Struggling with debt? Ask a debt advisor a question

StepChange_James · 10 December 2012 at 12:13PM

Alice_in_Welfareland wrote: »

I do not think this is correct but perhaps someone can clarify.

I have a debt which has been paid on a DMP for 2 years, the banks marks it on my credit record as AP or arrangement to pay, this is classed as a black mark and lowers my credit score considerably.

After 1 year then 2 years I can not increase my payments on my DMP, the bank keeps marking AP for another 6 months, then I lose my job and get a new job with less pay and have to lower my DMP payment. The bank gets angry and wants more money but I do not have it. After 3 more months they send me a default which then appears on my credit record.

This default then takes 6 years to clear so now my credit record is damaged for the 2 years plus the 9 months plus the 6 years. In theory the default can happen at any time in the DMP, even the last few months.

So in reality things can last on your credit record for much longer than 6 years. Correct?

Hi again Alice,

Everything you've said there look right to me. Any negative information on a credit file last for a maximum of six years, and if you're on a DMP things get entered at different stages of the plan.

While it's rare, we spoke to a client who received a default notice right at the end of their six year DMP, making it 12 years their credit file was affected. Here's the blogpost about it: http://www.lovemoney.com/blogs/debt/debt/16561/never-get-mortgage-credit-card-debt.

Kind regards

James

Alice_in_Welfareland · 10 December 2012 at 12:16PM

StepChange_James wrote: »

Hi Alice,

Thanks for posting. I think my reply to your earlier post covers why we work our payments out this way:

You can read more about how the charity is funded here:
Hope this answers your query.

James

Hi James
I still do not understand why Stepchange allocates payments this way especially when you actually state "It can sometimes work out that payments on our DMPs are more than the contractual payment for a debt, which means interest is often not stopped" but in your Debt Myths thread you said "I’d say that we find the majority of the time creditors are willing to stop or reduce interest. The biggest factor tends to be if they can see that there is a genuine debt problem and the payment being offered is reasonable."

Thanks for the link but that really does not tell us very much about funding, I would like to know more if this is possible? For example on your partnerships page, what does "Any credit organisation dealing with customer problem debt can discuss how to partner with us and explore being part of our unique Fair Share scheme" mean? What is the Fair Share scheme?

Sorry I can not post the links, even in your quotes, because I am new.

Alice_in_Welfareland · 10 December 2012 at 12:19PM

StepChange_James wrote: »

Hi again Alice,

Everything you've said there look right to me. Any negative information on a credit file last for a maximum of six years, and if you're on a DMP things get entered at different stages of the plan.

While it's rare, we spoke to a client who received a default notice right at the end of their six year DMP, making it 12 years their credit file was affected. Here's the blogpost about it:
Kind regards

James

Thanks James. So Rachel was incorrect? I think Stepchange should ensure that your staff only make accurate posts because this information is very important to a lot of people here. If an incorrect post is made perhaps Stepchange can highlight this and give the correct information in a later post? I will check the link and read that now.

StepChange_James · 10 December 2012 at 1:34PM

debtfreedreams wrote: »

Hi

I would be grateful for some advice regarding full and final settlements. I apologise in advance for the lengthy post.

I am currently on a debt management plan with Gregory Pennington. I currently owe £12,000 and ideally would like to strike a full and final settlement deal. I was planning to go through Step Change or Pay Plan. When I advised Gregory Pennington of this they planted ideas that they were not independent as they are funded by the banks and credit card companies. I realise that this is a sales tactic but it did get me questioning things more.

I live with my boyfriend and he luckily pays for the limited socialising we can afford. Anyway, the house (in my boyfriend’s name, as I couldn’t obviously get on the mortgage) has gone up in value by about £20,000 due to basic renovations, etc, and the fact that the area has risen in popularity. My boyfriend has kindly agreed to pay off my debt by re-mortgaging. I appreciate that a lot of people would advise against this. However, as a couple of the lenders have not frozen the interest, I am likely to be on the plan for another 10 years at least by my calculations and we both would prefer for me to be out of debt before 38!

Essentially, I would appreciate some advice regarding whether to make settlement offers myself or whether to go through Step Change or Pay Plan.

My main issues are:

1. Step Change have asked for a breakdown of my outgoings as part of the registration process that I am required to do in order that they can make full and final settlement offers on my behalf. I effectively maximised the amount as allowed during the process with Gregory Pennington (i.e. some parts where I overspent/were not allowed such as limited socialising or help towards house renovations would be put into other budget parts as long as those parts came within the recommended allowances).

I am therefore concerned as to whether if there are some indiscrepancies (Gregory Pennington will not give me a copy of the amounts offered) this information will get passed to my creditors who will get difficult.

Would I therefore be better making the settlement offers myself?

Do Pay Plan require this information before undertaking settlement offers on your behalf?

2. I have met all my monthly DMP payments since I started (although Halifax have kept changing the payment date and so I’ve effectively defaulted a few times). I’m therefore concerned that they will not see me as a liability. As far as I am aware the debts have not been passed on.

The only risk I could argue for is potential redundancy. I work in personal injury for a law firm and due to legislation cutting costs paid to law firms, many people will be out of jobs (there’s petitions on this basis).

I hope to be able to get out before then anyway as I am not suited to the work and would like to get into PR/marketing. However, this would require qualification costs and taking an entry-level job. I am confident I will succeed and ultimately earn more in the long-term as I will be more likely to succeed in something I am suited to and enjoy.

However, is it worth mentioning this? If so, how? And would I be better placed than Step Change or Pay Plan to make these arguments for a reduced settlement on the basis of this risk?

3. Lastly, should I advise Step Change or Pay Plan that my boyfriend could re-mortgage for the whole funds but would prefer to strike a good deal or shall I advise them I only have half the amount owed? I am obviously concerned that if I advise them of the truth that they will simply tell the creditors, who will then demand the full amount. Whilst I appreciate that I am responsible for my debt, a lot of my debt has been made up of interest and charges and I was young and irresponsible then. I’m also wary of using all of the equity in our house.

I apologise again for the lengthy post and thank you in advance for any help!

Thanks

Hello,

Thanks for posting and welcome to the forum.

I’ll respond using the numbers of the questions you asked, to keep things simple:

1. As long as the budget you do with us reflects your actual financial situation then I can’t see there being a problem with it looking different to the budget you prepared with Gregory Pennington. Obviously I’m not sure what Payplan’s procedures are but we do a budget so we can show it to creditors as part of the settlement negotiation. If you do make offers directly to creditors yourself it would probably help things along if you prepare your own budget to send in with your offers.

2. If you’re paying less than your contractual payments to your debts through your DMP then it’s worth exploring full and final settlements. Letting your creditors know that your job is currently under threat of redundancy and you are likely to retrain into lower paying work will certainly not harm your chances of getting a settlement agreed. It’s down to the creditors how much this information will matter to them but it’s worth letting them know.

3. As the money is coming from a remortagage from your partner's property then I think it’s reasonable to want to borrow as little money as possible against the house, particularly if the property is in someone else’s name.
As an aside, we generally advise against taking out secured loans to pay off unsecured debts, as it puts the property at greater risk if you ever struggle with the extra mortgage payments. Obviously every situation is different, so I can’t say if it would be a good idea for you or not. If you give us a call (http://www.stepchange.org/Contactus.aspx) we’ll give you advice on all your other options alongside the full and final settlement route.

Kind regards

James

StepChange_James · 10 December 2012 at 1:37PM

angelnn66 wrote: »

Hello

This is my first time here and, probably like others here, I am in a constant state of panic over my debts. My husband and I have good jobs, but we have ammassed debts of around £30,000 on top of our mortgage. We have remortgaged as much as we can and are not coping at all.

Our wages last a week or two and then all of our food, petrol, etc. has to be bought on credit cards, as our money all goes quickly on cards and loan payments.

We've lived like that for years, but now we cannot get any more credit and our cards are all up to the maximum, so we can't get hold of any more money.

We haven't missed any payments yet, but we are going to this month for the first time. We have always had to pay minimum payments bu drawign money out from other cards. Christmas has sent us over the edge.

Neither of us can sleep, we are so worried, but we dont know what to do. Are we in debt crisis? I'm not sure whether we are, as we haven't actually missed any payments yet.

Any advice would be gratefully accepted, thank you

Hello,

Welcome to the forum.

There aren’t really criteria for when a situation is classed as a “debt crisis” but it does sound like your debts are causing you and your husband an awful lot of worry.

Even though your payments are up to date, if you’re using credit to cover living costs then it’s sounds like you could use some debt advice. We can help you with this.

The first thing to do is visit our online debt advice service Debt Remedy (http://www.stepchange.org/msehelp) to help you find a solution to your debt problem quickly.

Debt Remedy will assist you in completing a financial statement with information on your household, employment, income, expenditure and debts. From this the service will automatically determine your options.

To help you fill in the form, it’s best to gather together information about:
• Your income
• Your expenditure
• The creditors you owe money to

You’ll receive a downloadable advice booklet providing a tailored solution for you based on your current circumstances and advice on ways you may be able to improve your situation.

If you’re not confident with computers or would like to speak to an advisor then you’re welcome to ring our Helpline on 0800 138 1111 (free including from mobiles). We’re open Monday to Friday 8am - 8pm and Saturdays 9am – 3pm.

If you phone us it may be possible to refer you directly to a counsellor for immediate advice. Alternatively, we will arrange for an appointment to be booked at a time convenient for you.

You’ve taken the first step to sorting out your money worries and we can support you with free and impartial advice along the way.

Hope this helps.

James

StepChange_James · 10 December 2012 at 2:01PM

ChocolateTree wrote: »

Just wondered if someone can help with a couple of questions please. I've just received my pack from Stepchange (temporary payment arrangements). The debts are all in my name only, but the Income & Expenditure form and the list of creditors form have both mine and my husbands names on it. I've had to do it jointly as I have no income of my own. I've been advised to send a copy of each off to each creditor with £1 (monthly amount for each creditor) but I don't want to send it with my husbands name on. Can I cross it out?
Also, one of the debts is with an ex partner but it says "joint" giving the impression it's myself and my husbands debt when it isn't. Do I just write a note next to it explaining? And do I have to send the list of creditors anyway?
Don't know what to do and wanted to get them sent off asap. Thanks in advance.

Hello,

There’s no problem in crossing out your husband’s name. I would perhaps add something into the comments that clearly explains the other person in the household is your husband and it’s his income listed on the budget. This is just so it makes sense to your creditors when they receive it.

I also can’t see a problem with adding a comment onto the list of creditors about the joint debt being with your ex. We recommend sending a copy of your list of creditors with your income and expenditure budget to show them that all debts are getting the same treatment.

Hope this helps.

James

kaydizz · 10 December 2012 at 2:31PM

Thanks for all of your helpful answers James

I did the debt remedy and asked for the application pack.

I did key the information in quite a rush and underestimated one of the creditor balances by about £800, completely missed the box where I have pets and want to reduce the amount I put down for meals at work as I am going to start taking my own when I can to reduce spend, the gas and electric amounts also need a bit of tweaking after reviewing my most recent bills.

Is is ok to do another debt remedy and ask for the application pack on this one

Thanks

nickyg890 · 10 December 2012 at 2:57PM

I have currently just moved into my first house and am creating a problem for myself.

I really dont no if Im coming or going with money going out my bank account on a daily basis with bills and home essentials/improvents needed.

Along with that I have a serious gambiling problem, but before you judge I only do this to try and get whats needed done and to get me though. I no its not the right way, clearly because its not working. But if only it was that easy to give up.

I am currently £2800 over drawn, with a £1000 bank loan. Oh yes and I did a stupid payday loan of £300. All money I havent really got. I only recive £1600 a month - with mortgage/bills/petrol/food (all essentials) totaling around £1400.
I just havent got any room to breath

I have been in debt for about 6 years and Im only 24. Ive never been in the Black and had money behind me, and I now want this so bad. It would make life so much eaiser and stressless.

Advice please??

mandi · 10 December 2012 at 3:15PM

Hi James.

Looking for some help please .

My son has a gym membership which he has been unable to use since September due to reallocation .

He spoke to the gym early October and they said that if he provided a letter from his employer to state this , they would allow him to cancel .

Because he is away it took several weeks to get the letter which clearly stated his name etc and was signed by his branch manager sating that he has been working away since September .

In the meantime they have continued to charge him his membership and several amount of admin fees .

Today he has received a letter stating that they will not cancel the membership as the letter was not a " formal document " they advise that they will continue with the fee and admin charges , and threatening further action .

What would your advice be please .

angelnn66 · 10 December 2012 at 5:11PM

Thank you James - we'll do that x

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