With the current cost of living crisis, many people are struggling to pay their mortgage, utility bills and other debts or commitments. This can be very difficult to deal with and many feel there is nowhere to turn.
Instead of discussing things or knowing where to get help, difficulties are often ignored in the hope that at some point things will get better.
This often leads to a build-up of arrears which adds more pressure resulting in:
- Additional interest and costs
- Pressure from creditors (those who money is owed to)
- Threat of court action
- Threat of action to repossess property
- If there are other family members in a property and the property is at risk, this impacts them too, and they may be unaware of the position
In a recent case, our advisors were asked to deal with a situation where the individual concerned chose to avoid the issues outlined above.
Mr X owns the family home in his sole name with the mortgage being solely in his name. There are some defaults starting to arise on the mortgage payments. He has significant other debts which he has not maintained. He is married with 2 children residing with him in the family home. He and his wife are employed full time and as he has always dealt with the household finances, his wife is unaware there are defaults and difficulties arising. He is too troubled to discuss it with her or seek advice.
One of his creditors takes court action which he ignores. His wife is not aware paperwork has been served on him and he has not let her see this. In doing nothing, a few months later he is sequestrated (Scottish name for bankruptcy) and has still not advised his wife. He doesn’t cooperate with the Trustee appointed in his bankruptcy, continuing to hide away from his problems. The Trustee investigates the position with his property, getting it valued and obtaining the current mortgage statement from the lender which is obtained from title searches on the Land Register. There is sizeable equity in his property but not enough to pay all his debts in full.
Mr X is required to disclose his income and expenditure to his Trustee so that the Trustee can determine whether he should be paying a contribution into his bankruptcy. He doesn’t co-operate despite sheriff officers serving paperwork at his address. All the documents are in his sole name and his spouse is unaware of the significance of them. His Trustee obtains information from his bank directly and calculates a contribution from investigations made. In the absence of Mr X discussing this directly, his employer is contacted by the Trustee and a contribution from income is made directly to the Trustee.
Things get worse for the family financially as Mr X has not realised that by cooperating and admitting the extent of his financial problems, he and the family could be supported to reach a solution. The family rely on support from other family members.
The Trustee has no alternative but to raise proceedings, sell the family home and realise the equity. Mr X is given the opportunity to discuss the property position with his Trustee and reach agreement to avoid legal action – he doesn’t engage. The Trustee’s legal agents then progress to take possession of the property and a date for eviction is served.
This results in sheriff officers and locksmiths attending the premises to undertake the eviction. Mrs X then realises she will lose her home and is being vacated. The whole situation is clearly catastrophic and traumatic for the family who must find alternative accommodation immediately.
What could Mr X have done, and would his position have improved?
Mr X could have shared the debt predicament with his wife at an earlier stage, enabling both to seek professional advice and consider their options on what matters were important to them. As his debts far outweighed assets and level of disposable income collectible – bankruptcy was likely to be unavoidable for him. This is not always the case as there could be several options to avoid bankruptcy – including a Debt Arrangement Scheme which allows a lengthier repayment of some debts with no interest payable.
Had Mr X taken advice, he could have discussed matters with a proposed Trustee prior to bankruptcy. He would then have known exactly what level of contribution would be payable into his bankruptcy, avoiding his employer being contacted. He and his wife would have understood how it was calculated, what variations could be made throughout the period, and know that it would come to an end after 48 months.
The property value could have been ascertained and discussions taken on options including whether third parties (family members) could assist. They could potentially enter a longer-term repayment plan after the contributions paid, which would enable the value of the equity to be paid. This would avoid its forced sale. If they were not in a position to raise sufficient funds to pay the equity, discussion would be placed on the sale of the property, with a timescale for them vacating it and looking at alternatives. This would have avoided the huge trauma of a forced eviction and shock to the family. Whilst it is not always possible to safeguard a family residence and avoid its sale -remaining in control with time to explore various options and alternatives is a lot less stressful.
Debt causes considerable stress and anxiety and is a difficult subject to raise. Speaking with trusted advisors at an early stage, helps navigate the difficult path and enables individuals to see there is an end to their difficulties with a future plan they can work towards which avoids added stress and burden.
We’re here to help
The Dunedin Advisory team have considerable knowledge in offering advice in all aspects of personal debt. If you are struggling with your current financial position and would like advice and support, we can help. Our team are highly experienced in providing confidential debt advice and understand how difficult and worrying financial pressures can be. There is no one solution fits all and we take time to discuss each individual circumstance with clients, providing a full summary of the discussions and our recommendations for individuals to consider.
We can meet face-to-face at an agreed meeting place or via Teams/Zoom call, standard call via landline, mobile to mobile or via email communication.
We offer all employed individuals receiving employment income, those in receipt of private pension income and homeowners a FREE consultation, to discuss financial budgeting and lending assessment. This includes a review of short-term borrowing and the repayments required across various commitments with a summary review and recommendation. Where a fee-paying service may be an option, we set out our terms of business and fees in advance of clients making any decisions or commitment to engage our services. To book a free review, please click on the link below or call: