Advice needed for retired, homeowner friend 5 April 2022 at 10:24AM in Debt-free wannabe 5 replies 431 views

Elvie14

Hi all,

I have read a lot myself but still a bit confused. My friend is 67 retired and a homeowner on pension credits. Her credit card payments per month are swallowing up her very low monthly income. I believe the debt is about £7,000 and it is with one bank. I will confirm this. Would a DMP help? Even if it's just with one bank? What is realistically the lowest monthly payment a creditor would agree to? I can't see how she can afford more than £10 a month. Are there any schemes where the debt would be eventually written off? I'm sure I saw one that was a DMP and if a homeowner the debt would be written off after 5 years of payments, 4 years if not a homeowner, but I can't seem to find the info now. 

My friend is living in poverty, albeit in a house she owns but she is not ready psychologically to downsize and move. She had to go to a foodbank recently and is very worried about energy prices going up.

Any help/advice greatly appreciated

Thanks in advance

Elvie

Exodi

If your friend is as destiute as you describe, then making credit card payments shoudl be her last priority.

Ensuring she can adaquetely cover her bills, utilities and food should be her primary focus. Really you need to go through her finances in-depth (feel free to post this to the DFW for particular expense advise). I'd expect energy bills are set to rice by more than the £10 a month you propose she's able to pay towards her credit card.

Following this, I would post a letter to the credit card company, outlining her circumstances (including a brief statement of affairs)  and ask that they freeze interest and give her soem time to work out what to do.

gwynlas

If your friend is living in poverty but owns her home she would probably benefit from taking equity release

Jude57

Elvie14 said:

Hi all,

I have read a lot myself but still a bit confused. My friend is 67 retired and a homeowner on pension credits. Her credit card payments per month are swallowing up her very low monthly income. I believe the debt is about £7,000 and it is with one bank. I will confirm this. Would a DMP help? Even if it's just with one bank? What is realistically the lowest monthly payment a creditor would agree to? I can't see how she can afford more than £10 a month. Are there any schemes where the debt would be eventually written off? I'm sure I saw one that was a DMP and if a homeowner the debt would be written off after 5 years of payments, 4 years if not a homeowner, but I can't seem to find the info now. 

My friend is living in poverty, albeit in a house she owns but she is not ready psychologically to downsize and move. She had to go to a foodbank recently and is very worried about energy prices going up.

Any help/advice greatly appreciated

Thanks in advance

Elvie

Hi @Elvie14 and welcome. You're a very kind friend to want to help your neighbour.

There's lots of help available so please don't be panicked into letting your friend make any rash moves at this stage. The 'DMP' you refer to with a 5 or 6 year timescale isn't a DMP. A DMP is an informal agreement with creditors to make reduced payments until the debt is cleared. Creditors will sometimes agree to suspend interest and charges but they don't have to.

What you describe is likely an Individual Voluntary Arrangement (IVA) which is a formal type of insolvency for people who have assets, usually a house, to protect. An IVA is overseen by an Insolvency Practitioner who, like any professional, charges fees for their work. These fees are likely to be several thousand pounds. In the case of your neighbour, it's quite possible that the fees will be more than she owes, so I doubt that any reputable debt adviser would recommend it as a solution. 

I'd recommend that, first, you double check to make sure your neighbour is claiming all the state benefits she's entitled to by running her numbers through:

https://www.entitledto.co.uk

The fact she receives Pension Credit can be a help in qualifying for other benefits so it's well worth checking.

Once you're both sure you know what income and expenditure is correct, you could call or use the online Debt Remedy tool at StepChange. They're the biggest debt advice charity in the UK and help millions of people every year. They've seen this situation before and will talk you through the options. If equity release is suitable, StepChange have an equity release team who would talk your neighbour through that. For what it's worth, I don't think equity release would be a suitable solution for such a small debt because, again, there are costs involved because equity release is, quite rightly, a tightly regulated profession.

https://www.stepchange.org

Please use the link to get to StepChange's website, and note the .org address - there are imposters if you just search the name.

I'm sure others will be along to offer other suggestions but, to me, and based on the little information you've posted, I'd be suggesting a long term DMP or token payments for the foreseeable future. I'd also be querying how your friend will deal with any home repairs or appliance replacement? She really needs an emergency fund and if you post her Statement of Affairs (SOA), we can give some more detailed advice.

MWT

gwynlas said:

If your friend is living in poverty but owns her home she would probably benefit from taking equity release

That is also something else that StepChange can help with, it is a different team from the debt side of things but they are still a free service.

I wouldn't assume that it is sure thing though, but StepChange are the right place to be asking.

sourcrates

Credit card debts are what is known as "non priority debt".

I can tell you now if the bank knew she was struggling like this, they would not accept payments off her, they must abide by affordability rules now, issued by the FCA.

She needs to tell them her circumstances and all this will go away.

If she can`t afford payments, they won`t expect her to make any, there is no reason to be proud here, tell them her situation, that is all you need to do.