Struggling with debt? Ask a debt advisor a question

bowdery7 wrote: »

Hi,

I've got credit card debts of £13000 that have crept up over the last few years and an overdraft of £2000. I have decided to try and take this into hand to try and reduce debts. I have gone onto Stepchange and it has suggests a Debt Management Plan. If I was to undertake this with Step change, Can you pay more off a month if I get a payrise with my job or do I have to stick with the payments first suggested? Also, there may be a possibility that I could get some help from family but I don't want to wait, I'd like to try and tackle this now and at least commencing one monthly payments as part of the DMP should at least help me be able to monitor my outgoings. Is this a sensible thing to do?

Cant believe I have let this spiral over the last few years and panicking about not being able to ever afford money to put aside in savings or towards a mortgage. Will a DMP really affect my credit rating?

Thanks for your help.

Hi Bowdery7,

The monthly payment on a DMP is based on the amount of money you've got left over after you've covered your important costs. So if your money coming in goes up then you can review your budget with us and, providing your expenses haven't gone up, you can increase your payment.

There's no harm at all in starting a DMP now based on your current situation and making adjustments if things change in the future.

It's very likely that a DMP is going to affect your credit rating. If your creditors are going to be receiving lower monthly payments then they'll report this information to the credit reference agencies and details of any further action they take.

There'll be more information in your advice paperwork about the powers your creditors will have but you can read more in the article: http://moneyaware.co.uk/2011/08/you%E2%80%99re-in-debt-but-what-can-your-creditors-actually-do/.

A DMP can be a good solution to get debt repayments down to a manageable level but one of the downsides is that your credit history is going to take quite a knock.

Kind regards

James

cdshakey79 wrote: »

Hi
My partner and I currently have nearly £13000 debt between us made up of overdrafts,credit cards and one small catalogue debt.
I previously looked into getting a consolidation loan with the bank but was knocked back due to credit rating. I also contacted Baines and Ernst about either a Debt Management option or an IVA. Realising there was nothing to 'save' our credit ratings as we stand I believe an IVA is the best option!
As I am now a stay at home mum, I am reliant on his wage and obv cant make financial decisions without his approval. He went mad at me saying all Debt Management companies are scammers and scam you for majority of whatever you pay so hardly anything you pay actually goes to your creditors. I have tried to get through to him "so what as long as our payments are affordable and any debt left over after 5 years gets written off, it's a no-brainer" but he is stubborn!! Aaarrggghh! :mad:
Anyway! He believes that we should just write to all of our creditors, tell them we cant pay and simply offer them say £10 a month. They can't refuse and it will be wiped off after x years or written off after 3 years if we dont pay it at all!?!
What I need to know is:
1. Is he talking out of his bottom
2. Is my understanding of an IVA correct in that creditors have to accept it, yes it will affect credit rating but not half as bad as not paying at all/doing it ourselves, the creditors won't hound us once the agreement is made and the remaining debt WILL be written off after 5 years, drop off credit file so we can then build credit rating up again. I am also under the impression that will have to set up a bank account with another bank to those we have debts with which can only be a basic account with no overdraft etc.
3. Can I do an IVA just for my debts even though I am reliant on my partners income and what would happen if we were to split.

Hope this makes sense!
Many Thanks

Hi there cdshakey79,

Thanks for your message and welcome to the forum. To answer your first question, debt is not written off after five years if it’s not paid. Your partner may be confused with statute barred debt, which you can read a bit more about here: http://moneyaware.co.uk/2013/10/statute-barred-debt/ However even when a debt is statute barred, it doesn’t mean it’s written off.

When it comes to IVAs, creditors don’t have to accept the new agreement, however if 75% or more of your creditors agree to it then it would be accepted overall. IVAs take five or six years depending on whether you own property or not, but they won’t be more than six years. When it comes to your credit rating, any defaults listed on your credit rating should drop off around six years after the date your IVA was approved.

However I would suggest that at this stage you try not to focus too much on your credit rating – we usually recommend taking steps to deal with your debts first and then looking at how to build up your credit rating.

As an IVA is a formal agreement and a form of insolvency, I’d suggest you get advice on whether or not it’s the best option for you. You mention that you’ve been in touch with debt management companies but that your partner is concerned that they may charge you for the service. As a charity, we don’t believe you should pay for debt advice. The advice we give is impartial and free, and we offer a range of solutions to help you deal with your debts, including IVAs, which you can read about here: http://www.stepchange.org/Howwecanhelpyou.aspx

I’d recommend you get in touch with us and speak to a debt advisor. They’ll be able to look at your financial situation in more depth and work out the best way for you to deal with your debts. You can give our helpline a call on 0800 138 1111. It’s free to call from landlines and major mobile networks, and is open from Monday to Friday from 8am until 8pm and Saturdays from 8am until 4pm.

Alternatively you could use our online Debt Remedy tool, which guides you through the same process as an advisor would over the phone: https://www.stepchange.org/debtremedy This usually takes around 20minutes to complete.

I hope this helps.

Kind regards,
Laura

Hi there,

Thanks for posting.

When debt becomes statute barred, it doesn’t mean that the debt is written off it just means that the creditor can’t take court action to recover the debt. It's hard to say whether the bank will pursue the debt through the court, I've spoken to people who receive CCJ's within the last few months before the debt becomes statute barred but there's no specific yes or no answer to this.

One thing's for sure, if the creditor does decide to take further action, the details would likely be sent to your previous address without your knowledge which could leave you unaware of any further action.

If you did receive a CCJ for the debt, you’d need to provide a budget and complete the paperwork to make sure that you don’t potentially end up with a ‘judgment in default’. This means that the court wouldn’t be aware of your financial situation and if no payments are made to the CCJ the creditor could take action such as a bailiff (enforcement agent) or a deduction from your wages or benefits as two examples of enforcement action.

Once a CCJ is in place, it would be in place for as long as it takes to repay the debt.

We’ve discussed statute barred debts and the Limitations Act on our MoneyAware blog here: http://moneyaware.co.uk/2013/10/statute-barred-debt/.

If you’d like to take our advice and deal with the debt, we can help. If you think you’ll struggle to repay what you owe then we can offer our free, expert and impartial advice and solutions.

You can find out more about how to contact us by visiting https://www.stepchange.org/contactus.aspx

I hope this helps,

Rory

SGE wrote: »

Hi

I am finally on my way to clearing up all of my old immature mistakes and have one default on my account that I'm afraid will turn into something more serious if I do not act on it.

The facts are I had a current account with overdraft that defaulted on the 30/6/2009 it becomes statute barred on July 1st 2015. Therefore there is 5 months left until this happens.

This account is registered to a very old address that I have not lived in since 2008. I last checked the court records register In Dec 2014 and no ccj has been registered against me for this account.

My worry is this still could happen between now and the end of June and if it does it will not go to my current address therefore I will not be able to do anything about it and will likely end up with a ccj.

What I would like advice on is what is the best course of action I should take to prevent this. Is it likely RBS will try and take me to court between now and the end of June?

Or is it best I contact RBS and try to arrange a payment plan? I do not have the account details anymore just the last 4 digits of the account number and address its registered to. How would I go about doing this? I understand contacting them will start the clock again. getting a ccj for 6 years seems like a high price to pay for something I could have avoided?

The only thing I'm concerned about is- they may be chasing me- but at my old address therefore I am oblivious to it all. also I do not if this debt has been sold on.

Any advice on this would be welcomed!

Hello,

I'm in year 3 of my 6 year IVA paying back around £75 a month (approx £30000 of debt) which is affordable.

I live in rented accomodation paying £600 per month. I also have an £80000 mortgage on a property worth approx £85000, rental income £382, mortgage payment £400 which is only slightly more than interest only.

My question is should I sell the property now? There's very little equity in it, I can't live in it because it's a one bed bungalow and there's now 3 of us and even if I did have any significant equity I'd have to put it towards my IVA.

Or do I wait until my IVA has finished? My tenant is happy and stays she wants to stay for the long-term.

Any advice gratefully received!

Thanks

Hi there, thanks for posting.

An IVA is a formal debt solution and because of this, we wouldn’t be in a position to be able to advise you on the best way to deal with your property. It would be a good idea to discuss this with your IVA provider as it’s in both of your interests to make sure everything runs smoothly and they can answer any questions you have.

I hope this helps, apologies for not being able to go into any more detail about the IVA specifically.

Rory

bridkid wrote: »

Hello,

I'm in year 3 of my 6 year IVA paying back around £75 a month (approx £30000 of debt) which is affordable.

I live in rented accomodation paying £600 per month. I also have an £80000 mortgage on a property worth approx £85000, rental income £382, mortgage payment £400 which is only slightly more than interest only.

My question is should I sell the property now? There's very little equity in it, I can't live in it because it's a one bed bungalow and there's now 3 of us and even if I did have any significant equity I'd have to put it towards my IVA.

Or do I wait until my IVA has finished? My tenant is happy and stays she wants to stay for the long-term.

Any advice gratefully received!

Thanks