I Need Help Clearing My Debts :(

fr0zen · 20 November 2017 at 4:18AM

Hello Forum,

I'll jump straight into it, i'm in a lot of debt. I owe a total of £45,000 in unsecured debts to the banks - a combination of a personal loan, credit cards and overdrafts. I'm currently unemployed and on universal credit @ £300 a month. I have no assets and no savings. I do not expect to be working/earning for at least six months.

Stepchange advised based on my circumstances, I go for bankrupcy but I want to explore other options.

1. My primary debt is a personal loan, currently just short of 20k.
With an early redemption offer and 80% short settlement, this can be paid in full at 14k.

2. The combination of my other debts are 25k.
10k of which are 0% interest overdrafts which are not payable for 6 to 12 months.
The 15k balance are currently frozen with the respective lenders under financial difficulty at 0% interest.

Within 1-2 months, many of these frozen accounts will default (+180 days) so I have a short timeframe left.

I cannot agree a Debt Management Plan as I will have no income to make any sort of payment towards the debt for the foreseeable future.

What I would ideally like to do is...

a) Take out a Debt Relief Order only against my loan (20k)
b) Settle the remaining 15k of debt within the next few months through a loan from a family member or a DMP.
c) Leave the 10k of 0% interest debts for 6-12 months and pay off when they are due.

I don't know if the above is allowed under the terms of a DRO? From my perspective, my only debt is the 20k loan, which I am not in a position to repay due to its value. The other amounts due are between 1k to 3k to various lenders and are just credit card loans or overdrafts which I don't need to settle immediately so I don't want to include them in the DRO.

Questions.
1. Can I settle these other debts (15k) after I take out the DRO on the loan? Or would this be seen as favouring a creditor? From the info I have read, you must declare if you have paid off another creditor in the two years prior to the DRO but nothing is stated on what you can do after taking it out.

2. Am I allowed to take out a 20k DRO if my total debts are actually 45k, even though I am not including all of them in the DRO?

3. Is there any major difference between going for a DRO or Bankrupcy? I could potentially just do a bankrupcy and wipe out the full 45k debt, but I feel that only 20k of it is out of my control. I would be happy to pay off the remaining 25k myself if it means I don't have to go through a bankrupcy.

Any other suggestions would be helpful. I just want to be debt free and start fresh and feel the best way forward is to somehow write off this 20k loan somehow.

-taff · 20 November 2017 at 9:17AM

I don't think you can have a DRO and a DMP running at the same time, so your plan of having the DRO for the 20k and then a DMP for the 15 is not going to work.
I may be wrong, someone with more experience will be along soon.

If you have no money now, how will you pay back 15k to your family if you borrow money off them?

And what assets do you have? If you have more than 1k, you won't qualify for a DRO.

What is the reason you only want to include the 20?

kazwookie · 20 November 2017 at 9:29AM

fr0zen wrote: »

Hello Forum,

I'll jump straight into it, i'm in a lot of debt. I owe a total of £45,000 in unsecured debts to the banks - a combination of a personal loan, credit cards and overdrafts. I'm currently unemployed and on universal credit @ £300 a month. I have no assets and no savings. I do not expect to be working/earning for at least six months.

Stepchange advised based on my circumstances, I go for bankrupcy but I want to explore other options.

1. My primary debt is a personal loan, currently just short of 20k.
With an early redemption offer and 80% short settlement, this can be paid in full at 14k.

2. The combination of my other debts are 25k.
10k of which are 0% interest overdrafts which are not payable for 6 to 12 months.
The 15k balance are currently frozen with the respective lenders under financial difficulty at 0% interest.

Within 1-2 months, many of these frozen accounts will default (+180 days) so I have a short timeframe left.

I cannot agree a Debt Management Plan as I will have no income to make any sort of payment towards the debt for the foreseeable future.

What I would ideally like to do is...

a) Take out a Debt Relief Order only against my loan (20k)
b) Settle the remaining 15k of debt within the next few months through a loan from a family member or a DMP.
c) Leave the 10k of 0% interest debts for 6-12 months and pay off when they are due.

I don't know if the above is allowed under the terms of a DRO? From my perspective, my only debt is the 20k loan, which I am not in a position to repay due to its value. The other amounts due are between 1k to 3k to various lenders and are just credit card loans or overdrafts which I don't need to settle immediately so I don't want to include them in the DRO.

Questions.
1. Can I settle these other debts (15k) after I take out the DRO on the loan? Or would this be seen as favouring a creditor? From the info I have read, you must declare if you have paid off another creditor in the two years prior to the DRO but nothing is stated on what you can do after taking it out.

2. Am I allowed to take out a 20k DRO if my total debts are actually 45k, even though I am not including all of them in the DRO?

3. Is there any major difference between going for a DRO or Bankrupcy? I could potentially just do a bankrupcy and wipe out the full 45k debt, but I feel that only 20k of it is out of my control. I would be happy to pay off the remaining 25k myself if it means I don't have to go through a bankrupcy.

Any other suggestions would be helpful. I just want to be debt free and start fresh and feel the best way forward is to somehow write off this 20k loan somehow.

Hello

Sorry to read of your problems.

were these work / business related loans?

middleclassbutpoor · 20 November 2017 at 9:36AM

Sounds crazy to me that you are thinking this and I don't think it's possible.

Get them all written off with Bankruptcy as SC have stated - trying to pay them back in your position is madness.

fatbelly · 20 November 2017 at 9:37AM

You don't qualify for a DRO. You no not have enough income for a dmp.

Go bankrupt.

Start again.

StopIt · 20 November 2017 at 10:02AM

No, for many reasons.

A DRO only works if your TOTAL debt is less than £20k, and you only have £50 budget surplus or less BEFORE debt payments.

If you have the money to service £25k of loans, you'd be in breach of the DRO even if it could apply like that.

Speak to a debt charity about your situation in full. You cannot write off some of your debts in insolvency. It's all or nothing.

fr0zen · 20 November 2017 at 5:04PM

Thank you for the replies! I really thought I could do a DRO for just the 20k loan, but it seems from replies here and my own research this morning, that it is not possible as my total debts are more than 20k.

One of my main issues with bankrupcy is that a substantial portion of my debt is due to gambling, which I feel will come up during bankrupcy proceedings and extend my BRO for up to 15 years.

I did not specifically take out the loan for gambling, it depends how its looked at. In the last 24 months, I have had payments into my account in excess of 100k from my salary and a settlement - all of which have been lost through gambling. In addition to this, I've had my day to day living expenses, so a combination of the two has left me 45k in debt.

fatbelly · 20 November 2017 at 5:31PM

fr0zen wrote: »

Thank you for the replies! I really thought I could do a DRO for just the 20k loan, but it seems from replies here and my own research this morning, that it is not possible as my total debts are more than 20k.

One of my main issues with bankrupcy is that a substantial portion of my debt is due to gambling, which I feel will come up during bankrupcy proceedings and extend my BRO for up to 15 years.

I did not specifically take out the loan for gambling, it depends how its looked at. In the last 24 months, I have had payments into my account in excess of 100k from my salary and a settlement - all of which have been lost through gambling. In addition to this, I've had my day to day living expenses, so a combination of the two has left me 45k in debt.

It's not impossible that you might get a BRO through gambling, neither is it a given that you will. What's certain is that you won't get a 15-year one - 2 to 3 years at the most. If you can evidence where it went you may not get one at all.

Here's one from the register (anonymised) that got 3.5 years:

Between 04 July 2016 and 26 July 2016, whilst insolvent and after having obtained insolvency advice, Mr X obtained additional credit of £4,600 which he had no reasonable expectation of being able to repay. He states he used the money to gamble. He then filed his own bankruptcy petition on 29 July 2016.

The point here is that he knew he was insolvent, had already taken advice, yet borrowed further money in a last-ditch attempt to gamble his way out, then went bankrupt 3 days later. As you say, you did not specifically take out your loan for gambling,

poppasmurf_bewdley · 20 November 2017 at 6:07PM

Your only way out is bankruptcy.

We all know it, and so do you. Stop looking for ways of doing this and that, and playing one off against another.

sourcrates · 20 November 2017 at 6:42PM

Your only options are the ones laid down by parliament for debt relief.

They are :

Bankruptcy
IVA
DRO
DMP (unregulated)

Bankruptcy is the only option left for you, all the others either require you to have an income surplus, or you simply don't qualify under the rules, of course if you find work, then an IVA may be an option in future.

fr0zen · 21 November 2017 at 4:07AM

I don't care about my credit rating, its already screwed. I just don't want to lose my cards and the freedom of not being bankrupt! I have other options available to me, which include;

1. Agree F&F Settlement on the loan @ 14k and F&F settlement on some of the other debts @ 11k = 25k total.
I can get this 25k from a close family member (repayable at anytime).
That would leave me with 11.5k of debt @ 0% interest which I could potentially set aside 1000 a month over the next 12 months if I take a job in January @ 30k a year. By the end of 2018, I will be debt free (to the banks)

My only issue with this is it worth paying off 36.5k of debt just to avoid going bankrupt? I could use this money later in life to build myself back up, and not be indebtted to family for a further 25k.

2. If I take the IVA route, what can I reasonably expect to pay back? As I understand, its based on my personal circumstances, but assume I will be earning 2500pm net and have 500 surplus each month to service my debts. Over 5 years, that is 30k repayable so I save 6.5k vs option 1 but have an IVA hanging over me for 5 years.

If I could agree a lower monthly IVA payment to my creditors of say 250 a month, over 5 years, that would be £15,000 total which the banks may have to accept through a court, as they would get less if I went bankrupt? I could handle paying 15k of 45k over five years without borrowing money from family.

I Need Help Clearing My Debts :(

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