what is the way forward - pls help

[alexteh]

If their credit history is terrible then they have nothing more to lose so you've come to the right place for help!

 

Firstly, make sure they understand that creditors cannot take money they don't have! What you need to do is to sit down with your parents, calm them down and work out EXACTLY who is demanding money from them.

 

Then you need to split those creditors into priority and non-priority debts. Priority debts are the mortgage and any secured loans, council tax and current utility bills (but not arrears!). Work out how much these come to each month and then work out how much money they need to live. Ignore any non-priority debts when you do this and don't worry if they've promised to pay back a credit card company hundreds of pounds - it really doesn't matter right now because they won't be getting their money. The CAB can help them work through this if they want face-to-face advice!

 

Next thing to do is to cut up all the credit cards so they don't get into any worse debt for now. If your parents have loans or credit cards with their existing bank, it is a good idea to open a new bank account not affiliated with any of their creditors. What you want is a BASIC bank account which has no credit check or facilities. Get any salary or pensions or benefits to be paid into this new account and also transfer the direct debits or standing orders for your PRIORITY creditors to this account too. Then write to ALL of your non-priority creditors telling them that your parents are experiencing financial difficulties and are seeking advice. Template letters for this (Letter A) are available from http://www.consumeractiongroup.co.uk/forum/general-debt/20758-creditors-dcas-letter-templates.html.

 

Once you have done a budget of your living expenses and priority debts, there may be a little money left over and this is what you will be offering to your creditors. Before you do that though, I'd recommend sending all of your creditors a CCA request (with a postal order for £1) to ensure that they are actually able to collect the debt at all. If you look at http://www.consumeractiongroup.co.uk/forum/general-debt/83035-guidelines-requests-original-agreement.html you'll see the details on CCA requests and how they will help you. A number of your parents creditors are likely not to be able to supply the relevant paperwork and you can then ignore these completely as the debts are unenforceable - they may continue to hassle you but you can ignore them. For those creditors who can supply the relevant paperwork, the next step is to check through the last 6 years worth of statements to ensure they've not added illegal charges and check whether they have mis-sold payment protection. You may have to send the creditor a SAR request (and a £10 cheque/PO) to get all the information they have on you to determine this. Once you have all the information, reclaim any charges/PPI and this will bring the debt down (or even mean they owe you money!). This process can take weeks or months - all of which time the debt is in dispute and they cannot force you to make payments!

 

Once you have a final list of non-priority creditors, you can work out on a pro-rata basis how much you can afford to pay them each month and then send them letter B. If your budget works out that you can't afford to pay anything at all, send letter C instead. If you read through the remainder of the template letters, you'll see responses to the most common replies you'll get back from the creditors.

 

If your parents PRIORITY debt repayments plus living costs exceed their income, then you really do need to seek professional help - the CAB are probably one of the best places to try first. It is possible you can persuade the mortgage company to switch the mortgage to interest only to reduce the monthly payments although there are obvious down-sides to it. I just wish you'd come to us sooner as I'd have advised against the remortgage (I speak from experience - I did exactly what they did - remortgaged to pay off stuff, found it wasn't enough and got secured loans up to the hilt and finally decided enough was enough and sent the keys to the house back to the bank as a voluntary repossession, found CAG and am dealing with my other creditors and am living in a much bigger rented house in a nicer area for less than my mortgage payments and I've not looked back!)

 

Well I've probably gone on long enough for now so read, digest and come back with any questions and someone'll answer as best they can!

 

Good luck and remember that creditors cannot take what you don't have despite how many times DCA's may claim that they can EXTRACT BLOOD FROM YOUR STONE EVEN IF NOT SQUEEZED BY YOU! or something

[alexteh]

thanks so much for your replies, maybe there is light at the end of the tunnel. I have asked my parents to get a copy of their credit file so I can see what is on there but they are too scared to do it and my mum thinks it will tip my dad over th edge. what i do know is that none of their debts are with a DCA they struggle to pay them and end up greatly overdrawn with bank charges. the credit card they pay 200 a month on and only pay 20 tactually off as all the rest is interest, the bal on that is 12 thousand, i know they have other cards but am not sure what the balance is. nothing is now securred on the house.

 

Seriously, no matter how bad it seems, there are tons of people in a worse situation - myself included a few months ago! By the sounds of it, the credit card balance is chock full of illegal charges so it may end up that they owe your parents money even! Bank charges are probably similar but it's all up in the air at the moment but they should still start the process of reclaiming these too!

 

I am thinking that if their credit rating is bad anyway, we can CCA these creditors as some may not be enforceable, hopefully sort things out now and in six years time if they stay debt free, which they will then all this bad credit will be wiped off, is that right?

 

Not quite no. If after 6 years the creditor has not been paid and you have not acknowledged the debt in any way, it will be statute barred. What you are probably thinking of is that stuff drops off your credit file after 6 years - bear in mind though that DCA's have a nasty habit of putting a default on or something after 5.5 years to screw it up so you're better off dealing with it all now - CCAs are the most important step here - no CCA = no enforceable debt and also no right to put ANYTHING on the credit file!

 

can you tell me what an IVA is please? i have heard of them but dont know how they work?

Personally, I wouldn't touch them. A DMP may be appropriate but with some support from CAG a DMP doesn't do much you can't yourself.

 

What you say is right and I guess this is what I need to do, sit down with them. I have advised them to seek prof help, but they dont. how can I help them if they wont help themselves?

 

Always the hard one - if they wont take professional help, will they take your help? A year ago, I'd buried my head in the sand regarding all my debts - I'd been doing that for about 10 years. It took getting my home repossessed for me to wake up and now I'm in a better position than I've been in for as long as I can remember. When I moved out of my house last October, I had a pile of letters from DCAs and creditors that filled a black bin sack and I dreaded the postman coming. Now I actually look forward to receiving a letter from a DCA so I can laugh at the BS that they tell you (before CCAing them of course). There is light at the end of the tunnel - you just need to enter the tunnel and start walking!

 

 

Yeah they may be stuffed with that in the short term - bear in mind that by following the advice here, they will cut back on their other debt repayments drastically so it may be possible to manage anyway

 

I guess they will have to put up with defaults being registered against them for an unenforceable debt, then in six years they will be clear and get get decent mortgage rates again.

 

No, they won't have to put up with defaults BUT you need to move quickly as its far easier to stop them by proving the debt isn't enforceable than it is to get them removed afterwards! Same goes for CCJ's!

 

what do you think?

 

p.s i am so glad you have never looked back and are getting on with your life.

 

I think you need to sit your parents down and get them to wake up and deal with their reality NOW! Not next week, not next month - they need to sit down and work out that budget in the next 24 hours and get all the creditor letters (letter A from the templates) out THIS WEEK! Then they may be in a position that they can feel they are regaining some control and they might even enjoy christmas without this huge black cloud over their heads. Remember that putting a little aside for christmas and birthdays etc. each month is a perfectly valid item on their budget too - and don't skimp on things like food and be realistic. if they smoke, make sure you budget for them - quitting during the initial stress of this is a bad idea (CAB told me that!) Make sure the budget is realistic because they WILL have to stick to it and if you've not been then you will come unstuck.

[alexteh]

I wouldn't recommend going down this road.... this is usually part of the ('phone) bowlarks they try and tell you in order to get increased payments. I had that little gem said to me countless times (during the days when I spoke to them on the 'phone) in an attempt to get me to admit I owned property.... which I always denied, of course.... They don't have the right to say such things... it's bullying, plain and simple.

 

I wouldn't necessarily recommend what I did either - I was in a very specific situation where I'd fallen for the whole "take out a secured loan" thing - in fact I had 2 seperate secured loans and a mortgage - and was in the situation where I couldn't afford to live and pay the mortgage and the secured loans and the house was worth less than the loans secured on it (negative equity). By handing the keys back, I got about 3 months effectively living there for free until they completed the legal side of repossession and during that time I just defaulted on my 2 secured loans too and built up enough cash to pay the deposit on a rented property. When the house was sold, the mortgage company got all their money, the first of the secured loans was almost entirely paid off and the 2nd I negotiated to an unsecured loan over 25 years with affordable repayments (basically as there was no property to secure on they had no choice). It was a scary time but the moment I handed the keys back, a huge weight lifted and I've since found CAG and am dealing with all my unsecured debts.

 

I just wish i knew then what I do now.

[alexteh]

Thank you. my partner meant he didnt want me to start drawing money off my visa to help out as he was worried it would end up that we were also in debt and couldnt pay it back. I would help my parents out in any way I can but I cant afford to finnancialy so i will do it the CCA way instead and sorts the creditors out for them!!

 

Thanks for your help everyone I am sure I will have lots of questions along the way !

 

Good luck and if you have any questions ask away