# Friend cannot pay debts - Advice required



## John Rambo (26 Jun 2009)

Guys,

A close friend of mine bared his soul to me this afternoon about his financial situation.

It can be summed up as follows: 

He has an outstanding personal loan of €30,000. 

He has €12,000 on a credit card. 

He is overdrawn with two banks to the tune of €6,000. 

He lost his job two months ago and has had no luck in seeking alternative employment. 

He lives rent free and has no assets apart from a car worth perhaps €5,000 (although in the present climate who knows). 

It doesn't look like he'll get a job anytime soon and the Dept. of Social Welfare are messing him around so he's not even in receipt of the Jobseekers Allowance yet because of the backlogs etc. 

Essentially the guy has no money to live and no hope whatsoever of paying these debts. He can't afford to buy a beer, never mind make any of these repayments. 

Should he declare personal bankruptcy? Should he face down the banks? Or would his name then be mud (or is it only for 5 years)? 

I'm trying to work out what to do...to help him negotiate or even to start paying the loans myself? Has anyone any experience with such a situation? Any advice is greatly appreciated (and this isn't a "I've a friend stories - i.e. I'm not the one in trouble!).


----------



## Sue Ellen (27 Jun 2009)

Hi John,

Sorry to hear about your friend's financial problems.

Despite your obvious good friendship I think you need to take a step back from the whole situation and certainly do not start paying the loans yourself.

To call a spade a spade you mention that your friend lives rent free which makes me wonder in light of this how he has got himself into such serious debt?


----------



## d2x2 (27 Jun 2009)

You really should get your friend to seek advice from Mabs.ie. 
Best of luck to both of you in sorting this out.


----------



## Brendan Burgess (27 Jun 2009)

I agree with Sue Ellen - do not make repayments on his behalf. Buy him a pint if you want to. 

He has to go to MABS as soon as possible who will speak to his creditors for him.

However, he should make out a list of all his debts and his income and go and speak to all his creditors and explain the situation. They make take legal action against him, but they cannot get blood out of a stone. If he speaks to them now and explains his situation, it will stand to him if they take him to court. 

Declaring bankruptcy is expensive in Ireland and is not really an option.

When he gets back on track i.e. a job and has some prospsects of making small repayments, you or MABS could speak to his creditors on his behalf. You could offer an Individual Voluntary Arrangement whereby you, as a friend,  will pay 25% of his debts and they will write off the balance. They might go for it just to close the file. 

His credit record will be destroyed but it is already, so that is not a problem. But he will be solvent again apart from owing you €12,000.


----------



## John Rambo (28 Jun 2009)

Thanks for the advice guys...

I was planning to speak to his creditors myself and "face them down" so to speak. He literally has no money (I mean not even €10) and it doesn't look like he'll get a job anytime soon.

If I approach the creditors, explain the situation (i.e. that he has no money and no assets) do you think they might agree a settlement? Call me incredibly naive (or even stupid) but I think there's a bit of a stigma attached to having MABS dealing with your affairs. 

We're close and I would have no problem "lending" him €12,000 to settle these debts if it preserved his good name. It's hard to see the point of taking someone who has nothing to court...but then this recession/depression will probably be characterised by "fat cats" being treated leniently and the little guys being pursued to the ends of the Earth.

Sue Ellen, your points and analysis are entirely valid...he has got himself into this mess through reckless spending. Frankly I'm at a loss to explain how someone with literally no "normal" living expenses (e.g. mortgage, rent, bills, food) could end up in a mess like this. It's basically a result of living like Puff Daddy without the millions to back that up. But he is committed to cleaning up his act. 

What's happening on the social welfare front is pretty bad too...I know a few people who got the bullet as a result of the recession and are still waiting for their jobseekers allowance. I've no doubt my friend will be able to exist on €204 a week and that he will repay me any money I pay out. I'm going to insist he start repaying me immediately (e.g. €25 a week). Yes that's a pittance against €12,000 but the money isn't my primary concern...it's seeing him through this difficult period as I think he's in a deep depression. Paying a little bit back will make him feel a little better and motivate him to budget properly. 

Generally, I think the psychological impact of this recession and the growth in unemployment are being underplayed too much. It's probably easier if you've always had very little than to have had money and now have nothing. We should all be keeping a close eye on anyone dear to us that's struggling. We as a country really are up "you know what" creek.


----------



## mathepac (28 Jun 2009)

John Rambo said:


> Thanks for the advice guys...


Interesting, then you propose to go on and ignore it; an indication perhaps that what you really wanted here was vindication for your 'knight in shining armour' proposal?


John Rambo said:


> ... I was planning to speak to his creditors myself and "face them down" so to speak. .... If I approach the creditors, explain the situation (i.e. that he has no money and no assets) do you think they might agree a settlement? Call me incredibly naive (or even stupid) but I think there's a bit of a stigma attached to having MABS dealing with your affairs. ...


I hope you get his approval before undertaking any representation on his behalf.

Hopefully for your friend's sake and for yours, you have a successful professional record in this kind of interfacing and financial negotiation as otherwise your intervention could be viewed as that of a well-intentioned but clueless, interfering busybody and it may go badly wrong for both of you and your friendship. BTW, the institutions concerned will refuse to speak with you unless you can prove to their satisfaction that you are a bona fide representative of the "debtor / account holder".

Irrespective of your personal thoughts on MABS, they have expertise in this area. If you or your friend together feel you can do a better job than MABS personnel, then I fear that both of you may inhabit that mythical Puff Daddy / Walter Mitty Land.


----------



## Lsquared (28 Jun 2009)

You mention that your friend is likely very depressed and also that he is committed to cleaning up his financial mess. I think you should, as his friend, support his efforts to do this but not try to solve his problems for him. Think of how low in self esteem he may feel if he cant even take some small steps on his own to confront his problem and has to rely on a generous and well intentioned hand out from his friend. Your friend has some serious issues to deal with but I really think he needs to dig himself out of his hole, not you.


----------



## Up Rovers (28 Jun 2009)

Hello John,

There is one good thing in your friend's favour and that is that he has you on his side.  Having said this though you still need to be careful that you are keeping a clear head and taking the very good advice here on board.

I hope you won't take offence when I say that there may be other issues here that you even as his very good friend are not aware of.  The only reason why I say this is because I went through this terrible experience myself with a close relative.  You may well be throwing your €12,000 away if there is some sort of addiction or other problem lurking in the background.

www.mabs.ie are the people who really need to deal with this matter and if you were to go and meet them with him it may be the confidence booster he needs.

Best of luck with your endeavours on his behalf.


----------



## Mpsox (29 Jun 2009)

1: don't lend him money, your're depending on him changing his ways and if he can get himself into debt to the tune of €48000 then whose to say he'll be able to sort himself out and pay you back

2: Secondly he has assets, a car worth €5k for starters, if he is so worried about his debts, why has he not sold that for starters? the money would tie him over til his SW kicks in and possibly clear some of his debts


----------



## annR (29 Jun 2009)

I agree with the other posters - you need to tread very carefully and look very clearly at why you want to loan him money - is it because you want to or because it's what makes sense when it comes to him taking responsibility and sorting himself out.

- There may be something you don't know which caused him to run up such debt and if there is that will mean he may not pay you back if you loan him money
- Also if there is something in background like this you will be doing him absolutely no favours at all by loaning him money - you will be funding whatever problem he has.

Without knowing much about him, I think it's safe to say he does have some sort of problem if he has run up this debt while having no normal expenses - even if it was just 'reckless spending' he still has a problem with money imo.  Do you know what he actually spent the money on?


----------



## mathepac (29 Jun 2009)

Brendan said:


> ... You could offer an Individual Voluntary Arrangement whereby you, as a friend,  will pay 25% of his debts and they will write off the balance...


Sorry Brendan but I don't believe Ireland has the legal equivalent to an IVA (or the proposed Simplified IVA) which exists in England, Wales and NI, where a debtor's insolvency practitioner goes to court with a proposal to the creditors, which must be agreed to by the majority of the creditors (by value of debts) and approved by the court to become binding.

Ref Insolvency Act 1986 - 

Scotland has a similar piece of legislation but its named / adjudicated  differently.


----------



## DeeFox (29 Jun 2009)

John Rambo said:


> Frankly I'm at a loss to explain how someone with literally no "normal" living expenses (e.g. mortgage, rent, bills, food) could end up in a mess like this. It's basically a result of living like Puff Daddy without the millions to back that up. But he is committed to cleaning up his act.
> 
> .


 
The OP is clearly a good friend to this person but to me the above comment causes alarm bells to go off.

Who pays your friends bills, etc.?  I assume his parents?   Could they not help him out?  If not, why not?  Is there something they know that you don't?

What sort of work does your friend do?  Is there any way he could do some sort of part time work meanwhile?


----------



## John Rambo (29 Jun 2009)

Thanks to those who posted helpful and/or sympathetic material...it's appreciated. 

Mathepac, I found your post (yesterday at 13.15) particularly unhelpful and condescending. I have negotiated with financial institutions on behalf of corporate clients but never on behalf of an individual. 

I thought the same as some other posters...that there was a sinister massive drain on his finances (gambling, cocaine, escorts etc) but there isn't. He was just living way beyond his means. 

Anyways, I spoke to the relevant creditors today (armed with an authorisation letter which I was not asked for), and we may have the bones of an agreement with all of them. Bearing my own concerns in mind (and the warnings of other posters) I'm trying to facilitate a settlement that protects my interests, his good name, and gives the creditors something that's acceptable to them. We'll see. 

Thanks again for your advice folks.


----------



## truthseeker (30 Jun 2009)

John Rambo said:


> I've no doubt my friend will be able to exist on €204 a week and that he will repay me any money I pay out. I'm going to insist he start repaying me immediately (e.g. €25 a week).


 
This bit rang alarm bells for me - if he has gotten himself into this financial mess what makes you think that he will suddenly do a massive turn around and be capable of paying you back on a regular basis?
If he has been living like Puff Daddy then how can he be expected to live on 204 a week?

I appreciate you want to help your friend but if you sort this mess out for him you will actually be enabling this destructive behaviour - give advice and support yes, step up to talk to creditors and give him your own money - bad idea - in the long run his self esteem will take a much worse battering if you sort this out for him instead of allowing him to sort it out for himself.


----------



## annet (30 Jun 2009)

Maybe you should take a step back and ask your friend how you can help him help himself.  While I don't know your friend - the last thing you want to do is take complete control or more importantly make your friend feel like he's inadequate, has control of the situation or create an inintentional dependency on yourself.  Your friend is obviously in a quite vulnerable position having lost his job and being in financial difficulty - and I reckon the difficulties you tell us he is experiencing are only the tip of the ice-berg.  With full consent, I see nothing wrong in negotiating on your friends behalf - after all its your area of expertise - but give your friend responsibility and more importantly in terms of his long-term mental well-being some sense of control.  Think very strongly about giving him the 12,000 - are you really helping him - or with entirely good intentions actually adding or prolonging his woes... as you say when the jobs market is very scarce?    

If your friend has no income or means - pending the assessment of his JSA claim he can apply for Supplementary Welfare Allowance from the Community Welfare Officer in his local HSE clinic.   I'd also suggest that MABs get involved - they are experts in this field - and there's no stigma in getting help when one needs it!


----------



## startagain (30 Jun 2009)

In my experience, paying off his debt will not help him at all..

I am currently in debt and have posted before so a few already know my situation..i was in the same position as your friend..i had an offer from a family member but i refused and the reason was because like your friend i had no budgeting skills, no real value of what i was spending and living way beyond my means.

Practical advice that i can give you is for him to write (dont phone or go in person) to his creditors, everything by registered post, explaining that he is currently unemployed and that he will begin to repay once he seeks work/social welfare payments..most big lenders wont go for this but it looks good that you made a offer =)

And definitely go to MABS...and you can also go to FLAC for legal advice which he will need if they bring him to court 

Wish your friend all the luck from me and if you need anymore advice, PM me =)


----------



## csirl (1 Jul 2009)

While the job market isnt strong, there are jobs out there. Is it that your friend cant get a job? or is it that, considering his Puff Daddy lifestyle, he considers low paid jobs as beneath him.

When you have his level of debts, you take whatever job you can get and get 2 jobs if you can. As he effectively has no living costs, even things like cleaning jobs, McDonalds, stacking shelves etc. would enable him to make a serious dent in his debts.

Giving him the money is a bad idea. I had a friend in a similar situation a few years ago. His family bailed him out twice - 20-30k each time. Made no difference. Never paid his family back and, in spite of claims that he'd change, continued on with the same lifestyle - excuse always being "one last holiday, night out, purchase etc. before I change...." Third time he got in the situation, family funds were exhausted, so he's now having to change his lifestyle and knuckle down to work. Also, due to not paying back his family, he's now estranged from some of them - borrowing off friends/family can have a heavy toll on personal life.


----------



## nmesisca (2 Jul 2009)

John Rambo said:


> Thanks to those who posted helpful and/or sympathetic material...it's appreciated.
> 
> Mathepac, I found your post (yesterday at 13.15) particularly unhelpful and condescending. I have negotiated with financial institutions on behalf of corporate clients but never on behalf of an individual.
> 
> ...


 

I wish I had a friend like you mate.


----------



## chlipps (2 Jul 2009)

what kind of work is your friend trained to do... 

if i was in his predicament, then i would go 'cap in hand' to supermarkets, hotels etc... until i go some form of work part-time stacking shelves, cleaning, security or whatever it takes to have some form of income.. Trouble is he has lived the high-life and will find it difficult to face reality

as per other posts, your friend needs to go to MABS for advice


----------

