Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Bestthingsinlifearefree
    • By Bestthingsinlifearefree 5th Mar 18, 10:23 PM
    • 1,474Posts
    • 1,280Thanks
    Bestthingsinlifearefree
    General advise please
    • #1
    • 5th Mar 18, 10:23 PM
    General advise please 5th Mar 18 at 10:23 PM
    Hi,


    I'm posting on behalf of a relative. Brief history. She was working self employed until December 2016 (up to this point was generally up to date financially). In December 2016 she became ill was in hospital for 4 months (mental health). Discharged in April 2017. Medically off work 8 months recovering / on benefits. From Jan 2018 has gone back to work in a phased return 15 hours per week in lesser paid role than she had before.


    The 12 months with no income (apart from benefits) have caused havoc on her finances.


    Her current income is about 1,000 (422 salary,292, ESA, 241 housing benefit, 77 Council tax credit) & her outgoings are about 1000 (housing costs 500 & then about 500 in food, electric, water, insurances, phone, clothes, TV license, building insurance etc etc). Her property 40% mortgage / 60% rent housing association.


    I have done an SOA and we have trimmed back costs e.g car has gone, gym membership, no pets, is a non-smoker, non-drinker, no Sky packages etc. So I'm on the case from a cost cutting perspective.


    In essence there is no spare for debt repayments & the debts are rising i.e interest. The gap is 300 per month.


    Credit cards / overdraft come to 7,500
    & Inland revenue owed 7,500 (tax bill would have been paid but no earnings last 12 months / money put aside for it gone whilst in hospital for 4 months bills kept coming in)


    Mentally she is still fragile and though back to work P/T, still o medication, under DR supervision hence I'm dealing with her financial affairs trying to keep creditors at bay.


    Just wondering what generally the way would be to go forward?
    Should I try and negotiate with each creditor? (I have been dealing with HMRC whilst she has been ill).


    Is a debt management plan the way forward?


    She has some equity in her flat would her property be a risk?


    In light that she was hospitalised for 4 months with mental health issues will creditors deal with her differently?

    How would it be best to move forward. When her income is not enough to make debt repayments & the debt keeps growing?

    Any advice much appreciated on the assumption she has already reduced her costs as much as possible.


    Thanks
    Last edited by Bestthingsinlifearefree; 05-03-2018 at 10:26 PM.
Page 1
    • sourcrates
    • By sourcrates 5th Mar 18, 11:14 PM
    • 14,368 Posts
    • 13,554 Thanks
    sourcrates
    • #2
    • 5th Mar 18, 11:14 PM
    • #2
    • 5th Mar 18, 11:14 PM
    Hi,

    As we dont know exact figures here, there isnt much to work with, but in general, you cant have any form of debt solution if you have no disposable income, with the exception of a DRO, but she owns a house so would not qualify, likewise Bankrupcy, she would most likely lose the house with that option.

    That is, Im afraid, it, the best you can do is plead her case to her creditors, and ask them to take 1 a month each as a token payment.

    If her situation improves, then maybe a DMP could be arranged, but for now, thats about all you can do.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File And Ratings, and
    Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.

    For free debt advice, contact either : Stepchange, National Debtline, or, CAB.
    For Free Legal advice see : http://legalbeagles.info/
    • fatbelly
    • By fatbelly 5th Mar 18, 11:29 PM
    • 12,361 Posts
    • 9,403 Thanks
    fatbelly
    • #3
    • 5th Mar 18, 11:29 PM
    • #3
    • 5th Mar 18, 11:29 PM
    Amazing how often these shared ownership deals go wrong. To answer your questions

    Should I try and negotiate with each creditor? (I have been dealing with HMRC whilst she has been ill). Yes but you can't offer any payment from what you say


    Is a debt management plan the way forward? Not if there is no surplus for the non-priority creditors


    She has some equity in her flat would her property be a risk? As long as she pays the mortgage and rent, and HMRC are not considering bankruptcy, no


    In light that she was hospitalised for 4 months with mental health issues will creditors deal with her differently? Yes, at least in the short term

    How would it be best to move forward. When her income is not enough to make debt repayments & the debt keeps growing?

    I would say the first move is to complete a mental health evidence form and ask for write-offs.

    Some info here.

    https://www.nationaldebtline.org/EW/factsheets/Pages/debt-and-mental-health/mental-health.aspx

    The main priority is HMRC - She may need more specialist advice. Possibly Business Debtline, possibly Tax Aid
    • Bestthingsinlifearefree
    • By Bestthingsinlifearefree 5th Mar 18, 11:31 PM
    • 1,474 Posts
    • 1,280 Thanks
    Bestthingsinlifearefree
    • #4
    • 5th Mar 18, 11:31 PM
    • #4
    • 5th Mar 18, 11:31 PM
    I wondering particularly how HMRC would react on the news that there is no money to pay them? At the moment they have 'held off' on the view of her being ill and now returning P/T. They were going to pass it on to external debt collectors but have agreed to hold off whilst I put an SOA together for them.


    My concern is that if she lost or sold her flat she would be on the slippery slope to homelessness. She is up to date with mortgage and rent albeit it has been subsidised by credit cards / over draft over the last 12 months. Would HMRC go after the flat? (there is not much equity in there as she only has a mortgage on 40% but still maybe 30K/ 40K equity).


    If she / I phoned up each creditor and basically offered 1 how would they react to that. The key issue being that she has been hospitalised for 4 months with mental health issues and she will not be able to deal with all this as effectively as someone in full health.


    The other option is would creditors take a part payment if relatives could club together to make an offer of part payment on her debts?


    Just thinking out loud. I appreciate any comments.
    • Bestthingsinlifearefree
    • By Bestthingsinlifearefree 5th Mar 18, 11:39 PM
    • 1,474 Posts
    • 1,280 Thanks
    Bestthingsinlifearefree
    • #5
    • 5th Mar 18, 11:39 PM
    • #5
    • 5th Mar 18, 11:39 PM
    Amazing how often these shared ownership deals go wrong. To answer your questions

    Should I try and negotiate with each creditor? (I have been dealing with HMRC whilst she has been ill). Yes but you can't offer any payment from what you say


    Is a debt management plan the way forward? Not if there is no surplus for the non-priority creditors


    She has some equity in her flat would her property be a risk? As long as she pays the mortgage and rent, and HMRC are not considering bankruptcy, no


    In light that she was hospitalised for 4 months with mental health issues will creditors deal with her differently? Yes, at least in the short term

    How would it be best to move forward. When her income is not enough to make debt repayments & the debt keeps growing?

    I would say the first move is to complete a mental health evidence form and ask for write-offs.

    Some info here.

    https://www.nationaldebtline.org/EW/factsheets/Pages/debt-and-mental-health/mental-health.aspx

    The main priority is HMRC - She may need more specialist advice. Possibly Business Debtline, possibly Tax Aid
    Originally posted by fatbelly

    Thanks Fatbelly I have a mental health evidence form as when she came out of hospital. As at the time I had to negotiate the return of her car / cancel the lease, negotiate cancelling her gym membership and sort various other things out. At the time (last April / May / June) the mental health evidence form was useful. Not sure if it 'expires' though. She is still under supervison of Dr on phased returned to work.




    At the moment she has avoided receiving any nasty phone calls, debt letters but only because she has been effectively payiing one credit card with another etc. However in a few months she will hot all her credit card limits and things are already snow balling (interest etc). I'm just trying to pre-empt it before it all implodes and the stress she will face at that moment.


    In fairness to her she wants to pay all her debts back, has worked all her life and has battled to get back into work parttime. However her health is fragile and a relapse would not be a big surprise.
    Last edited by Bestthingsinlifearefree; 05-03-2018 at 11:49 PM.
    • Bestthingsinlifearefree
    • By Bestthingsinlifearefree 5th Mar 18, 11:44 PM
    • 1,474 Posts
    • 1,280 Thanks
    Bestthingsinlifearefree
    • #6
    • 5th Mar 18, 11:44 PM
    • #6
    • 5th Mar 18, 11:44 PM
    When she first got ill we hoped / assumed she would be back in full health maybe in a few months as it turned out it took over a year. When she was initially in hospital for 4 months we could not do much to access her financial stuff / make decisions. Her direct debits were paid by her savings in her current account (which she had put aside for her tax bill) and going into her overdraft.


    When she came out of hospital April 2017 for a few months I battled on her behalf to get benefits, support, her finances sorted. Then there has been a lull and I'm preparing to go back into battle on her behalf as it is clear that a return to full health / full employment etc is still a long way off (if it happens at all) and her financial situation will implode soon.


    I'm now researching the best way forward for her / fact finding before I engage with her creditors or debt management companies / charities etc.
    Last edited by Bestthingsinlifearefree; 05-03-2018 at 11:50 PM.
    • pmlindyloo
    • By pmlindyloo 6th Mar 18, 10:00 AM
    • 11,583 Posts
    • 13,486 Thanks
    pmlindyloo
    • #7
    • 6th Mar 18, 10:00 AM
    • #7
    • 6th Mar 18, 10:00 AM
    First of all I am looking at this from a benefits point of view. I presume she is doing Permitted Work which seems the most sensible option at the moment. I am not sure about her ESA payment - could you break it down please - support group, disability premiums etc so we can check if it is correct. Figures don't look right to me.

    I suggest that she applies for PIP - get some advice from a welfare specialist or CAB about this.

    If she is awarded PIP at standard daily living she would then also get a severe disability premium added to her ESA (presuming she lives alone and no one claims carers allowance for her.) This would boost her income by over 100 a week which would enable her to make arranged payments to her creditors.

    In the meantime you can negotiate with her creditors enclosing an Income & Expenditure form and explaining past circumstances and that she has applied for PIP and asking for a continued 'grace period' until things are sorted out.

    The problem is the house costs. Have you spoken to the mortgage company and see if they will allow a payment holiday/extend the term/pay interest only for a term?

    This may all take some juggling. Due to the mental health issues it may be worth a visit to CAB (if you have a large enough one) to speak with their debt/money specialist. There may be a way of writing off/reducing debt to credit companies or help from charities. A good debt specialist at CAB should have that kind of knowledge.

    PS. You have checked that she hasn't got a mortgage protection plan?

    And (sorry) as she is on income based ESA have you checked that she is on all the special tariffs for her utilities?
    Last edited by pmlindyloo; 06-03-2018 at 10:12 AM.
  • National Debtline
    • #8
    • 6th Mar 18, 10:18 AM
    • #8
    • 6th Mar 18, 10:18 AM
    Hi there


    If I've understood correctly your relative does have enough to cover her basic living expenses, but there is nothing left over to offer any of the debts? In that case it is best to stop paying the debts now, rather than continuing until she hits the limits on her credit cards. She'll only end up in the same position she's in now, but with a higher level of debt.


    HMRC is the priority debt as they can be more aggressive than other creditors. However your relative is clearly vulnerable and hopefully they will take that into account. As fatbelly says, you can seek some specialist advice on the HMRC debt from Business Debtline or Taxaid.


    The credit cards and overdraft have more limited powers. You can start by sending them a hold action letter asking them to put everything on hold for 30 days https://www.nationaldebtline.org/EW/sampleletters/Pages/Hold-action-on-your-account-%28sole-name%29.aspx.


    It's also important for your relative to open up a basic bank account somewhere she has no debt. If she has debts with her current bank she's at risk of them helping themselves to money out of the account to pay off any arrears she falls into.


    Susie
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

742Posts Today

6,792Users online

Martin's Twitter
  • This tweet made me reread my 'How to Vote in the EU referendum' guide - quite interesting to realise how little has? https://t.co/lFQaSSqUGj

  • Ah these care free days of watching #ENG score 5 goals in the first half of a World Cup match. It reminds me of... Never.

  • Then it should be. It's not some accident. It's deliberate grappling https://t.co/UxVTuUSNio

  • Follow Martin