DM or IVA

[coastline]

Hi this is my first post so sorry if I am providing too little or too much info.

My Father is 72 years old and has unsecured debts of approx £25500 (£9200 of that in his wifes name (aged 48), this was a consolidation loan for other joint debts but was done in her name recently because of my Fathers age).

They own a house jointly with a Mortgage of around £20,000 (4 years remaining). Also an additional Loan (Secured I think with the same mortgage company) of £30,000+ through to 2019.

Total current debt payment = £1200 per month.
Joint Income = £1838 per month (which includes £200/month rent from my 18yr old brother still living at home but is mostly £1,200 from my Fathers pensions).
Total Expenditure (inc debt payment) = £2365/month

Yep - £500 per month more than they earn! This is currently being met by additional money from my 18 year old brother and my father going back to work part time even after a recent significant health problem.

The house has a value of between £160,000 and £180,000 I believe, so there is equity. We have discussed the possibility of selling the house which would leave a sizeable amount left after debt payment but not enough to buy another property and he would not qualify for a further mortgage based on his age.

I'm not sure if an IVA is applicable or if Debt Management could provide enough relief to reduce the financial burdon.

I would be grateful for any advice as I am quite concerned that the current situation cannot continue for long without serious consequences.

Thanks



Tony

[cr15py]

Welcome to the site.

My personal view from that is that the unsecured debt could be financed from a further secured loan, and that would presumably reduce outgoings, but perhaps not by £500/month.

One of the experts will be along shortly to offer their opinion.

[Oliver]

Neither an IVA or Bankruptcy is an option as your PArents are not Insolvent (as they have enough equity to pay the debts).

Sale of the house and then renting could be an option as long as the rent was affordable within your Parent's budget.

An alternative might be for a family member to raise the money to pay the debts / mortgages off and then ask your parents to contribute to the mortgage costs.

[ianmillington]

Unless I'm missing something the mortgage/secured loans are only £50k but the monthly outgoings are £2385? I think before I could commit to a recommendation I think I would need to see a breakdown of the income and expenditure.

Ian

[coastline]

Thanks for all your replies.

I have some more detailed info for Ian:

Mortgage+Secured Loan (31/12/07)= £56,478 (£407/£302 per month respectively)
Unsecured Loans+Credit Cards (April 07)= £24,566 (508.63/month)

detailed expenditure:

Mobile (orange) -3.00
HomeServ (Insurance) -3.59
Britannic Life insurance -8.67
TV LIC -11.61
Gas (Maintenance) -16.00
Mobile (virgin) -20.00
Water -25.00
TSB House ins -29.82
HSA Health -31.20
Phoenix Ins Mortgage -36.24
Coop Life -36.52
Scottish Widdows Mortgage Ins -41.02
Scottish Widdows Life Ins -6.00
Utilities (Gas/Electric) -158.00
Council Tax -93.33
Virgin Media Cable (tv/phone/adsl) -60.00
Car Ins -72.74
Barclaycard CC -100.00
Mortgage Loan -302.29
TSB CC -100.00
Mortgage -407.14
Loan MBNA -116.34
Newspapers -7.80
Loan TSB -192.29
HSA Health -31.20
Norwich Union Ins () -3.97
TSB Personal Loan Protection -9.19
Pearl Assurance -8.66
Food -200.00
Sundries -171.00
Petrol -60.00

Expenditure -2,362.62

Pensions 1,161.33
Wife 476.67
Rent From Son 200.00

Income 1,838.00

Thanks

[ianmillington]

Hi Tony

I have to dash off now but my intial thoughts are that it will probably be virtually impossible to enter into any plan that simply involves monthly contributions.

I'm struggling to see a DMP working on what you have said, primarily because taking the unsecured loans out of the equation only creates an equilibrium from an I&E point of view. So, unless your father can make a sizeable cut-back in monthly outgoings, it would seem that there is no source of surplus income for payments to be made to the creditors.

For the same reason an IVA would be problematic, as you have the above issue, together with the fact that creditors would get paid in full, and probably sooner, in a Bankruptcy.

So that then leaves remortgage or equity release. What follows is advice given by my company's mortgage advisor. He suggests you leave remortgage out of it at least for the moment, given there's only 4 years to go on the existing deal, however, your father could investigate a secured loan or equity release. Clearly his age may be an issue, but he will find out in the morning for you as to the how the lenders will assess the suitability of someone with the criteria you have stated in todays market. I may then be able to make some sensible recommendation as to what your father should do.


Hope that helps

Ian
Great test of the brain cells, this site!

[coastline]

Hi Ian,

Yes, that helps a lot - everything you have said makes perfect sense. Thanks for taking the time to look at this.

Any further advice you can give would be fantastic.

I'm afraid all my brain cells were blown away when he told me about "His slight financial difficulties"!

Thanks again.


Tony

[CoverItAll]

Hi coastline

Does the TSB loan protection really cover someone aged 72 in part time work ? It's only £9.19 per month but bno point in paying it if it wouldn't pay out.

[coastline]

Hi John,

I think that is for the loan that is in my Step Mothers name (aged 48).

But there are a number of insurances that I am trying to get to the bottom of exactly what is covered and what isn't.

I am concerned that some of the lending particularly over the last few years has not entirely been in my Fathers or my Stepmothers best interest. I'm no financial wiz but it didn't take long to figure out that they were getting in way over their heads.

Thanks for the comments.

Tony

[ianmillington]

Hi Tony

Not good news I'm afraid.

I understand that the only lender who would let your father have a secured loan is one I won't name here but I can't recommend as it's one of last resort and there is a severe risk of making things even worse. An equity release scheme whereby the owners sell the property to a company who lets it back may be a little tricky, given the age differential between your father and stepmother.

It seems to be boiling down to the only viable solutions being either a sale of the house or slashing the expenditure (probably with a machete) to get back to a positive bottom line at which point there then may be options.

Ian

[coastline]

Hi Ian,

Thanks a lot for your time and impartial advice on this it really is much appreciated and a complete breath of fresh air.

A big thumbs up for this forum.

Kind Regards

Tony