Advice from CAB

ZinKep

Hi,

My Mum has been using CAB for sorting out her debt problems - she owes 12K - I won't go into the gorey details, but she is now a widow. However, I am concerned over CABs advice - they are really pressurizing her to sell her house. She owns the house outright, no mortgage and the house is probably valued at 250K (although that is based on an estimate 3 years ago - 4 bedroom Queen Anne house in need of lots of repair) Is this really the way for her to go? SHe has been through so much - the debt seems small in comparison and selling her house surly is a knee jerk reaction?

She does have a monthly income of 1200 - has a car which she will trade in to get smaller model and cash back and also has antiques that can be sold. Obviously these all take time - but CAB are insisting she puts her house on the market despite current trends. Any advice?

Thank you

mumoftwins

Hi Zinkep, I think this sounds a bit harsh actually! I am no expert but I am sure there is an easier way to get round this and I am sure someone will be along soon to give more sound advice. But please don't let your Mum be pressured there is another way round this xx

Surfbabe

That seems on the face of a bit extreme, but someone will be along soon to give you "proper" advice.

Batfink

I'm no expert - and obviously don't have all the finances in front of me - but that seems like the wrong thing to do. I'd suggest sell what you don't need, downsize the car and then set reasonable repayments for the rest.

Working for the CAB doesn't make you an expert - I guess its just their opinion on what to do, much like we on here have ours.

x

CCCS_Sarah

You could look at getting a second opinion somewhere i.e. CCCS. If selling comes up as an option again let the counsellor know your views and then they will look at other options that are available.

CCCS have an online debt advice facility called Debt Remedy if you click on this link it will take you directly to Debt Remedy or your mum could call the CCCS helpline for an appointment on 0800 138 1111

ZinKep

Hi Thanks for your advice - I have suggested trying another debt counselling service but it took all her courage to contact CAB, and she is terrified that changing now would mean that her creditors would think she was "pulling a fast one" Mum suffers with dyslexia which really knocks her confidence corresponding with people and thought as since the CAB helped her write letters and all they were the ones...

beanielou

At the end of the day your mum doesent have to take the advice of CAB.
Could you maybe pop up a SOA on behalf of your mum & we can see if we can help.

silvercar

I would ask on the mortgage board, with an income and a valuable house there is probably a way that she can borrow the money against the house. May not be ideal, but at least it means she can stay in her own home.

Gemmzie

silvercar wrote: »

I would ask on the mortgage board, with an income and a valuable house there is probably a way that she can borrow the money against the house. May not be ideal, but at least it means she can stay in her own home.

That would be my suggestion too. It's not a large mortgage, it depends on her age but if she could show that she could afford the repayments, it would make sense.

fatbelly

That really sounds like kr@p advice and your Mum should consider a complaint to the Bureau

As a single person with 1200 pcm income and no mortgage, can she really not afford the minmum repayments on 12k debt?

It sounds like a budgeting issue to be honest

marclandsman

The advice CAB have given is actually not that awful when seen from the creditors' point of view - they will be looking for a quick repayment, and if she can them back by selling the property, they will usually expect it. When seen from your mum's point of view, though, it is a totally different story!

Selling the house is likely to not only be a drastic option, but the costs will be out of all proportion to the debt (1% estate agents fee alone is £3000 give or take with VAT, and there are legal fees on top).

Roughly how much would she be able to pay per month? Would that pay everything off pretty quickly? Making a 'sensible' offer is always an option, but whilst the banks are always saying that you should talk to them, the problem is that some are also looking for charging orders against properties far more quickly these days than ever before, and whilst they usually say they won't enforce, this adds costs.

Presumably she is beyond moving balances to cheaper cards etc? (see virtually any of Martin's articles on this sort of thing). If she plans it properly she could avoid paying interest for a while, and repay capital.

She should consider a mortgage or secured loan (remember that rates change according to how much is borrowed, so look at the repayments for amounts slightly above and below the amount she really needs - borrowing an extra £100 may mean that the rate is lower and thus total repayment is far lower. Again I think Martin has mentioned this before)

Whilst I would not usually recommend paying someone else's debts, are you in a position to help her. You could buy a share of the equity if you can afford it, which would also mean (on a very morbid basis) that there would be less inheritance tax to pay if the property increases in value and if current tax rules do not change much. BUT count the number of 'ifs' and seek proper legal advice on this so that you get get it right and do not create problems in the long run.

Whatever she decides, the options which are unlikely to be right for her are to stick her head in the sand, go bankrupt or enter an IVA (her debts are too small so costs would be disproportionate, and the property alone would cause major creditors to reject).

Except for CAB, all debt management schemes have costs to them. One in particular has a charity number but according to their web site is financed by the main banks etc. They potentially therefore have the same conflict of interest as an Insolvency Practitioner can be accused of having when recommending an IVA.

If she has incurred debts because of the house or living beyond her means, she may of course find that selling the house IS her best bet. This time of year though is not a time when traditionally many people buy houses.

Marc