Legal Aid Debt nearly 20 years old

[Unregistered]

Hi

I am querying for an retired gentleman that I care. He has an outstanding debt of £7,500 to Legal Aid following his divorce over 20 years ago. He has been gaining interest on this loan since then.
He has had a letter from legal aid saying that 'interest is currently being charge at 8% per annum and is added to the balance at the start of each month.'

He wants to get rid of this debt and is thinking that loan may be cheaper to pay off if its a lower APR

However another site told me to check here regarding the legalities of the debt with it being nearly 20 years old.

I understand that he used his house as a guarantee for the debt and now that he has paid off his mortgage they have taken the deeds.

He is concerned that when he dies the legal aid will sell his house to pay off the debt and only give whats left to his daughter who is the beneficiary.

Can anyone please give me some advice, so I can advise him how to get out of this situation.


Thank you

Samantha

[Kati]

Re: Legal Aid Debt nearly 20 years old

tagging [MENTION=48934]Debt Camel[/MENTION] xx

[Debt Camel]

Re: Legal Aid Debt nearly 20 years old

Well to point out the obvious, 7500 is a small debt if he owns a house mortgage free and even adding 8% for a lot of years isn't going to make it huge.

If he can afford to pay more to the debt than he is doing at the moment, fine. But he certainly shouldn't make his own life difficult by taking on a commercial loan - yes the interest rate may be lower but the monthly repayments could be a lot more.

[Kati]

Re: Legal Aid Debt nearly 20 years old

Well to point out the obvious, 7500 is a small debt if he owns a house mortgage free and even adding 8% for a lot of years isn't going to make it huge.

If he can afford to pay more to the debt than he is doing at the moment, fine. But he certainly shouldn't make his own life difficult by taking on a commercial loan - yes the interest rate may be lower but the monthly repayments could be a lot more.

do legal aid debts ever go SB'd DC??

[SmanthC]

Re: Legal Aid Debt nearly 20 years old

Thank you. What does sb'd mean please

[Diana M]

Re: Legal Aid Debt nearly 20 years old

do legal aid debts ever go SB'd

No

According to the OP there's a statutory charge on the property.

The 'going rate' of interest since 2005 has been 8% (the OP needs to check they've not been overcharged)

Di

[Kati]

Re: Legal Aid Debt nearly 20 years old

Thank you. What does sb'd mean please

SB'd is statute barred ... where a debt becomes unenforceable in court after 6yrs (5 in Scotland)
https://www.stepchange.org/debt-info...rred-debt.aspx

- - - Updated - - -

No

According to the OP there's a statutory charge on the property.

The 'going rate' of interest since 2005 has been 8% (the OP needs to check they've not been overcharged)

Di

I was asking generally xx

[Diana M]

Re: Legal Aid Debt nearly 20 years old

I was asking generally xx

I was answering specifically

Di

[Diana M]

Re: Legal Aid Debt nearly 20 years old

He wants to get rid of this debt and is thinking that loan may be cheaper to pay off if its a lower APR

I understand that he used his house as a guarantee for the debt and now that he has paid off his mortgage they have taken the deeds.

He is concerned that when he dies the legal aid will sell his house to pay off the debt and only give whats left to his daughter who is the beneficiary.

I'm not authorised to give financial advice but I have been in a similar situation following my divorce whereby the Legal Aid Board (as was) placed a statutory charge on my house.

When I sold the property 18 years later my solicitor was legally obliged to pay Legal Aid from the proceeds before the charge could be removed. I took comfort in the fact that the value of the property had more than doubled during that time so paying the bill from the 'capital appreciation' felt less painful.

The interest charged by Legal Aid ought to be simple interest (on the initial loan amount) not compound interest (interest on the interest on the interest etc) so perhaps it's not a massive amount. However I see no reason for him not to get quotes for an alternative way to pay the sum owed.

When he dies I would expect the property (and any other assets/money/insurance policies) he has would be included in his estate. He needs to ask a lawyer whether there is a way to write his Will which takes the Legal Aid debt issue into consideration. This is not my area of law I'm afraid but others on the forum may help you.

As I see it when he dies the debt would need to be paid but that doesn't necessarily mean the property has to be sold if there is another way of paying it from the estate. A lot will depend on his IHT situation and other creditors at the time plus any life insurance he may have.

If I were to inherit my father's house mortgage free then I would look to raising the funds to clear any debts secured on it in order to keep the property. This is academic since my father left the property to my rotten brother - but that's another story

Di

[SmanthC]

Re: Legal Aid Debt nearly 20 years old

Thank you so much everyone. and thank you Diane. You have helped me a great deal.

I will talk to him about it when I go and do his cleaning and garden at the weekend.

Kind regards
Samantha

I'm not authorised to give financial advice but I have been in a similar situation following my divorce whereby the Legal Aid Board (as was) placed a statutory charge on my house.

When I sold the property 18 years later my solicitor was legally obliged to pay Legal Aid from the proceeds before the charge could be removed. I took comfort in the fact that the value of the property had more than doubled during that time so paying the bill from the 'capital appreciation' felt less painful.

The interest charged by Legal Aid ought to be simple interest (on the initial loan amount) not compound interest (interest on the interest on the interest etc) so perhaps it's not a massive amount. However I see no reason for him not to get quotes for an alternative way to pay the sum owed.

When he dies I would expect the property (and any other assets/money/insurance policies) he has would be included in his estate. He needs to ask a lawyer whether there is a way to write his Will which takes the Legal Aid debt issue into consideration. This is not my area of law I'm afraid but others on the forum may help you.

As I see it when he dies the debt would need to be paid but that doesn't necessarily mean the property has to be sold if there is another way of paying it from the estate. A lot will depend on his IHT situation and other creditors at the time plus any life insurance he may have.

If I were to inherit my father's house mortgage free then I would look to raising the funds to clear any debts secured on it in order to keep the property. This is academic since my father left the property to my rotten brother - but that's another story

Di

[Diana M]

Re: Legal Aid Debt nearly 20 years old

thank you Diane. You have helped me a great deal.

I will talk to him about it when I go and do his cleaning and garden at the weekend.

That sounds like a good way to get the ball rolling.

Chatting about the situation while you nonchalantly weed the garden (weather permitting ).

He may need to take formal legal advice but at least you'll have started the conversation.

Di