Elderly family financial mess

[Orangesandlemons77]

I can't believe the pickle elderly relatives seem to have got themselves into. Wondering how best to try and help.

They have a business, for last twenty years after taking early retirement in their 50s, with a final salary pension and mortgage paid off. Sounds good yes?

Well, from then on they have got further and further in debt, taking out loan after load, seemingly going into the business. Over the years rent for their business has increased, more than doubled. They took equity release in their home.

Over time, things were not kept in good condition and as the buildings are old, there are now huge problems in both the business rented building and their home. The council terminated the lease due to rent arrears and fails to upkeep the building, along with an extensive survey of costs which reaches a high sum.

Then sadly one of the couple died during lockdown. However all of the business costs are in the surviving partners name, also a will leaves everything to the surviving partner.

They are asking for help and advice. Thought maybe CAB might be useful? We can't afford to help financially. They are now facing later years (elderly) in a very precarious financial position.

failure to upkeep the building, that was meant to say

For further info, not a ltd company unfortunately.

Oh dear. So they're a sole trader with significant business debts? Do they want to keep trading?

Do they have any equity in their property and how does this compare with their debts?

Depending on any assets and size of debt, options might be to downsize to release equity to pay the debts off, through to bankruptcy or possible IVA or debt management plan. However, would depend on what their position is. While it might not feel like it now, if they have little or no equity in the property or other assets, bankruptcy might be the best solution for a clean break.

Look at Moneysavingexpert for a start. If the debts are business related, they want to go to Business Debtline, not CAB or Stepchange.

www.moneysavingexpert.com/loans/debt-help-plan/

Even though they have done equity release think they would still have quite a bit of equity in their home. They are nearly 80 and would struggle with losing their home. They want to continue trading just not with the premises.

Is the business something that can be done at home, to save the cost of having a premises, even if it involves building an outbuilding or unconventional use of some of the rooms of the house? Eg using a bedroom as a living room and setting up machinery or keeping stock in the living room?

Not paying the debt and keeping their home if they have assets and income is unlikely to be an option so they need to sort out how to pay the debts off before court costs etc are added. Councils can be very mercenary about recovering debt and are well known for racking up costs that they expect others to pay, as illustrated by the survey fees.

At 80 and with interest rates being relatively low, an equity release lifetime mortgage might be the way to go to release money to pay the debt off. These are nowhere near as bad as they used to be as you can fix the interest rate at a relatively low level and there will be a no negative equity guarantee. It should be regarded as a product of last resort, but if your relative wants to stay in their home, this is probably a last resort situation.

If they already have an equity release plan, have they considered looking at a plan review to see if they can switch to a better plan and save themselves money in the long run and potentially release more money if the plan allows for it?

@BeeDavis

If they already have an equity release plan, have they considered looking at a plan review to see if they can switch to a better plan and save themselves money in the long run and potentially release more money if the plan allows for it?

I suppose this could be an option. Having looked into similar dilapidations claims it seems the council may be willing to accept a lump sum settlement- they have already asked if it is possible for the relative to get a contractor to do the work instead. This has been tricky due to the time limits and lockdown etc as well as financially.

Why do they want to continue trading? The business has been a financial drain for twenty to thirty years.

Is there a manager running the business or does the person run it themselves? At that age could they consider selling the business? If the building is in disrepair and was supposed to be maintained as a condition of lease then someone hasn't been doing their job. I don't mean that as harshly as it sounds, though it seems like an indicator they are not up to it. If the business is viable could it be sold to pay off any debt?

Also, see if they are a member or could join the federation of small businesses. I believe they can offer a CAB type support for small businesses. The council may have small enterprise support. There are the Corona bounce back loans if trade has been affected (randomly thinking if stuff). It would be worth checking the terms of their lease, have the council carried out regular inspections and is it certain the business is liable for whatever works are required? I would definitely be checking. But as PP said, it does sound like this business costs rather than makes money so a good time to write it off perhaps.

@merryhouse

Why do they want to continue trading? The business has been a financial drain for twenty to thirty years.

This.

They should give up the idea of keeping trading.

@merryhouse

Why do they want to continue trading? The business has been a financial drain for twenty to thirty years.

I agree, however they won't let go. I am trying to be as understanding as I can be, they are still grieving and it has been a difficult time. I think doing it as a small thing at home may help them mentally.

@Random63638

Also, see if they are a member or could join the federation of small businesses. I believe they can offer a CAB type support for small businesses. The council may have small enterprise support. There are the Corona bounce back loans if trade has been affected (randomly thinking if stuff). It would be worth checking the terms of their lease, have the council carried out regular inspections and is it certain the business is liable for whatever works are required? I would definitely be checking. But as PP said, it does sound like this business costs rather than makes money so a good time to write it off perhaps.

Thanks, that is interesting.

After reading threads on here on equity release I think they might find there is a lot less equity left than they think. I would get them to check it.

@BonnyandPoppy

After reading threads on here on equity release I think they might find there is a lot less equity left than they think. I would get them to check it.

Depends on when they originally did Equity Release, house prices have shot up in recent years! Meaning they could have more equity. Deffo worth having a review, won’t cost them anything if it’s not beneficial for them to go ahead.