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