Mums finances surprise

[danjerman]

Hi Foolers,

I have just found out that my mum is significantly in debt (just under 30k). I'm trying to think of options for her and wanted to touch base with this community for some guidance please.

-Single Pensioner 70+
-Owns property on holiday park (lives there all year) - value 150-160k. No mortgage.
-Pension income 944 per month
-CC & Overdraft Debt 27k
-Loan Debt 2k
-Her income does not cover her bills and minimum repayments for the debts.
-She has approx 20k being paid to her in March 2023 from a loan she gave a family member several years ago.

I've had a look at statements etc and the interest and charges are killing her. She is living above her means anyway even if she didn't have the debt but this is now a vicious cycle of the late payment fees, interest and other charges accelerating her indebtedness.

She has 3 sons, of which I am one. It is possible for her to come and live with us but I suspect she is unlikely to want to give up her independence. However, she doesn't seem to grasp what is happening with finances and the seriousness of the situation so I wonder is she is capable of managing her own affairs going forward.

My specific query is how to stop the bleeding right now. Is a DMP the right way forward? How can we stop the charges and interest?

The other query is there any comeback for obviously crazy lending policies? She clearly cannot afford the credit she has been given and it seems predatory as the majority of the debt is likely to be charges and interest at this point. It has been going on for some years by the looks of it.

Thanks for any advice or guidance

Kind Regards
DM

[Gerry557]

Im sorry to hear about your mum.

Obviously now the problem is "known" you can start doing something about it, that is if she is willing to allow you. She may still be in ostrich mode.

You might be able to contact the agencies and agree a way forward. Citizens advice would be worth a chat. They probably know a lot more than me at dealing with debt.

Depending on your situations, the children might be able to assist especially if there is going to be an inheritance. This might not be possible if the children have similar issues etc.

Hopefully there can be action taken to stop the cycle and get on a better footing going forward.

Good luck

[Bminusrob]

It seems to me that the £20k is crucial here.

How sure are you that it will be repaid on time?
Is there any chance of early repayment, or part repayment?

Assuming repayment is made, it is vital that the money is used to reduce the debt in the most efficient way. I know too many people who have been in debt, and get a lump sum of money, only to spend some or all of it, rather than reduce the debt. If the debt can be reduced to £10k or less, and your mother still can't afford repayments, that is the time to get a debt repayment plan in place.

[88V8]

The holiday park home... is it a building, or one of those large static caravans?
If it is unpledged, might Equity Release be possible?

V8

[DrFfybes]

Sorry to hear about this.

She is living above her means anyway even if she didn't have the debt

This is the worrying part - she is beyond her means even without the debt, so any DMP is not going to reduce the debt unless her other outgoings are reduced. Does anyone have PoA for her?

Others will know far more than me about how to deal with the lenders, but going forwards what needs to be done is arrange things such that your mum is living within her means. This either means reducing her outgoings (check her phone, TV, insurance, etc arrangements to see if she is overpaying), or increasing her income (as V8 says, equity release seems a candidate) but also making sure she is getting all the allowances and benefits she is entitled to. Subsidising her yourselves and keeping records, so the debts are settled first if she sells the home or passes is another option, like a DIY equity release. Obviously this needs sorting with your siblings as to how and if it is feasible.

Paul

[daveh]

Sorry to hear about this.

She is living above her means anyway even if she didn't have the debt

This is the worrying part - she is beyond her means even without the debt, so any DMP is not going to reduce the debt unless her other outgoings are reduced. Does anyone have PoA for her?

Others will know far more than me about how to deal with the lenders, but going forwards what needs to be done is arrange things such that your mum is living within her means. This either means reducing her outgoings (check her phone, TV, insurance, etc arrangements to see if she is overpaying), or increasing her income (as V8 says, equity release seems a candidate) but also making sure she is getting all the allowances and benefits she is entitled to. Subsidising her yourselves and keeping records, so the debts are settled first if she sells the home or passes is another option, like a DIY equity release. Obviously this needs sorting with your siblings as to how and if it is feasible.

Paul

I would ask how she is managing to live above her means with an income of £944/month? I assume that is after tax. You need to sit down with her and go through a budget and get her outgoings before the debt repayments well below the £944/month.

That should be possible. I'm single, live in a 2-bed house, and have some expensive hobbies (downhill and xc skiing) and a run a car and e-bike (which costs a fortune in spares but saves on diesel). If I look at my outgoings and remove the unnecessary items (most savings etc) I spend approx £350 on bills (electricity, council tax, sky, TV licence, broadband and mobile etc) and £84 of that is sky, so you should be able to get bills down to under £300. I spend around £30 a week on food and alcohol, but I grow my own veg and I cook from scratch in bulk and freeze meals for later use which saves a lot. Car is around £80 a month in diesel and £500 a year in servicing, so other necessary items including food and car should only be another on average £250 a month, so around £550 a month should be possible.

[DrFfybes]

If I look at my outgoings and remove the unnecessary items (most savings etc) I spend approx £350 on bills (electricity, council tax, sky, TV licence, broadband and mobile etc) and £84 of that is sky,

At risk of diverting this thread, and teaching you to suck eggs, but "a grand a year on telly?"

WITH a short annual phone call, our Broadband, Sky TV, mobile SIM, BT Sport, and landline is under £75/month in total. Sadly our fuel and council tax bills add up to over £500 at the moment, and they can't be haggled

pAUL

[daveh]

If I look at my outgoings and remove the unnecessary items (most savings etc) I spend approx £350 on bills (electricity, council tax, sky, TV licence, broadband and mobile etc) and £84 of that is sky,

At risk of diverting this thread, and teaching you to suck eggs, but "a grand a year on telly?"

WITH a short annual phone call, our Broadband, Sky TV, mobile SIM, BT Sport, and landline is under £75/month in total. Sadly our fuel and council tax bills add up to over £500 at the moment, and they can't be haggled

pAUL

I know, but I like my telly, which is why I left it in as I know my elderly mum likes her telly but she has a free view box, and dish so gets it a lot cheaper than me. But I like my sport so have to pay for sky sports to get the cricket and skiing and biathlon via eurosport. I thought about chopping sky movies for a while as I've not been watching it (though I'd loss the recorded films) and adding it when I wanted movies, but annoyingly you can add channels on the website, but have to phone to remove them. By making it difficult they are managing to keep my bill up. Must get round to giving them a ring and negotiating the price down, same with my BT broadband contract.

If I was in the OPs situation, I would be getting my MUM to prioritise her spending and if it was me the sky would be coming down to the minimum package I could live with.

[gryffron]

Hi DM,
Nasty shock. I feel for you. But you’re not going to like my answer.

Your mum has significant assets. She can afford the debt and she can pay the repayments. It is possible a DMP can help, but frankly, there is no reason a creditor should accept it, or any request for reduced interest/fees when they can simply go after her assets. Bear in mind they don’t have to offer reduced interest/fees for anyone on a DMP. They’re only really likely to do so when a person cannot pay. Without a reduction in charges, all a DMP is likely to achieve is to drag out the debt for longer.

Credit card and overdraft debt is the most expensive there is. Can she source any other money? She’s unlikely to get a bank loan. The £20k? Can family help with a loan? If anyone has cash in the bank they could achieve better interest and it still be MUCH cheaper for mum. Can also be possibly secured on her house.

Although I agree with previous posters that if she is living beyond her means and can’t control her future behaviour, then this will all be for nought. Maybe she thinks she deserves to spend her own assets? If she doesn’t want to change, you’ve got a much bigger problem than the debt.

Gryff

[Charlottesquare]

IVA may be the way.

I did once deal with a lot of credit card companies for a friend (he was bi-polar) and managed to negotiate some of the card debts down (a lot of the interest that had built up), but I could explain the medical position, they ought not to have given him the more recent cards (50k in total) and I had funds from his house sale to cover the debts so the promise of immediate repayment of the reduced sum was appealing to them. Without a good argument I doubt your chances and a legal power to act that can be exhibited (which I had) will likely be needed for them to even talk to you.