How to use parent's DMHEF to protect health & keep home that already has Lifetime Mortgage?

StessedSon

Hi everyone & thanks in advance for any advice you can offer on this one : )

My parent is in their mid-70s and has £26k in unsecured credit card debt across nine accounts. They are two months into a StepChange Debt Management Plan (DMP) with payments of £55 a month, which is a struggle to afford.

Two years ago, my other parent passed away after a long illness. Since then, my survived parent's physical and mental health has rapidly deteriorated, leading to severe depression, anxiety, and several stress-related hospitalizations. 

They have been medically recognized as struggling, and I have a well-documented DMHEF (Debt and Mental Health Evidence Form) from their GP that details their inability to manage their finances, their cognitive impairment, and the significant health risk posed by creditor contact.

Their only asset is their home, which is already subject to a lifetime equity release mortgage with Aviva. The current balance on the mortgage is £108k, and the home's value is an estimated £243k. A clause in the mortgage contract states that Aviva can repossess the home if the homeowner becomes "bankrupt, or enters into an agreement with your creditors."

I need advice on the best course of action to protect my parent's health and home. What is the safest option:

• Continuing with the DMP?

• Proposing a full and final settlement (F&F) with a lump sum (up to 30% of the debt)?

• Requesting a debt write-off?

My main concern is that any of these options could trigger the repossession clause in the equity release agreement. I want to minimize the risk of creditors pursuing the home - it would break their heart to loose it after already loosing their soulmate. I will be sending a cover letter and the DMHEF to each creditor's vulnerable person support team and need guidance on what to ask for.

Any thoughts on how to proceed would be greatly appreciated x

Brie

If it wasn't for your concern about the equity release I would say just stop paying and let the debts just sit there.  But as you are concerned (how rightly or wrongly - I don't know as I don't know all the T&Cs of the agreement) then a different tack might be required.  Then again your parent has already entered into an agreement with the creditors by having a DMP.  

I would suggest stop paying the DMP for the time being informing StepChange that it's no longer affordable and a different solution is required.  Give them a copy of the DMHEF for their records.

I would then suggest writing to each creditor (or getting StepChange to do this if they will) asking for a copy of the credit agreement (assuming this hasn't already been requested) and providing a copy of the DMHEF stating that the DMP is unsustainable.  Some may decide to write off the debt, others may come back with a F&F offer.  

The template on the NationalDebtline website is a good template to start off what you might put in a letter.

debt_and_mental_health_evidence_form_DMHEF_pack_with_instructions_NDL_EW.pdf

If your parent doesn't have the fortitude to deal with this and you are going to do so on their behalf I also suggest that you include a simple letter of authorisation for you to deal with things on their behalf.  A simple line of "I, <parent's name>, give <son> authority to act on my behalf in any dealings with you regarding my account."  And then signed, dated, with home address.  Do one real copy and then photocopy or scan it to send to each creditor.  You don't need to have it specifying who you are sending it to.  

Hope you can work it out!

StessedSon

Thankyou Brie,  I hadn't considered stopping the DMP in that fashion (because I thought this would then almost force the creditors to take some form of court action or stepchange would recommend entering in to a protected deeds trust type arrangement given the lack of ready finance to make token payments which is basically what the DMP is now.  I will certainly look into it and call stepchange to see if that is a viable route to go down.
Once again - thanks a million : )

RAS

Is your mum in Scotland? Laws and rules are very different there.

StessedSon

RAS said:

Is your mum in Scotland? Laws and rules are very different there.

She is RAS & yes, they do seem to be

kimwp

I wonder if the repossession clause is more about protecting Aviva's rights to the house if another organisation or creditor wants it, rather than them being able to take the house if any sort of agreement is entered.