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A Fin24 user finds herself in a difficult position with her father-in-law who had a stroke, ran up lots of debt and is unable to pay this off. He has now moved in with her family and they made an arrangement with the bank to help him out and pay off some of the debt, but are no longer able to do so.
There are many complicated issues involved here. We look at them one by one.
Here’s her story. She writes:
My father-in-law was medically boarded for back problems, and had a stroke since. This affected his brain and hearing, so he has a very poor short-term memory and I don’t believe he’s of sound mind.
He has no assets, and lives with us. His only income is his UK pension of around R4 000 per month (used for medication, food, etc).
Before we took him in, he ran up credit card debt and by the time we found out what was going on, it was a lot. We made an arrangement with the bank and were paying it off. But we can’t do it any more.
I want to get him declared bankrupt, but found out we need a lawyer to get this done. None of us have money for this.
I have tried talking to the banks, but they do not care how it happens, they just want their money. One bank employee even told me that they would send the sheriff of the court in, who would take everything they can find and the onus would be on me to prove it’s mine and not his. As all my stuff is old, I no longer have any such proof.
This situation is seriously stressful, and affecting all of us very badly.
The questions that emerge here can be summarised as follows:
Q: Who can be held liable for someone’s debt?
A: The person who made the debt is the only one who can legally be held responsible for it. The only exception is if a couple is married in community of property. A financial institution cannot hold family members responsible for debt incurred by a relative, unless they have signed surety for a loan. For more information on debt, debt collection and the protection of the consumer, read the excellent section on consumer law on paralegaladvice.org.za.
Q: What responsibility do lending institutions have to make sure that borrowers understand the implications of a loan?
A: The new Consumer Protection Act of 2008 does however stipulate that it is the responsibility of institutions which grant credit to check that the borrowers understand, or are able to understand, the terms of the loan/credit facilities/hire purchase, and that they are able to make the necessary repayments. That is one of the reasons why institutions do credit checks and ask for financial details of your income and expenditure and existing loans before they will consider lending you money.
If these checks have not been done adequately, and can be proven not to have been done, the lender may have to forfeit the money loaned. Banks do check your spending patterns and could contact you if there is unusual activity on your accounts.
Q: How do I prove that someone is not of sound mind?
A: If someone is not of sound mind, a letter from a treating psychiatrist will strengthen your case. If someone suffers from dementia, a brain scan and a visit to a memory clinic can prove this. A letter from a treating psychiatrist will also help. It is, however, quite difficult to prove retrospectively that someone was not capable of making certain decisions at a particular time in the past. This might be the major obstacle the Fin24 user is up against.
Q: What are the pros and cons of declaring bankruptcy?
A: The advantages of this are that the debt will get written off. But it is not that easy. It is a long, drawn-out and, ironically, costly exercise, involving all the creditors. This could take years. Many financial institutions know people shy away from the stigma involved in doing this.
If you file for bankruptcy, your assets could be attached and you will not be able to obtain any credit for up to five years. Your assets, if any - and only the assets of the person who incurred the debt - will be distributed equitably among your creditors. A trustee could be appointed to manage your affairs. If you should die while this process is taking place, your estate could be declared bankrupt.
Q: How does one stop someone with dementia from being conned, or mismanaging their money?
A: Many wealthy (and some not so wealthy) elderly patients with dementia are targeted by fraudsters and con artists, or just manipulative relatives. If someone is experiencing mental or memory problems, they may also lose touch with the realities of their financial situation and go on a spending spree.
Often decisions need to be made by relatives about a patient’s personal welfare, financial affairs and medical treatment. One can either appoint a curator to look after someone’s affairs, or give power of attorney to another person. The disadvantage of the first option is that it is costly, and the second that it can be easily abused, according to Emeritus Professor Tuviah Zabow, formerly of the UCT department of psychiatry and mental health. The person to whom power of attorney is given should therefore be chosen very carefully.
A fixed amount of money can be paid out to the patient on a regular basis to settle certain bills, but the person will not have direct access to the bulk of the cash, limiting the amount they can spend. Sometimes this is the only way to ensure that someone’s money is safeguarded for their own long-term use.
Q: Where can I get legal advice that won’t cost me an arm and a leg?
A: It might be an investment to go for one session of advice to a carefully chosen lawyer. If you are unable to afford this, see if there is a university nearby – they often have free legal advice clinics.
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