix etc. Her June bill was £280!
• O2 sold her a 128GB iPad Pro with 100GB of 4G data, insurance for the iPad (she doesn't take it out of the house!) They were charging her £25 for a 1GB sim. Her bill each month for O2 was about £100
• She's been renting her TV for about 15 years paying a company £30 a month!
• She has multiple loans
• Multiple Klarna/Clearpay
• Recently took out a £1500 loan to pay off other debts
• Huge credit card outstanding balances with companies like 118 118 MONEY, I'm going to assume the interest rate is sky high. I've already checked the card switcher on MSE and she has no chance of transferring the balance
• She has tons of unnecessary spending, shopping at expensive supermarkets like Ocado and M&S
• She had subscriptions she didn't even know about taking money without her knowledge
• She has been paying Scottish Power £200+ a month because of a bill that was apparently miscalculated years ago and they said she needs to pay it, so she agreed

There's more to it... I'll document it here as I go along.

She's retiring and has her fixed pension income. 

The bottom line is she can not afford to pay all these debts that have built up, she needs an IVA to get these in control.

I have no idea how she was accepted on the new flat but at least she won't be homeless, I said to her she needs to get her head out of the sand now and hit this head on. 

She has lied to be about what debts she has because she is ashamed but I said no more lying now, it's time to sort this out for the future.

Steps so far:

• Cancelled her current card and ordered a new one
• Cancelled all direct debits apart from electricity etc until I get in control of what's going in and out (she simply can't afford to pay any of the bills, she would have £0 in the bank)

Todo:

• Set up IVA, can anyone recommend the best process for this please
• Statement of affairs
• Consider contacting the CC companies and loan companies to inform them of financial circumstances
• Tell her family

I'm not her family and it's quite stressful baring the brunt of this but I know I can't just leave her to fix her problems. 

Thankfully I learnt the value of money with my own financial worries in the past so this has brought back some memories to say the least.

I'll let you know how it's going but any help and recommendations are welcome going forward, thank you MSE goers.

[Deleted User]

Why did you cancel her card? That won't have any impact on her current CPAs. Or its it to stop her spending and you're going to keep hold of the card?

If not too late, rather than cancel all the DDs, cancel the subscriptions where you can. If will save the debts getting higher and avoid a stream of debt collection letters.  She may also still want internet access, etc.

Savedotmoney

Deleted_User said:

Why did you cancel her card? That won't have any impact on her current CPAs. Or its it to stop her spending and you're going to keep hold of the card?

If not too late, rather than cancel all the DDs, cancel the subscriptions where you can. If will save the debts getting higher and avoid a stream of debt collection letters.  She may also still want internet access, etc.

Bit of both really, stop her spending and also to stop anyone charging her card if they were going to. 

The problem is she doesn't know where all her subscriptions are so I have to try and uncover them via emails and previous statements.

I'm going to try and set up cheap internet with Shell energy, the £12.69 a month one (that's if they will accept her with her poor CR). If they don't then I will try to negotiate a cheaper deal with Virgin Media under £20 a month for their 100MB package.

fatbelly

"The bottom line is she can not afford to pay all these debts that have built up, she needs an IVA to get these in control."

Gosh that's a very swift diagnosis.

You say "I have no idea how she was accepted on the new flat ". That sounds like she is in rented accommodation and passed a credit check. Does she have any assets that need to be protected? That would normally be the reason for choosing an IVA, along with very high debts and significant surplus income.

Could you prepare a soa and post it here and we can see more clearly what is going on. This all sounds like non-priority stuff and small debts.

https://www.lemonfool.co.uk/financecalculators/soa.php

Please don't push her into a particular debt strategy at the moment.

Why do you have to tell her family?

sourcrates

My first instinct on reading your post was that you were an IVA lead generator, telling us a story, and then providing the solution.

Obviously now that is not the case, but I have to agree with fatbelly, that was a very swift diagnosis indeed.

IVA`s can be the right choice in certain circumstances, mainly for those with assets to protect, but from what you have told us, I don`t think that would be the right choice here.

We would need to see a fully completed SOA to give more appropriate advice.

And please do not go telling anyone about this at present, keep it between you for now.

Savedotmoney

fatbelly said:

"The bottom line is she can not afford to pay all these debts that have built up, she needs an IVA to get these in control."

Gosh that's a very swift diagnosis.

You say "I have no idea how she was accepted on the new flat ". That sounds like she is in rented accommodation and passed a credit check. Does she have any assets that need to be protected? That would normally be the reason for choosing an IVA, along with very high debts and significant surplus income.

Could you prepare a soa and post it here and we can see more clearly what is going on. This all sounds like non-priority stuff and small debts.

https://www.lemonfool.co.uk/financecalculators/soa.php

Please don't push her into a particular debt strategy at the moment.

Why do you have to tell her family?

Her outgoings far outweigh her incomings and it has been that way for years.

Well if anyone had checked her bank statements properly from the referencing company they would see her rent bounced twice on two of the months and that she's been in a negative balance. From first glance at her credit rating she has more debt than sense, I'll report back later what exactly I find. 

She doesn't own, she rents and has no assets. She only has her fixed income from her pension now, I'll post up a SOA later to help clarify. I'm not pushing her in to any strategy at the moment, I have to figure out what exactly is going on first but it doesn't look pretty.

I would tell her family to protect her going forward as I won't always be there, they need to take some responsibility in checking in on her because her spending and debt is clearly a problem. I've already inherited my parents debt problems in the past and I'm not prepared to take on responsibility of managing someone else's again. I will help but I have enough to manage in my own life. The fall out of my parents money problems etc has been poor mental health for myself so I don't want to go down that road.

Savedotmoney

sourcrates said:

My first instinct on reading your post was that you were an IVA lead generator, telling us a story, and then providing the solution.

Obviously now that is not the case, but I have to agree with fatbelly, that was a very swift diagnosis indeed.

IVA`s can be the right choice in certain circumstances, mainly for those with assets to protect, but from what you have told us, I don`t think that would be the right choice here.

We would need to see a fully completed SOA to give more appropriate advice.

And please do not go telling anyone about this at present, keep it between you for now.

Most definitely not, I’m a normal guy trying to help his elderly neighbour who has herself in some bother.

I don’t know how to use IVAs so I’m coming here to ask for advice, with thanks.

I haven’t told anyone yet, I’m working through it myself. I need to speak about it with someone so I thought the best place may be here with a lot of knowledgable heads.

Here is the SOA for the new flat she is moving to, it’s much worse for the current state of affairs but I’ve listed all the debt she has to clear when she moves. Unfortunately I don’t have the APR etc for all of them. 

I haven’t listed the outgoings for things like birthdays, travel expenses like taxis and I don’t know all that info. There’s £265.89 for the debts and everything else that may pop up that month.

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 

Number of cars owned.................... [b]

Monthly Income Details[/b]

Monthly income after tax................ 1689.7

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 1689.7[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 1050

Management charge (leasehold property).. 0

Council tax............................. 110

Electricity............................. 35

Gas..................................... 35

Oil..................................... 0

Water rates............................. 0

Telephone (land line)................... 0

Mobile phone............................ 8

TV Licence.............................. 13.12

Satellite/Cable TV...................... 0

Internet Services....................... 12.69

Groceries etc. ......................... 150

Clothing................................ 0

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 10

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 1423.81[/b]

[b]

Assets[/b]

Cash.................................... 98

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 98[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Clearpay.......................229.63....0.........0

Tesco credit card..............547.4.....0.........0

Scottish power ................817.56....0.........0

HSBC...........................2923......0.........0

Virgin Media...................117.......0.........0

Salary Finance.................1500......0.........0

Aqua...........................2210.17...0.........0

Vanquis Bank...................962.14....0.........0

Capital One....................708.2.....0.........0

118 credit card................168.36....0.........0[b]

Total unsecured debts..........10183.46..0.........-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,689.7

Expenses (including HP & secured debts). 1,423.81

Available for debt repayments........... 265.89

Monthly UNsecured debt repayments....... 0[b]

Amount left after debt repayments....... 265.89[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 98

Total HP & Secured debt................. -0

Total Unsecured debt.................... -10,183.46[b]

Net Assets.............................. -10,085.46[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Savedotmoney

I have recently been on the phone to O2 and cancelled the iPad she had, they cancelled it all as a gesture of good will and I changed her mobile to £8 a month, so that’s been reduced by £92 a month.

I have cancelled the Virgin Media which was £117 a month. 

TheAble

A very sad story - it's a great pity to be at this point late in life. Changing the spending habits of a lifetime is going to be like turning around a barge but I hope it works out.

Once all the nonsense bills have been sorted out, I'm struck by the size of that rent payment relative to income. If there's little prospect of getting any more income I think moving to a cheaper place ought to be considered.

RelievedSheff

Can she not rent somewhere cheaper?

Her rent is far too much as a percentage of her outgoings.

Savedotmoney

TheAble said:

A very sad story - it's a great pity to be at this point late in life. Changing the spending habits of a lifetime is going to be like turning around a barge but I hope it works out.

Once all the nonsense bills have been sorted out, I'm struck by the size of that rent payment relative to income. If there's little prospect of getting any more income I think moving to a cheaper place ought to be considered.

RelievedSheff said:

Can she not rent somewhere cheaper?

Her rent is far too much as a percentage of her outgoings.

Unfortunately the place has been agreed now, it’s in the centre of town.

She has lived this way for 15 years so it’s going to be a task to change things, this is why I will eventually speak to her family with her consent so they can help.