Unsecured debts and redundancy payment

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archieknox

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Hi to all. I'm hoping someone could advise us on the best course of action with the following.My father is working in construction most of his life. He is 51 and has been told that he will be made redundant soon.He is due only statutory redundancy of 13,000 euro based on his 11 years service with his company.At his age and because he is only classed as a builders labourer , his chances of finding more work could be nigh on impossible.
He is not optimistic on any work in the near future.He has 3 kids still at school and has a council house.He has no assets.He currently has unsecured loans of approx 30,000 ( credit union 5k ,catalogue 1k ,car loan 2k ,credit cards 3k and personal loan 19k) Despite the high level of debt he has an excellent credit record and has not missed any payments on any loans.
Considering he might be on the dole for quite a while what is the best thing to do.My mum is a carer for my sister and their new combined income on social welfare would make it impossible to maintain their current combined loan payments of 250 euros per week They obviously don't want to hand over all their redundancy money and still have crippling payments on the remainder.They also dont want to favour any particular creditor or get a bad credit rating in case it could affect them or their kids in the future.
Sorry for the long post.
 
Tough one.

If he pays the €13k off his debts, this will bring them down to €17k and he will then qualify for a Debt Relief Notice. He should ask MABS about this.

Alternatively, he might contact a Personal Insolvency Practitioner and go for a Debt Settlement Arrangment with a very short term e.g. one month.

The various creditors should be happy to take 13/30ths of the amount in settlement.

Who is the personal loan of €19k with? He needs 65% of his creditors to approve. He is nearly there with the personal loan. If it's the same bank as the car loan or credit card, then that might swing it.
 
Hi Brendan, thanks for the response,

The personal loan of 19k and 2k of the credit card debt is AIB .Would either of the debt settlement options impact his childrens credit rating in years to come? I might wish to apply for credit in the near future.
Thanks.
 
I don't think that it should affect your credit rating.

There have been occasional errors where people with similar names living at the same address got their rating damaged by accident. But it's easy to correct the record.

Your father should lodge the cheque somewhere other than AIB. But then he should talk to AIB and seek their agreement. They might want the whole cheque, but he should insist on paying everyone in proportion. Likewise the CU will probably insist that their debt is paid in full, but he should not do so.

Brendan
 
What are the repayments on each debt each week, if you look at that in conjunction with the balances, rather than just looking at the balances alone, it may be possible to use the redundancy in a way that will mean he can afford the payments on the rest.

I would clear the credit card and catalogue first as these are the highest interest and should reduce down his outgoings-due by a good amount, but we need to know the amounts due on each debt each month/week
 
Hi hippy

I am not sure that we do need to know it. He will not be able to service the repayments on €17,000 out of social welfare payments. So his best option is to try to do a deal now while he has a lump of cash.

If he does want to try to pay off the debts over time, then he should pay off all the small debts first and just have one large creditor to deal with.

Brendan
 
Thanks to everyone for responding.
Brendan, would it be wise to pay off the smaller debts with the lump sum and then try and get a debt relief notice on the 19k AIB loan or would this be seen as giving preferential treatment to the others and prompt AIB to veto the DRN? His current account is with the AIB and although they wont see the redundancy cheque ,they will know that his employment is finished when his wages stop going in to the account.They could also know that he was due at least statutory redundancy ,based on information given on the personal loan application from 2 years ago. Maybe I'm over complicating this !! but its got me worried for my parents. I only found out how much debt they had recently
and I feel a lot of it was taken on to get me through college.I still have 2 years uni left.If I was closer to qualifying I might be in a position to help them out.
 
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Archie, offer them absolutely nothing individually. It is very possible to make an offer on a pro-rata basis across the board to all creditors at once. You also do not need to go down the route of an insolvency practitioner - although you may require a DRN later on through MABS if an awkward creditor does not accept.

It will also potentially affect the credit rating, as it will be reported as a 'partial settlement'

There is a way of doing this, and I've achieved settlements as low as 17c in the euro in similar circumstances. The idea is that you create two scenarios for the creditors, showing how much they will get your way, and how much they will get if you take a different track. If the figures add up, you will get the acceptances you are looking for.


www.frost.ie
 
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