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Power of Attorney and Debt article
Power of Attorney and Debt article

Most of us know it’s wise to have a will. We are often advised of it, particularly when we buy our own home. It makes sense and can assist those we leave behind in the process of winding up our affairs. However, how many of us have ever been advised on granting a Power of Attorney and if we were, how many of us would think, why should we? Is it not just something you do when you are old and being taken into a care home?

The truth is Powers of Attorney can be useful for a wide range of reasons, some of which are when you get old and are no longer able to manage your affairs. They can, however, also be useful in many other situations too.

What if you end up working outside the country and are not able to manage your affairs? What if you suffer an unexpected illness or are left incapacitated as a result of an accident? Like with death, it’s not something we like to think about, but as with drafting wills, we do it not because it’s pleasant for us, but because it makes things easier for those around us.

The difference between a Power of Attorney and a will, is a will only takes effect once we die. Powers of Attorney, however, are for when we are still alive, but unable to manage our own affairs and need someone to deal with them for us. This can include dealing with our credit cards and loans, and making decisions about how our debts should be dealt with.

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What is a Power of Attorney

This first thing to note is Powers of Attorney are different, depending on which part of the UK you live. Scotland, Northern Ireland and England and Wales all have their own laws relating to this area. In general, however, they are the same in that they allow you to appoint one or more persons to help you make decisions when you need to or need someone to make decisions for you.

Those decisions can relate to a wide range of issues, depending on the type of Power of Attorney you grant.

In Scotland, there are two types of Power of Attorney. The first is Continuing Power of Attorney and the second is a Welfare Power of Attorney; in England and Wales there are Lasting Powers of Attorney, which can either be to deal with Property and Financial Affairs or Welfare and Health; in Northern Ireland, there are Enduring Powers of Attorney.

What they all have in common is they can only be granted by you when you have the mental and legal capacity to do so: so, you must be at least 16 years old in Scotland or 18 years old in the rest of the UK and of sound mind.  If you were to become mentally incapable either through illness, disease or because of an accident, you will not be able to grant a Power of Attorney.

On granting a Power of Attorney, as you still have mental capacity, you can stipulate what powers the person or persons you are granting it to will have. This may mean having the powers to manage your banks accounts and investments, but also could include powers to sell your home.

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With financial Powers of Attorney (including Continuing Powers of Attorney in Scotland) you can also give someone the powers to deal with your debts, and if necessary the powers to make you bankrupt or sign a trust deed or Individual Voluntary Arrangement on your behalf. Alternatively, you may choose to restrict the powers you give someone, so they cannot sell your home.

With welfare Powers of Attorney, you can give people the powers to make decisions about your welfare, such as decisions about where you live and what medical treatment you should receive.

Not all Powers of Attorney take effect immediately, if you choose for them not to.  They may also be cancelled at any point, providing you retain the mental capacity to cancel them. You can also stipulate the conditions on which they will take effect, such as when you lose your mental capacity or are out of the country.

In Northern Ireland, Enduring Powers of Attorney are only effective once they are registered with the High Court (Office of Care and Protection) and once evidence is provided that you are mentally incapable (you are also notified of this, so you can dispute it, if you wish).

In England and Wales, Lasting Power of Attorney takes effect when it’s registered with the Office of the Public Guardian; whilst in Scotland a similar process is used, but the document must be registered with the Office of Public Guardian (Scotland).

Who can be your Attorney

Who you choose to be your Attorney is your decision, but they should be someone you trust and they must have legal capacity, that is be over the age of 16 in Scotland or 18 in the rest of the UK. They also cannot be subject to a Sequestration in Scotland or a Bankruptcy or Debt Relief Order elsewhere in the UK.

What if you are an Attorney

If you are an Attorney for someone who has debt problems, you need to ensure you exercise reasonable care when dealing with their affairs, which means you should not make decisions you are not qualified to make without first taking professional advice. You can yourself be held responsible if you make wrong decisions.

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Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed’s, and various other debt solutions.

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Our debt experts, and insolvency practitioners continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

June 8 2017

Written by
Maxine McCreadie

Edited by
Maxine McCreadie