I have received an offer from Cabot to clear an outstanding HSBC debt.

[Harley12]

Some years ago, I went bankrupt but one of my loans from HSBC was joint with my wife. This loan was purchased by Cabot a couple of years back. Since then my wife has been paying £15/month. The outstanding amount is about £15k. Cabot have just written to her asking if we would like pay £4500 to clear the debt. Is there a catch here and how can I be sure that they really mean the debt would be cleared. Would be grateful for some advice.

[2222]

£15 per month will take nearly 100 years to pay off. No wonder they would rather take 25 years as a lump sum instead.

Do you know how the £15 is arrived at? Is it fixed permanently, or can they increase it? If it is definitely fixed, I would say the £4500 is probably a first offer. They will probably accept less.

Bear in mind that it costs them money to collect and account for the monthly payments, and they probably don't even know how much longer your wife will be able to pay. And if the debt is frozen they are getting no interest.

[Harley12]

I think the debt must be frozen as it has not had any interest added for about 10 years. The £15 was agreed as being all we could pay per month when it was with MCS and it has also been with DG Solicitors. I have asked them not to not contact my wife as she has been very unwell recently but to deal with me only. They seem to have ignored this but I would love to just get rid of the debt as she feels the burden of it. I guess we could somehow raise the £4500 but would prefer to pay a lower amount if I could. Thanks.

[MIKE770]

MCS & DG internal so called departments, old names in house desk.

Amethyst

[2222]

If your wife has no or very few realisable assets, and particularly if she is in poor health, you could tell them all that as part of a negotiated settlement of the debt. Lay it on a bit! Then offer a fraction of what they are asking.

I would not take on a substantial new debt to replace this one that is costing only £15 a month. So, when you say you could raise the money, how exactly? You would not want to borrow more expensively from Peter to pay Paul.

If I can be downright tactless, your wife may feel the burden of the debt, but the reality is that she only pays £180 a year, and if she is in poor health the rest of the debt will probably get written off when she dies. If you pay 25 years payments as a lump sum that you have to borrow and pay interest on, that only makes financial sense if you expect your wife to live at least another fifty years or more!

[wales01man]

How long has she been paying £15 a month for ? Was this a result of a CCj awarded against your wife and payment set by the Court IMO unless you have money going spare and unlikely to be needed carry on the payment

[2222]

How long has she been paying £15 a month for ? Was this a result of a CCj awarded against your wife and payment set by the Court IMO unless you have money going spare and unlikely to be needed carry on the payment

Can I just add that Harley needs to think about the cost of a loan for the £4500. If the interest rate is 10%, the cost of the loan is going to be £450 a year plus any capital repayments. Compared to paying £15 per month, there is no real sense in that, apart from the purely emotional appeal of appearing only to owe £4500 instead of £15000. However, the reality is that the £15000 loan repayable over nearly 100 years without interest, is worth far less than £15000. In fact, it's almost certainly worth less than £4500!

I would make Cabots a low offer that you can easily afford and makes sense given your wife's circumstances. If they accept that, fine. If not, just continue to pay the £15 a month.

[Harley12]

Many thanks for the feedback. I will call them tomorrow and offer them a low amount to see if they will take it .... probably about £800. I will not need to take a loan for that. There was no CCJ by the way. She also has vey little realisable assets apart from 50% four home! I don't want them to come after that!

[Amethyst]

If Cabot are pushing for settlement they may be considering court action, if only to get security for the debt by way of a charge over the property.

Definitely advise them of your wife's health circumstances.

This was a joint loan which was excluded from the bankruptcy as your wife was joint and severally liable.

It defaulted over 10 years ago ?

When did you go bankrupt?

when was the original loan taken out ?

Also what happened to your half of the house in the bankruptcy ?

Was it it just a loan ( unsecured ?) that remained or was there a joint bank account overdraft as well ?

[Harley12]

Thanks for your post.

The bankruptcy was in August 2006 and the discharge was 14 May 2007. The loan defaulted prior to August 2006.

The original loan was taken out on 30 August 2004 and was unsecured. It was not an overdraft and not related to an overdraft.

I was able to purchase my interest (half of the house value less the mortgage) in the house back from my Bankruptcy Trustee with help from my parents.

Here is the letter from Cabot.... They are offering 43% settlement.
.

[Amethyst]

That letter says it's a First Direct Current Account ? Of course HSBC is First Direct too. HSBC have a bit of a history in moving loans and credit card debts into overdrafts and merging everything together. The DCA's then have problems getting the original documents and evidencing the debt ( as they are under the misapprehension it's a current account overdraft debt when it isn't )

They do say they are happy for your to continue paying as you are ( which presumably is the £15 a month ) so there's no immediate threat. It is a 70% discount ( 30% settlement) so it is likely to be the best offer you get for settlement so if you can do it without creating problems it is worth considering. I have settled a couple debts previously with Cabot for 70% discount after this kind of letter and there have been no issues with any comeback - but they were lower amounts and didn't require me to borrow from elsewhere in order to settle. They do seem to be offering instalments on the settlement offer amount - so if you could do an increase on the monthly payment that might be one way around it.

There doesn't seem to be a deadline on acceptance? It is already with specialist support so this may be because of the previous bankruptcy or they may already be aware of your wife's health issues.

Anyway, you should be able to find more out about this debt without upsetting the status quo.

I might be inclined to send a CCA letter today to Cabot

CCA Request

I might also send a SAR to First Direct / HSBC to find out if this IS the joint loan.

Subject Access Request Letter

[2222]

If they are prepared to take the £4500 in interest free instalments that would help.

who would you want to leave the house to after you both die?

[Harley12]

Thanks for your help. The loan was definitely a personal loan rather than a current account overdraft.

My children will inherit the house when we die. However, we are considering moving to a smaller one in the next couple of years.

Do do you think it is worth trying to negotiate a smaller settlement figure or would it lead to the withdrawal of the current offer?

[2222]

Amethyst has insight into how they work. If she says that you are on the maximum discount that they offer, I believe her. I don't think they are going to storm off in a huff because you offer less, but you may be up against a brick wall of people who simply don't have the authority to accept your offer.

they do appear to have the authority to discuss instalments, though, according to their letter. So, perhaps you can agree a lump sum now with instalments that you are definitely able to afford? I would make two points to them, though. First, the instalments are without interest. Second, this offer is coming from you, out of your own money, and your wife cannot afford to pay more than she is at the moment.

the main advantage is that you can leave your house to your kids without anything owing on it. You might reasonably come to the conclusion that your need for money during your lifetime trumps your kids' need for an inheritance. As a compromise, perhaps the kids could help to pay the £4500, as they will be the main beneficiaries of doing so?

i have fortunately never been in the position of having to negotiate with Cabot, but I imagine that they will want the £4500 paid over a fairly short period, not decades! But please don't get badgered into over-offering more than you can afford.

[Amethyst]

Also, I would send a CCA request to Cabot and a SAR to HSBC, as this letter says the debt is a FIRST DIRECT - CURRENT ACCOUNT - not an HSBC Loan so there may well be issues with the debt you can utilise to get a better deal/settlement.

If you are selling in a couple years then you could just keep up your £15's until then and then make a settlement offer from any equity released from the house. Don't get yourself into a worse position because they have dangled a carrot in front of you.