View more on these topics

Debts of despair

Following the purchase and renovation of a property, including new heating, kitchen and improving the garden, we have found, even though we have good incomes, we are finding it extremely difficult to get by and the overdraft is getting out of control. What can we do?

This was an actual enquiry we received via a national newspaper a couple of years ago. It is, no doubt, a familiar situation encountered by many advisers. We are certainly in an era of “buy today, pay later” and, unfortunately, we regularly encounter clients who have overcommitted themselves.

Advising this couple was a relatively straightforward exercise but what made this case interesting was another financial problem that Mrs X had – more about that later.

Having gone through their finances in some detail, we found that, fortunately, they had sufficient equity in their property that all their debts could be amalgamated and rescheduled.

By remortgaging their property and rebroking some very expensive Barclays protection policies, we managed to save our clients £264 a month and make their lives a lot less stressful.

It made a good story in the national newspaper. We received a number of similar enquiries as a result and our clients have recommended us to quite a number of their friends, who are now clients.

This was all very well but I mentioned earlier that Mrs X had a major financial problem that needed to be addressed once the remortgage had been completed.

Mrs X had a previous relationship that went wrong and her partner returned to his native Ireland, leaving her saddled with many debts. The home that they lived in was repossessed and, although they had a mortgage of £60,556, the house was sold for just £30,000.

This happened in 1993 and the lender, UCB, via solicitors, demanded £89,221.96 to settle the debt. Obviously, this was causing Mrs X a great deal of distress. She had to provide a budget analysis to UCB&#39s debt collectors every six months and agreed to pay £90 a month towards the debt.

At that rate, it would have taken her 89 years to clear the debt and she would have been 117 years old by the time it was paid off.

Obviously, with this huge cloud over her, she never applied for credit elsewhere and the present mortgage was only in her husband&#39s name.

We put her in touch with Eddie and Brenda Weatherall of the Independent Banking Advisory Service. They discovered that the calculation of the figure of £89,221.96 had never been explained to Mrs X and that she had been pressurised into signing a consent order without being told to take legal advice.

After a few months of negotiation, IBAS negotiated a settlement of just £1,000 – a saving of more than £88,000. This cleared her credit record and she now looks optimistically to the future, without that huge weight upon her shoulders.

The Weatheralls said she was not dealt with as she should have been and UCB realised that. They find many occasions when banks are chasing people to pay debts which have been calculated incorrectly and urge anyone facing demands to take advice as soon as possible.

They should not agree to pay anything until they have established exactly how the debt is worked out. Also, they should not agree to pay an amount they cannot afford.

Our client is not in isolation. There are some 200,000 homeowners still being chased over debts from repossessions which took place as long as 12 years ago. Average demands are for £27,000 but can be as high as £90,000. People are faced with the choice of going bankrupt or spending their life paying debts they thought had disappeared.

We have recently been approached by a new client who has been chased by Barclays Bank for £65,000 following a forced sale in 1989. He reaches state retirement age next year and is terrified that this debt will be following him into retirement. We have put him in touch with IBAS which, hopefully, can work its magic for them as well.

Should you have any client in a similar situation, IBAS would be pleased to hear from you on 01487 843 444.


The walls come tumbling down

A few months ago you pub-lished a very erudite letter from Graham Worrall of Dundee on the subject of the damage which will be inflicted on the UK financial services industry by Government-imposed charge capping, particularly on pension products. As most IFAs will doubtless have noticed, the horrible sticky mess predicted has already started – […]

MGM turns to art to raise profile

MGM Assurance is sponsoring the first piece of modern art to be displayed at the Royal Botanical Gardens, Kew for over 100 years in a bid to raise its profile with the public. The piece, called Autumn, will be placed in Kew&#39s Ave-nue of Maples and MGM says it hopes the plaque will raise public […]

IFS slams Tory tax proposals

Conservative proposals for cutting tax on savings have come under fire from a leading think-tank as being regressive and resulting in tax loopholes. Under plans outlined in the Tory manifesto, tax on savings and dividends would be abolished for all but higher-rate taxpayers. The Institute for Fiscal Studies says this is the single most expensive […]

Basket of benefits

Norwich Union has designed a cafeteria-style protection plan aimed at employers who have a Norwich Union pension plan in place for their employees. Business Benefits@Norwich Union has four elements – group income protection, group life cover, group private medical insurance and ASU cover. Employers can choose one or all of the options at any time. […]

Tax allowances and exemptions

Helen O’Hagan, Technical Manager at Prudential, looks into the planning strategies that can deliver considerable tax savings for your clients. Inheritance tax (IHT) Consider Margaret, featured on our Planning Matters family hub, who is a sprightly eighty year old with four children and several grandchildren. She’s recently been widowed and IHT planning is high on […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm