Mental incapacity and debt

Pinklepurr

I am currently in the process of registering a power of attorney for a family member who has suffered sudden loss of mental capacity as a result of a catastrophic stroke.  They are not expected to ever regain mental capacity and are likely to need 24/7 care for the rest of their life.

I am aware that this family member has debt, but I am unable to act in any way until the POA is registered, which is a frustrating 20 week wait.  My question is, can lenders or debt collection agencies continue to pursue someone for repayment of debt if the person is mentally incapacitated, or can the debt be written off?  Could bankruptcy still be forced by for example HMRC?  If anyone has experience of a similar situation then I’d be most grateful. TY.

My concern is that the debt will continue to build in the next few months and there is nothing I can currently do to address the situation.

DullGreyGuy

Debts will continue to be enforceable even if the person lacks capacity, though depending on what assets the person owns a company may decide its not economical to continue pursuing it with no prospects of future work (depending on age and pension etc). 

Action like bankruptcy will become more complex and may involve a court appointed deputy to represent their interests given they cannot appoint their own representatives or self represent. 

elsien

Contact whoever holds the debt and let them know of the situation. They should put debt collection activity on hold pending the other arrangements being made. 
https://www.handbook.fca.org.uk/handbook/CONC/7/10.html

In the long run, the debt is still enforceable. I am working with someone who ran up an equity release loan then lost capacity and had to go into care; although there has been a long delay to allow for the correct processes to be followed, the house will still be repossessed. 

Not sure why it would need a court appointed deputy in the future though given there will be a valid LPA. 

sourcrates

You cannot get a POA without the person in question agreeing to it, now they no longer have capacity, it might be a deputyship that will be required, and that is costly.

I had a similar experience with my late Brother, I simply informed his creditors of his situation, and every single one wrote off the debts owed straight away, no evidence or waiting around.

Does the person own property?

If they do, a deputyship through the court of protection will be required, if they don`t, you can just register as an appointee, to deal with any benefits they may be entitled too etc.

p00hsticks

sourcrates said:

You cannot get a POA without the person in question agreeing to it, now they no longer have capacity, its a deputyship that will be required, and that is costly.

I was going to say the same - however, the OP hasn't been specific about exactly what type of PoA is involved here. 

If it is the old style Enduring PoA, then then that could have been drawn up many years ago with the donors authorisation. They can be used as soon as they are drawn up but only need to be registered at the point that the donor loses mental capacity
Enduring power of attorney: acting as an attorney: Register an enduring power of attorney - GOV.UK (www.gov.uk)
EPAs that were drawn up prior to the introduction of the newer Lasting PoAs are still valid. 

The Lasting PoAs (Heath & Welfare or Finance & Property) that replaced the EPoA need to be registered straight away, so as you say it would be too late to set one up now that the donor has lost the capacity to authorise it. 

Pinklepurr

It’s the older style Enduring Power of Attorney, that we are registering now as mental capacity is completely lost. The family member does own a property (with a mortgage). 

fatbelly

I'd be asking for writeoffs, setting out the story as you have told us, in writing

https://www.nationaldebtline.org/sample-letters/write-off-debt/

But not mentioning the house situation

You mentioned HMRC. How much does the person owe them? That may be more tricky.

Pinklepurr

Thanks for your suggestion, I shall follow this up. It involves both personal and business debt, but the amounts are unclear. It’s going to be one heck of a mess to unscramble and sort out.  

DullGreyGuy

elsien said:

Not sure why it would need a court appointed deputy in the future though given there will be a valid LPA. 

If there is already an attorney then no deputy is required but were HMRC to file for bankruptcy "tomorrow" before the attorneyship has been established then the court would appoint one.