Have House Equity but settle debt for less?

[Deleted User] · 4 March 2018 at 1:20AM

I am posting on behalf of a friend of mine, he and his wife fell into some financial difficulty when he lost his job and they couldn!!!8217;t survive on one income. They had already been servicing a smaller debt balance, but after a several years with only one income it has spiraled out of control to the current situation.

Their debt balance is around 60k, which consists of various different credit cards and unsecured loans (mixture off different companies). They do have around 70k equity in their house.

The question is whether in this particular situation, they are able to default on any part of the debt (reduced settlement etc), or is there no way other than paying off the full balance, given their equity?

I know it may seem as ethically dubious, but the debt is unsecured and ideally they would not have to wipe out the inheritance they have worked hard to leave to their children.

sourcrates · 4 March 2018 at 1:21PM

Hi,

Its always difficult advising on the situations of others, especially when you don`t have the full story, but as a very rough guide, defaulting on debts may or may not attract action through the courts, if any creditors did obtain a CCJ then they can also apply for a charging order at the same time.

This does not mean an automatic order for sale will be granted, they are pretty rare, but it is a potential risk, also to get the kinds of discount you/they envisage, the debts would need to be defaulted/unpaid, for a good few years, passed through various DCA`s etc and then sold on, so its not a quick fix.

Best thing they can do is get some debt management advice from one of the free debt charities first and foremost.

January2015 · 4 March 2018 at 3:06PM

Take debt management advice and learn your (their) rights and what legislation is in place to support them).

I had £95k unsecured debt with £250k equity. I have no CCJs, no charging orders and am plodding along with a DMP. I am happier than I have been in years, I have savings (towards clearing debts with F&Fs).

I've settled one debt that was unenforceable for 10% of the balance and a couple of others for approx 50% of the outstanding balance.

I have no concerns that I will get CCJs or charging orders. I've managed to save enough to clear any single debt should that particular creditor/DCA start to get pushy - but in over 3 years it hasn't come to that

[Deleted User] · 15 March 2018 at 8:20AM

Thanks for the advice sourcrates and January2015. I will definitely encourage them to get some specialist advice.

Jan15 - quick question - So I am guessing you went something like this

built up debt
enter debt management plan
continue paying DMP whilst working and building up savings

but do your creditors not enquire about your circumstances? on what basis can you accrue savings whilst servicing the debt at a lower level?

by that token, could you then sell your house and continue with your DMP?

January2015 · 15 March 2018 at 3:39PM

ying_yang wrote: »

Thanks for the advice sourcrates and January2015. I will definitely encourage them to get some specialist advice.

Jan15 - quick question - So I am guessing you went something like this

built up debt
enter debt management plan
continue paying DMP whilst working and building up savings

but do your creditors not enquire about your circumstances? on what basis can you accrue savings whilst servicing the debt at a lower level?

by that token, could you then sell your house and continue with your DMP?

We spent years borrowing on cards and then consolidating onto loans (more than once). At one point our unsecured debt exceeded £100k :eek:

We eventually sought advice and entered a DMP with SC. After a year we went self managed and significantly reduced the amount were paying through SC to each creditor - almost halved the amount each month.

We are now paying token payments only. I send in an I&E to creditors to evidence this is all I can afford. I never send in wage slips, bank statements etc. That's my business, not my creditors.

We have managed to save towards full and final settlement offers, and have actually settled some already. We've been able to do this because we haven't been paying the debts, other than token payments.

We started the DMP at £95k debt, 3 years on we are now just over £45k. I expect it to stay at that level for another year or so before we try more F&Fs.

The support and advice of this forum, and especially the DMP Mutual Support thread is awesome.

Have House Equity but settle debt for less?

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