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Friends, debt... and how to make sure your help is effective

Monday, 15th October 2018

Seeing a friend in financial strife is difficult and can often prompt people into handing over their own money in order to help them. Just be wary before you part with your cash, you might well be out of pocket and your friend could still have ongoing debt issues.

A friend in need...

Several years ago I helped a friend who said he was having his overdraft called in and had just another small debt with that lender threatening legal action.

Instead of taking out a loan or credit card in my name to cover his debt, I decided to part with £5,000 of my savings. The reason? Like most people with debt issues, my friend was under considerable stress, was often depressed and found sleeping difficult. He was a family man and I could see the impact the debt was having on his loved ones.

Being in the position to help, it is quite natural that I would want to. But, I do now regret my actions and it ended in tears for both of us.

The full picture

My friend assured me that he only had around £5,000 of bank overdraft and credit card debts and that if I 'lent' or 'gave' him £5,000 this will get him back on an even keel. I obliged only to discover a few months after advancing the money, with a view to clearing all his liabilities, that the friend did not give me the full picture, it was a lot more ugly than this.

My friend had hidden other debts from me – a staggering £62,000 worth of loans, credit cards and mortgage arrears, plus the tax man! Through his embarrassment and feelings of low esteem he had not told me everything and, as a result, I ended up facing sleepless nights, let alone my friend!

In short, my intervention of £5,000 did not change or alter his debt position one iota; my friend was still unable to pay the other debts and he subsequently went bankrupt.

I became a creditor in his bankruptcy

Where did that leave me? Just the same as any other high street lender or credit card provider – a creditor in his bankruptcy.

What I have learned from this experience is not to "never lend money to a friend in need", but to arm yourself with the full facts first and be sure that the amount you are offering will make a material difference in resolving the debt issue. If it won't then don't do it – it will just be good money after bad.

So what can you do?

The fact that the debtor (someone that owes money) has taken their head out of the sand and is talking to you about their debt issues is a welcome sign. You are now in the position to support and encourage them to talk to a professional and explore their options. By the way remember, you are not that professional! That said I might argue that I was and should have known better.

Even if it transpires that bankruptcy is the only way forward and you still want to help them, you may wish to offer to pay the bankruptcy fee (petitioning costs). That way at least you know your involvement has helped resolve matters as all the debts will be taken care of in the bankruptcy order. What's more, it's a lot cheaper to you than loaning thousands of pounds!

What debt options/solutions are available?

There are six options available to you when debt problems arise, all these options, except for No.3 where you pay creditors in full, will affect your credit rating.

I have also illustrated our very own easy to read debt solutions table. This chart illustrates a summary of possible debt solutions, you can compare the options available to you. I detail which options freezes interest and those that can stop the creditors chasing you for the debts!

Not all will apply, it depends on your level of debt, your assets and how much spare money you have after paying essential bills.

Debt Solutions Explained & Debt Solutions Comparison Table

Still want to lend?

If, after reading this, you still feel inclined to advance large sums of your hard-earned cash then perhaps adopt this philosophy; "Only lend what you are able to afford to lose". I for one will not be caught out again.

Are you in debt but don't know where to start?

If you or a friend has debt issues and don't know where to start then we offer information on what to do, who to contact for help, how to take control of your situation, what to say to your lenders / debt collectors and importantly, how not to pay thousands of pounds in fees.

You can see the full five point guide here In debt? Don't know where to start?

Where to get 'not for profit and free debt advice

If you need more information on how to best manage your debts then look at our list of the 'not for profit and free' free debt help / advice agencies, they will not charge you fees for debt options.

REMEMBER, it is not a crime to be in debt - always insist that you are treated with respect.





For no nonsense advice just submit the short form and Mike or one of his team will get back to you.

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