massive debt - creditors chasing

[frogetyfrog]

My colleague has been upset over creditors chasing for a massive debt he has acrued. I suggested we post on here hoping for some sound advice. Hope that is an ok thing to do, but I am limited on what advice I can give.

Basically he is hopeless with money. He has always been hopeless with it and acrued debt which a few years ago he put through a debt management charity and was paying a small amount each month. However, after a run of bad luck, he took out a further loan which stupidly a bank gave him even though he was already in massive debt. A year later he put this loan through the debt charity and combined it with his other payments.

Now that bank are chasing for payment through a charge on his property. It turns out that the interest on the loan has increased it by almost 80% in 6 years so it is now huge. The debt management agency had agreed he pay back a tiny amount each month but had failed to mention the interest situation so effectively he was simply getting further and further into debt but he didnt realise (it does show on statements but he doesnt understand a bank statement)!

My questions are:

1. Are there any rules for irresponsibly lending (6 years ago) to somebody who should never have been lent to?
2. The debt management charity are saying there is nothing in writing about what had been agreed with the bank - but surely a national debt management charity wouldnt agree a small payment to the bank each month knowing the interest was acruing hugely each month increasing the debt significantly. We dont understand why the debt management charity has allowed the debt to increase so much while still taking the money each month and apportioning part of it to this bank.

Any help or advice or thoughts appreciated.

which charity?

1- no I'm afraid
2- you have to try and have the interest frozen yourself unless the charity negotiated it all on your behalf. Maybe they did ask and they said no, not all agree to freeze interest - bastards.

the consumer credit counselling service are good.

has he thought about an IVA?

I am not absolutely sure what charity but CAB apparently sent him there. I did see some paperwork from it and it has a charity number but cant remember the name.

The charity definately froze the interest on all the other debts and I think he assumed they would have that one too. What is the point of agreeing a small payment each month if the debt is accruing hugely. Surely it would have been better to keep that one outside the agreement?

What is an IVA? He is considering bancruptcy.

I will mention the credit councselling service - thankyou.

I will google IVA - am not being lazy posting on here. Just hoping for some advice that may be difficult to find via google.

Thanks for responding caro.

an iva might be what he has already got? you agree to pay a certain amount off over a set period of time.

did he tell the truth to the bank when he took out the loan? would be amazed if he told them all about his other problems- equally suprised it didnt flag up on a credit report.

rather than bankruptcy is there any equity in the property? if there is enough to pay off all his debts, then it makes sense to do this- far better than being made bankrupt. if there is insufficient then he may as well go bankrupt. i had a friend who chose an iva over bankruptcy and bitterly regretted it.

Thanks sonot. He had agreed to pay off a certain amount over a set period of time I believe as it was done through one of the national debt charities (they set it all up for him and he pays a certain amount each month as agreed by them). Problem is that he didnt realise that on one of the debts interest was acruing faster than he was paying it off as per the agreement. For 6 years they have been happy with that but now not.

Not enough equity in property to pay off all the debts unfortunately.

As far as I know he told the truth to the banks - he was with the debt management charity by then anyway and had had agreements with other credit card companies to pay back a certain amount over a fixed period through the charity before taking out the new loan. I have seen the evidence of that. They were stupid to lend to him.

It is unlikely you would get the interest frozen on a secured loan. Any company that would have lent to him with his credit rating is not exactly reputable.

If he can he should pay his secured debts in full and make arrangements on the unsecured debts.

Lynli - it was one of the national high street banks!! Wont name it but agree that they should never have lent to him. Now they are just whacking interest on at a massive rate even though they know he has no hope in hell of paying and is just getting further into debt!

This loan was not secure if they are trying to secure it now, so basically the charity should have confirmed first when setting up the payment plan whether interest and charges would be frozen and then notified your friend accordingly. In my experience large banks will usually (eventually) agree to interest and charges being frozen in return for a regular payment. The charity made a mistake not checking whether the interest and charges were carrying on or not.

If your friend does not want to lose their home they could always agree to a voluntary charge on their property, but make sure it is agreed (and that they get legal advice regarding a contract being drawn up confirming this) that the bank will not be able to force sale of the property before he is ready and that they will freeze interest and charges as long as they receive a monthly payment. This basically means that he has to pay an affordable amount off per month, and then when he is ready to sell the house the outstanding balance will be paid off from the proceeds.

Visit moneysavingexpert.com. Check out the debt free wannabe forum for help.

They specialise in this kind of stuff.

Thanks all. Will pass on.

I hate seeing somebody so stressed through what, in my opinion, is not really their own fault (well, technically it is, but he really cannot understand money, bank statements etc so in my view should never be lent to).

I am trying to get his paperwork in order to see whether the charity did agree with the bank for frozen interest. My suspicions are that a national debt charity would not make the mistakes that they appear to have done, and it may be that the bank started applying interest without further agreement.

We will see...

There are various options available to people in debt. Some are repayment options, some are insolvency options. It depends when he had his advice because the governement sometimes bring in new options for dealing with debt and if his advice is old, he might need some updated advice?

Token offers and holding letters are only discretionary options, meaning creditors can choose not to stop the interest and charges. I work for a money advice charity and there is NO way to guarantee that a token offer will be accepted. Unfortunately it's hit and miss with them as some of them refuse and some of them agree...