Drowning in (son's) debt - getting desperate

RAS

devondiver said:

Obviously my son has now to come on board and do the SOA and DMP and get his head round everything, but, in line with said advice, I am about to  suggest to him that he pre-emptively and immediately:

a) opens a new bank account which will receive his next month's pay and set up direct debits to mortgage and council tax;

Firstly, your son does not have to come on board. All you can do at this point it tell him the bank of mum and dad is now closed.

And that you've been exploring his options, which aren't many. He's not eligible for a DRO, he'd be mad to do an IVA for £15k or go bankrupt as a home owner.

He's probably going to be a bit shocked at the change of course. He may prefer to discuss things with Stepchange, CAB or National Debtline.

What we can safely say is that if he has an overdraft and other debts with his current bank, any debt solution that means he can't pay those off at the agreed rate means that he needs to move his income to another bank. The bank do have the right to offset income against debt, and to withdraw an overdraft overnight. The mortgage is OK.

He needs to check all three credit records to see if he has Arrangement to Pay markers. More on those later.

devondiver said:

b) tells Halifax and Santander that he cannot afford to keep making the overdraft and credit card payments and that these will stop now until further notice. This, if I understand correctly, will stop the interest being added and essentially freeze these accounts until a repayment plan can be agreed (which may even include parts of the debt/s being written off).

Not quite.

He needs to stop paying the OD and CCs as soon as the new bank account is sorted. If he contacts the creditors, he'll get AP markers, possibly for the next decade or more and there is no obligation to cease charging interest or fees.

What he needs are defaults, as those will stop charges and interest and they will clear from his credit record 6 years after being issued whether he pays the debts off or not. AP markers are removed 6 years after the last payment is made.

To get defaults, he needs to go cold turkey, absolute radio silence until the defaults are issued. And use that time to build up an emergency fund so he can cope with life's emergencies when credit is not there.

This is where those on MSE who've been through the debt mill differ from advisors at Stepchange etc. The debt charities encourage almost immediate payment plans that damage their clients' credit records longer and leave them vulnerable to every small financial shock. IMO and many others.

devondiver said:

He then needs to take ownership of the situation by opening up on here, doing the SOA, doing the research and formulating a DMP which includes reducing his outgoings to at least balance his income going forward. Basically, getting the help he needs to dig himself out of the hole.

Now, I know you will say I have to STOP spoonfeeding him but I feel an urgent kick-start is now essential to get the wheels turning. So - have I got this right? What am I missing? And can we action this immediately?

He doesn't need to come on here, he might want to speak to a debt charity, see if work offers debt support etc. That's up to him.

The SOA is a way, possibly the way, to go from financial stress to order. He's working long hours and probably reactive, and possibly has learned some bad habits. What is also does is remove a huge amount of stress. When you are no longer lurching from crisis to chaos and back, life is a lot better. 

What we can say is that the vast majority of people on MSE are supportive, that reading the back stories and struggles of others helps, as do some of the practical tips.

One piece of advice I'd definitely offer is that he avoids all of those companies that offer to reduce your debt by 79/81/83/87/91%. Those advertising are usually lead generators who get a fee for referring debtors to IVA companies who then charge £6-9k to put their clients on a very strict financial diet. In your son's situation, he'd also have to release capital in the house in year 5 and could end up paying more than he currently owes. The unusually is when they charge for a DMP which the debt charities offer free and can be self-managed.

When you speak to him remember he's going to be very tired, possibly shocked and need some time to get his head round the change. Also that if you want him to take control, you can inform, but he has to make the running. 

I'd suggest also briefing your wife, so that she understands the implications of any decisions he makes, and can offer similar information if he speaks to her.

devondiver

Thank you RAS. THis sounds most helpful - so I will re-read nd make sure I understand before coming back. 

devondiver

RAS said:

What we can safely say is that if he has an overdraft and other debts with his current bank, any debt solution that means he can't pay those off at the agreed rate means that he needs to move his income to another bank. The bank do have the right to offset income against debt, and to withdraw an overdraft overnight. The mortgage is OK.

Just to be sure - he can default on Halifax overdraft and Halifax CC but so long as he keeps up payments on the Halifax mortgage this will be unaffected - in any way?

RAS said:

He needs to check all three credit records to see if he has Arrangement to Pay markers. More on those later.

Is this essential - he has never had debt problems in the past (I have always stepped in to prevent that) - and, out of interest, what would be the effect if he had?

RAS said:

He needs to stop paying the OD and CCs as soon as the new bank account is sorted. If he contacts the creditors, he'll get AP markers, possibly for the next decade or more and there is no obligation to cease charging interest or fees.

What he needs are defaults, as those will stop charges and interest and they will clear from his credit record 6 years after being issued whether he pays the debts off or not. AP markers are removed 6 years after the last payment is made.

Pardon my ignorance but - how long does it take to set up a new bank account - and won't he need a reference from his present one?
And how long can we expect it to take for defaults to be issued, and does this matter to anything?

Thanks again, DD

Rob5342

A new bank account takes minutes to set up, just download the app, scan a few bits of ID and you're done. He doesn't need a reference from his current one, but they may check his credit record and limit the kind of account they'll give him. Monzo and Starling are nice modern banks that would be a good choice.

You need to take a bit of a step back now though. Say that you can see you have just made things worse for him and need to look after your own interests, and can't lend him any more money. Tell him about some of the options you've looked at and where he can go for further support and information, but then the ball is in his court.

Rob5342

noitsnotme said:

NeverendingDMP said:

devondiver said:

THX said:

devondiver said:

2021rdsunshine said:

devondiver you have done what a lot of parents would do, me included…different circumstances but this was one of reasons why my debt escalated. I don’t regret it but in hindsight maybe it was the wrong approach, I have ended up in the s…and he’s ok, completely unaware of my mess. And that’s fine, have no intentions of disclosing my mess to him. However, lesson learned, step back and make them sort their own mess if it ever happens again. Easier said than done when you are a loving supportive parent but if you don’t mind me saying it, my suggestion would be to sit down with your son , introduce him to this forum and letting him sort this the best he can. Wish you all the best 

Thank you for the caring words. Thing is, he's c.200 miles away.

That sounds like a bit of a poor excuse to me. What about the phone? Zoom? Teams? Smoke signals? Or will he just ignore you until it suits him?

I'm afraid it's not quite like that - so sorry if I gave the wrong impression. It's just not easy to sit down with him any time I like. He's either with his children or working all the overtime he can. 

I get it. Nigh on impossible to have a decent or lengthy adult conversation with children in the same building!!

The kids are in their early teens according to the first post.  It would not be difficult for a 13 year old to amuse themselves for a couple of hours while the adults have a zoom or telephone conversation once every couple of weeks.

I get that dad needs to spend time with the kids, particularly as the parenting is shared, but the conversations are important, so time needs to be found for everyone’s sake.

If both people genuinely want to do it and dont just make excuses then the time can always be found. 

devondiver

Rob5342 said:

If both people genuinely want to do it and dont just make excuses then the time can always be found. 

Absolutely! However, I did only kick this off on Sunday and he is working non-stop at the moment (eg.18.5 hours yesterday excluding 45mins travel each way) - so a little leeway just to catch up is, I suggest, not too unreasonable.  But in no way does this is excuse his "head-in-the-sand" attitude up till now. It's just high time for a wake-up call.

Oh - and BTW - in hindsight I feel that my attention-grabbing headline may have been a little overstated. Please don't anyone think that I (and wife) am in any way troubled by debts. But then - I am an optimist, and perhaps my feeling has now been tempered by coming on here and receiving so much wisdom and kindness in such a short time.

RAS

He will be limited when he has to renew his mortgage in the next 6 years, but can choose the best product from the Halifax portfolio without a credit check.š

Re checking his credit record, you mentioned that the Halifax have reduced the interest rate? It would be worth checking whether that is marked as an arrangement to pay, that's all.

A few more things

Your son needs a new BASIC bank account that doesn't have an overdraft. These are specifically used by people who have credit difficulties, so he'd have to apply for the right sort. Many banks do them based on being on the electoral roll and some basic ID checks, without a credit check, including Co-op and Barclays. But he can set up a Starling or Monzo account on-line today. The advantage of them is that they offer pots. So he can have a pot of the car, one for Christmas and birthdays, another for house maintenance etc.

It takes 3-6 months typically for debts to default. However affordability is everything so some creditors will offer lots more options before they default debt. I think Virgin gets a mention. And so many people are in difficulties that the creditors are a bit over-run with debtors, even with their automated systems. But 6 years later, his credit record will repair, even if he's still got debt.

elsien

I also agree that people need to stop asking you for updates.  This is going to come as a shock to your son and he will need processing time. He might also be cross that you’ve put his business out in public, even though it’s anonymous. 

Sometimes when people are upset, they lash out at those nearest to them.

You have no obligation to post updates on here although we are always interested, but if you want to keep the thread going and just come back and check things that you’re not sure once in a while about that is fine. 

 Posters need to remember that this is not a soap opera that that we’re talking about but someone’s real life. We are happy to share the information, but it doesn’t have to be a two-way street in terms of what you post back unless you want it to be. 

devondiver

Thanks elsien. And in reply to your signature (?) - never use a preposition to end a sentence with. 

devondiver

Question: RAS said:

It takes 3-6 months typically for debts to default. However affordability is everything so some creditors will offer lots more options before they default debt. 

So during that 3 - 6month period is interest still getting piled on? And if the creditor (Halifax) might be a bit helpful it's very tempting to talk to them (rather than complete radio silence - as suggested above). What is to lose by trying - as now suggested by Stepchange? (Serious question.)

Son has just set up Monzo account but nothing will go in until payday - 3 weeks away. So, he can either let Halifax overdraft max out again as DDs etc. go out, then pull the rug just before payday, or I can bung some 0% money transfer into his Monzo account for him to live on until then. Decisions, decisions.