Consumer Rights Q&A: 'I'm relieved my flat may be repossessed'

Handing over your keys may seem like the easiest option, but there may be alternatives ... plus when an intern becomes an employee entitled to pay

Q. I have just had a letter from my lender saying that they are starting repossession proceedings against me and I will lose my flat. You may think this is strange but I'm relieved.

I haven't been keeping up the payments, the red letters have been getting more and more demanding and stressing me out and I just wish the whole thing was over. Even before they put my interest rate up recently I couldn't make the full monthly payments and pay all my other bills as well. I have remortgaged in the past and the flat is probably worth less than I owe.

Should I just give them the keys and walk away? I will have to live with my parents which I don't want to do and I'm worried that I'll never get another mortgage but I can't think of another way out. Would handing the keys back without being taken to court help me in future?

SK, Manchester

A. Is the situation really that bad? Repossessions are rising as more people find themselves in your situation, but just because your lender is taking legal action doesn't mean you will definitely lose your home. Things may seem dire but may not be so bad that they can't be saved.

I'm guessing that you've been so stressed by those red letters that you haven't replied to them or tried to come up with an arrangement to clear your arrears.

The lender has to keep you informed about your payments, arrears and any action they are taking. They have to warn you you're in danger of losing your home. But the last thing most lenders want is to repossess. They would rather you paid up so that they don't have to go to the trouble of getting you out and selling your home.

However, if you don't pay up and you don't contact them they have little choice but to send letters and eventually take legal action. Ultimately that means they arrange a repossession hearing in court. But there may still be time to work out a suitable payment plan to help you clear your arrears.

If you can come up with a plan and the lender agrees to it the hearing may not go ahead. Many lenders will say they expect you to clear the arrears over six months or a year. That may be impossible if you are struggling to make the original monthly payment. If the lender won't agree to you clearing the arrears over a longer period it could be to your advantage to go to court.

Appearing in court to defend a repossession order can be a nerve-wracking experience but don't be tempted to miss the hearing. Should your case get as far as court, and you have a proposal as to how to clear your arrears over a longer period, the judge may be more sympathetic than the lender and could grant a repossession order but suspend it to give you the chance to pay. You may even be given the whole of your remaining mortgage term over which to clear your arrears.

You don't say whether you're working or why you've got so far behind with the mortgage.

Are you in arrears with other bills? Have you lost your job? If you are keeping up other payments, such as credit card bills, you need to think about cutting down on those payments to leave you enough money with which to pay the priority bills such as the mortgage. You can even make token payments to your unsecured creditors in the short term to get the mortgage on track.

Take a long hard look at your finances and get help to work out a realistic budget. Agencies such as Citizens Advice Bureau, CCCS and National Debtline can help. You'll find them through any search engine or listed in your phone book.

However, if you can't come up with a workable plan and are unable to make the regular payments, moving out may be your only choice. Simply handing back the keys won't clear your arrears. If the amount of money made from the sale of the flat isn't enough to cover the outstanding amount on the loan you will still owe the lender the difference.

You might get a better price for your flat if you sell it yourself. Call the lender, tell them you are taking advice and ask for time to sort yourself out. It just might pay off.

Q. My son has been working for a firm of landscape gardeners since he left school last summer. He was laid off for quite a while over the winter but started back in the spring. He is getting experience but I think he's being exploited.

He's called an intern and they only pay his expenses. Surely there are rules about how long you can call someone an intern and expect them to work unpaid? He works extremely hard, is learning a lot and now knows how to manage his time and get the job done. He loves the work but is exhausted by the time he gets home at night so it's hard to look for paid work. I don't know how to advise him as I appreciate there are probably lots of others who would step into his shoes if he kicked up a fuss and got fired. Can you give me some advice please?

GH, Leicestershire

A. Unless he really is a volunteer, your son is probably entitled to be paid the national minimum wage (NMW). For 16 and 17-year-olds that's £3.68 an hour; at 18 it's £4.98 an hour. If there is a contract of employment or other arrangement which makes him a "worker" he is entitled to be paid. It can be a problem deciding who is a worker and who isn't, but calling someone an "unpaid worker", "intern" or a "volunteer" isn't enough to prevent them from qualifying for the NMW.

The law says an employer can't force or persuade a worker who is entitled to the NMW to agree to work for less. Nor can your son sign away his right to the money. If your son claims he is a worker and is therefore entitled to be paid, the onus is on the person he considers to be his boss to prove that he isn't.

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