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Family Finance.

Byline: TONY HETHERINGTON

Q: I owe about pounds 15,000 on credit cards from when times were better. Now it is hard just to keep up minimum monthly payments. An advertisement from a debt management company says I can write off all my debts through an Individual Voluntary Arrangement. Does this really work? M.I.

A: An Individual Voluntary Arrangement does not write off your debts - it just reduces them and only as long as your creditors agree.

The debt management company calculates what you can afford to pay off over a number of years. It then negotiates with your creditors - the card companies - and hopes they will accept just a percentage of the full amount due, with no further interest added.

If your creditors accept your offer, and you keep up payments through the management company, then at the end of the agreed period the rest of your debts are cancelled.

Every silver lining has a cloud though. The management company's fees can be hefty and may swallow up a large chunk of your monthly payments. And an IVA will certainly affect your ability to get credit.

Debt management firms have come under attack from the Office of Fair Trading, which says some pose as charities or suggest their services are free. Before you go ahead, have a word with the National Debtline (0808 808 4000), which really is a charity that offers good advice.

Q: My father died a year ago and I was the administrator of his estate. I have settled all outstanding bills and taxes and distributed everything else within the family. Now, out of the blue, I have received a letter from a solicitor asking me to be 'de bonis non' administrator of my late uncle's estate. He died two years ago and apparently my father was supposed to be his executor. Am I obliged to take this on? D.N.

A: Nobody can force you to take on this extra task. The Latin term refers to 'assets with no administrator' and indicates that your uncle's executor died without winding up his estate and you are being invited to step in instead. The amount of work involved depends on the size and complexity of the estate, but you are free to say no.

Q: Our first grandson has just been born and we would like to set aside some money so he will not face university debts, assuming he gets there! How much can we give his parents each year for him, without paying tax? Mrs & Mrs A.W.

A: There is no income tax on gifts, and you can give away up to pounds 3,000 each year without worrying about inheritance tax either.

Q: We have an offset mortgage, where our mortgage interest is reduced because we have savings in the same bank. If the bank got into trouble like Northern Rock, how would we stand? R.T.

A: Under current rules, if the bank collapsed and you had a mortgage of, say, pounds 100,000 and savings of pounds 40,000, your mortgage would be reduced to pounds 60,000.

This is likely to change in December, affecting anyone with savings over the compensation ceiling, so make a note to ask your bank then for details.

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Title Annotation:Sport
Publication:Huddersfield Daily Examiner (Huddersfield, England)
Date:Oct 20, 2010
Words:548
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