47 years old, part time salary and £50k debt. How does one get out of this situation?

[Deleted User]

Hello everyone,

I am seeking assistance for my brother's financial situation, and I would greatly appreciate your input. He is 47 years old, has two children, lives in rented accommodation, and is burdened with nearly £50k in debt. Currently, he works part-time and earns around £1,200 per month, in addition to receiving approximately £1,100 from Universal Credit. I am trying my best to help him escape this predicament, but I am unsure of how to handle unmanageable debt.

Most of his debts have already been defaulted on, except for regular payments towards his car loan. He is considering an Individual Voluntary Arrangement (IVA) through a company called Bailiff Rescue. Let me break down the various types of debts and their significance. Please let me know if you require more details.

The largest debt he has is for his car, which amounts to £19k. Additionally, he has arrears of £3k, which he is paying separately. The car's value is approximately £12k, and the interest rate on the loan is an exorbitant 30% or higher. He is currently under a hire purchase agreement. My primary concern regarding this particular debt is whether there is a way to terminate the agreement, such as returning the car. According to a quick Google search, this is typically possible when half of the loan amount has been repaid. Is there any way to resolve this loan earlier? What would be the most effective approach? He does require a car, although it doesn't have to be the fancy one he currently owns. Presently, he pays over £1,100 monthly for loan payments, insurance, and fuel, whereas the expenses for a standard car should be significantly lower. The initial loan amount was £21k.

He also has loans totaling £21k from four other lenders, and many of these are in default. Interestingly, he mentioned that some of these debts appear on his credit report but have not pursued him for payment. One of the debts dates back over 20 years. Any advice concerning this specific situation would be appreciated.

Lastly, he has several smaller debts amounting to over £2k. These primarily consist of unpaid or defaulted mobile phone bills and a council parking ticket.

I have suggested a plan to address his monthly expenses, such as switching to a SIM-only contract, canceling his premium TV package, and exploring ways to reduce his £650 monthly grocery bill. However, I am uncertain about the best course of action regarding the debt. I have a limited understanding of an IVA, which seems like a form of debt consolidation where someone else is repaid with interest. Additionally, there is bankruptcy, which I am not entirely familiar with either. How does bankruptcy work, and what impact would it have on his employment (he works in a school), housing, and phone contracts? Any assistance or advice regarding the specific situations or overall situation would be immensely helpful.

Thank you all for your support.

Grumpelstiltskin

A quick point. Under no circumstances should he think about an IVA,

They are not suitable for any one who is renting.

Next why doesn't he come on here himself if he needs help?

Grumpy_chap

Your Brother needs to want help and would be better coming on here himself.

The first thing he really needs to do is to prepare his SoA (Statement of Affairs) and share that here and there are excellent people that will give sound advice about how to bring expenses into order.

I wonder, though, given you have suggested the obvious first steps (cancel the TV package and cheaper mobile package) but these have not been acted upon.  Does your Brother have the desire and will to make the changes that are necessary?

On the car loan, is the £19k the settlement figure, or the amount to pay of the loan runs the full course?  It is a big gap for a £21k car to still have £19k credit balance yet only worth £12k in the current climate.  Has he obtained the settlement figure and compared that against what the car will sell for to the various car-buying websites?
Something also does not seem to add up in the figures you quoted for this car finance.  £21k to start, £3k in arrears, £19k still owing, yet he has been paying £1k per month.

TheAble

From my understanding IVAs tend to be more suited to those with assets to protect (usually a house) so may not be the way to go here. 

fatbelly

You can voluntarily terminate an HP agreement at any time and limit your liability to 50%.

You are allowed to own a car worth under £2k in bankruptcy, provided you need one.

You only make payments for 3 years in bankruptcy compared to 5 years in an IVA. No payments are taken from benefits.

Some of his debts may be statute barred if he has not acknowledged them for 6 years by payment or in writing. Statute barred debt do not count towards the total for a DRO as they are not 'due and payable' - if he can get those debts below 30k he may qualify for a DRO (car limit again 2k)

[Deleted User]

Grumpelstiltskin said:

A quick point. Under no circumstances should he think about an IVA,

They are not suitable for any one who is renting.

Next why doesn't he come on here himself if he needs help?

He could, but at this point I think it's best we (family and I) research and make some decisions for him to be honest. He's tech and social media savvy and know where to ask. Whether he does is another question. 

fatbelly

Does he though?

He is talking to a company calling themselves Bailiff Rescue, whose website is careful to conceal who they are and where they are based

sourcrates

Bailiff Rescue don`t state what services they offer, so I`m thinking its a front for an IVA lead generator.

Companies that "offer advice" under dubious sounding names, are best avoided, they are usually lead generators for IVA companies, or debt management companies themselves, hoping to sell you a debt solution that is likely to be totally inappropriate for you/him.

He can forget an IVA, no good to him whatsoever, they are designed for homeowners with massive debts, who cannot go bankrupt, they are not for those who are renting.

His options will likely be either debt management, possible bankruptcy, or a DRO.

The car is an issue, get rid of that, possible voluntary termination there, check which debts are still enforceable, CCA requests, are any statute barred under the limitation act ? 

He may find that 50k whittled down to less than half, but it requires action to be taken, forget the regulated debt solutions for now, go through the steps I and others have stated, and see what the position is then.

EssexHebridean

I agree that in an ideal world your brother would do best coming here himself -  but there are some hints in what you have already posted that he isn't likely to do that yet, for the simple reason is that it seems that right at the moment he isn't quite in a place where taking responsibility for his situation is a priority for him. That in itself leads on to a further issue - and in my mind, the main one here. You can't have a lightbulb moment for someone else, unfortunately. He needs to fully realise he has a serious problem, AND be willing to take steps to deal with it - as much as you may want to help, and clearly you do, until he is ready to take action himself there really is a limited amount you can do. 

One thing you can do which could be positive for the future is that you mention he has kids - so you can try to ensure that they have a good grasp of money management - things like teaching them the benefit of saving for things that they want, teaching about budgeting, showing them the things YOU do which help to make your money stretch further. It will require a bit of careful handling to make sure it doesn't lead back to comparisons with how their Dad manages things - as you don't want to appear judgemental.