Struggling with debt? Ask a debt advisor a question

craighughes173 · 22 May 2015 at 9:25AM

Hi

I currently have a debt management plan with stepchange and am totally confused by what is going on. i want my debts to be paid off. However there are charges still being put on to my accounts and it seems like i am still in the trap of never paying off my debt. The estimated date is over 8 years. But I actually owe more this month than last so i cannot see this.

I have tried to phone a number of times and have not got through - as large number of calls being dealt with! i have been talking to an advisor from a debt settlement company - who in the plan they offer will pay my debts off in 5 years.

This seems too good to be true - and i have seen alot of information about not going through a fee charging company. However, if there if i pay less than the amount i owe via there negotiations for settlement and they take their fee from that - how is there a fee a there is no cost to me??

For example 36,000 debt reduced to 26,000 = 60 payments of 445 - leaves me paying off less and the debt being sorted.

i have been informed that stepchange have some kind of funding from the banking sector (i dont know if this is true) but it seems like i am still going to be stuck in a trap. which i will be if interest is still charged.

The "cost" of me doing this is 11,000 however it seems that this cost is from the creditors. I pay 10,000 less and they still get paid - how is this paying a fee?
Also - what is to stop me doing this myself i.e after i have entered in to the contract and the creditors have agreed, cancel the agreement and pay the full monthly amount amount myself and clear the debt quicker.

Any advice welcome

StepChange_Jen · 22 May 2015 at 2:53PM

craighughes173 wrote: »

Hi

I currently have a debt management plan with stepchange and am totally confused by what is going on. i want my debts to be paid off. However there are charges still being put on to my accounts and it seems like i am still in the trap of never paying off my debt. The estimated date is over 8 years. But I actually owe more this month than last so i cannot see this.

I have tried to phone a number of times and have not got through - as large number of calls being dealt with! i have been talking to an advisor from a debt settlement company - who in the plan they offer will pay my debts off in 5 years.

This seems too good to be true - and i have seen alot of information about not going through a fee charging company. However, if there if i pay less than the amount i owe via there negotiations for settlement and they take their fee from that - how is there a fee a there is no cost to me??

For example 36,000 debt reduced to 26,000 = 60 payments of 445 - leaves me paying off less and the debt being sorted.

i have been informed that stepchange have some kind of funding from the banking sector (i dont know if this is true) but it seems like i am still going to be stuck in a trap. which i will be if interest is still charged.

The "cost" of me doing this is 11,000 however it seems that this cost is from the creditors. I pay 10,000 less and they still get paid - how is this paying a fee?
Also - what is to stop me doing this myself i.e after i have entered in to the contract and the creditors have agreed, cancel the agreement and pay the full monthly amount amount myself and clear the debt quicker.

Any advice welcome

Hi there,

Thanks for posting.

I’m sorry to hear you’re feeling confused at the moment.

It’s common to feel like you’re stuck in a rut when it comes to dealing with debts but it’s good that you’re dealing with them.

Debt management plan time frames can seem long and this may be disheartening, however the time frame you’re given is only based on your current situation. A change in circumstances in the future like an income boost or a new job could mean it reduces.

You spoke about charges being added to your debts. We can request creditors stop adding charges to debts for clients but this isn’t something they have to do, no debt management company, including us, can guarantee this. It’s disappointing that your creditors are still adding charges to your debts but this doesn’t necessarily mean they’ll always continue to do so.

We can’t comment on debt solutions offered by other debt management companies as their policies can vary. Some debt management companies are fee-chargers, which means not all of your money goes towards repaying your debts. Due to this, we’d always encourage you to use a free debt solution.

To answer your question about the way we’re funded, our service is funded by creditors, not paid for by clients. This is made possible by the charitable contributions that creditors make to us. As a result, our advice to those in need is genuinely free. It’s based on what’s best for our clients, not what’s profitable for us.

We want you to feel happy with your debt solution however we also want to make sure it’s realistic. If you’re feeling unhappy or confused about anything, please talk about this with one of our advisors.

You mentioned that you’ve tried to get in touch with us and I’m sorry to hear you’ve been struggling to contact us on the phone. Unfortunately during busy times there can be a bit of a delay in getting through to us.

If you’d prefer, you can email a member of our team instead: http://www.stepchange.org/Contactus/Sendusanemail.aspx

I hope this helps but if you’ve got any more questions please let us know.

Jen

Ardnas66 · 27 May 2015 at 10:18PM

Hi,

I am under the wings of StepChange and have a DMP in place to help manage my unsecured debts.

As well as my mortgage, I have a secured loan. I'd like some advice about possibly using the equity in my property to pay off my secured loan and debts being managed with my DMP. Essentially borrowing more as a mortgage which will be less to pay every month than I am currently paying (hope that all makes sense).

I have approximately £135,000 equity in my property (not taking the secured loan into consideration). My property is worth approximately £200,000. My debts total approximately £45,000 (secured loan and debts under DMP). My mortgage is approximately £62,000 outstanding. I earn just over £28,000 all three jobs included.

I know I should be thinking about reducing my debt, not borrowing more, but feel I would be better off transferring my debts to become a mortgage, which the payments would be a lot less than I am paying at the moment.

I am very fortunate that I am working full time, I actually have three jobs. I live on my own, with one adult child who has left home and my other adult child spends part time with me and part time at his father's house. I am so tired working all the hours, just finding it so hard on my own.

I appreciate I got myself into my debt mess, and am not trying to shirk my responsibilities, just trying to manage them better.

I also realise that I will probably fail the initial stages of applying for further mortgage borrowing because of my credit history, but would be good to get some feedback about my situation.

Thank you for reading.

Joanne_escott · 29 May 2015 at 10:27AM

I've been with a debt management agency for 10 years they deal with my creditors there are 4 in total . I want to start negotiating a final settlement figure but am in the dark of how to go about this do I phone each company , write to them and what departments , plus do I have to go through my debt management company as they will act on my behalf but will charge me for this service ?

StepChange_James · 29 May 2015 at 10:29AM

Ardnas66 wrote: »

Hi,

I am under the wings of StepChange and have a DMP in place to help manage my unsecured debts.

As well as my mortgage, I have a secured loan. I'd like some advice about possibly using the equity in my property to pay off my secured loan and debts being managed with my DMP. Essentially borrowing more as a mortgage which will be less to pay every month than I am currently paying (hope that all makes sense).

I have approximately £135,000 equity in my property (not taking the secured loan into consideration). My property is worth approximately £200,000. My debts total approximately £45,000 (secured loan and debts under DMP). My mortgage is approximately £62,000 outstanding. I earn just over £28,000 all three jobs included.

I know I should be thinking about reducing my debt, not borrowing more, but feel I would be better off transferring my debts to become a mortgage, which the payments would be a lot less than I am paying at the moment.

I am very fortunate that I am working full time, I actually have three jobs. I live on my own, with one adult child who has left home and my other adult child spends part time with me and part time at his father's house. I am so tired working all the hours, just finding it so hard on my own.

I appreciate I got myself into my debt mess, and am not trying to shirk my responsibilities, just trying to manage them better.

I also realise that I will probably fail the initial stages of applying for further mortgage borrowing because of my credit history, but would be good to get some feedback about my situation.

Thank you for reading.

Hi Ardnas66,

Thanks for posting.

It's hard to give advice without knowing your full situation but we'll usually suggest our clients avoid taking out more secured debts to clear their unsecured debts.

One of the reasons for this is the likely increased overrall cost. Even though interest rates are usually lower on mortgages, the timescales are usually much longer, so you pay back more in the long run.

Also, borrowing more against a property increases the chances of the property being at risk. If you struggle to keep up with unsecured debts then it's very hard for them to get your house, with a secured debt there's a risk of repossession if you fall behind on payments.

Having made these two points, I'd still suggest exploring your options. There aren't hard and fast rules on these sort of things, so we can help you consider the options.

If you call us on the usual number and ask for a review then we'll be able to update your details and give advice about options. We have specialists that can give advice about mortgages.

I'd also strongly recommend pointing out that the amount of work you're doing is putting strain on you at the moment. Even if remortgaging isn't a good solution there may be other strategies that you could look at which involve a more managable workload for you.

If you've got figures of how much you'd have coming in if you were working a more sustainable number of hours we can do a "what if" sort of scenario and run you through your options.

Kind regards

James

Rooster01 · 29 May 2015 at 12:27PM

Need some advice please.....I'm currently 6 months in a dmp and Halifax have requested 6 month review. All information sent by Step Change however I've received letter from dmp informing me Halifax have rejected offer. I have contacted Halifax and they have told me they haven't received any documentation and that my current offer is near the minimum monthly payment so I may struggle getting them to accept and obviously interest will start again? What happens when account's are near expected monthly payments, do I continue to include them in the plan?

StepChange_James · 29 May 2015 at 3:19PM

Joanne_escott wrote: »

I've been with a debt management agency for 10 years they deal with my creditors there are 4 in total . I want to start negotiating a final settlement figure but am in the dark of how to go about this do I phone each company , write to them and what departments , plus do I have to go through my debt management company as they will act on my behalf but will charge me for this service ?

Hi Joanne,

There's no obligation to go through a fee-charging DMP company to agree settlements with creditors, you can do it yourself.

There's a page on our website with more information about full and final settlements which you might find useful: https://www.stepchange.org/debtinformationandadvice/debtsolutions/settlementoffers.aspx.

I've heard of people negotiating either by letter or phone, I think it's mostly down to which your most comfortable with. The important thing is to make sure you get any agreement confirmed in writing before you send any money over.

If you'd like any help then I'd suggest getting in touch with us. We can help you work out the best options and if it's making settlement offers then we have a specialist team who can help you make full and final settlement offers to your creditors.

Here are our contact details: https://www.stepchange.org/Contactus.aspx.

Kind regards

James

StepChange_James · 29 May 2015 at 3:27PM

Rooster01 wrote: »

Need some advice please.....I'm currently 6 months in a dmp and Halifax have requested 6 month review. All information sent by Step Change however I've received letter from dmp informing me Halifax have rejected offer. I have contacted Halifax and they have told me they haven't received any documentation and that my current offer is near the minimum monthly payment so I may struggle getting them to accept and obviously interest will start again? What happens when account's are near expected monthly payments, do I continue to include them in the plan?

Hi Rooster01,

It's still important to include all debts in your DMP even if the payments on some are near to the full amount. It's down to the creditor to decide if they want to freeze interest and charges.

It seems odd that you've had some correspondence saying the offer was rejected and they say they've not received anything. It sounds like something has gone astray somewhere along the line.

If a reviewed budget might help sway them in your favour then you're welcome to get in touch for a review and we can send an update out to them, so they'll be sent your information again.

Kind regards

James

joeqaz034 · 30 May 2015 at 9:36AM

Your creditors don’t have to agree to the reduced payment offering in a DMP, but even if they don’t we’ll still send them your payments, as they legally have to accept them as repayment on your debt. Until your DMP is set up your creditors won't receive payments from us on your behalf.

You need to be aware that if creditors continue to add interest and charges, this could increase the total amount you currently owe.

As you’ll be making lower, more affordable payments it'll take longer to repay your debts on a DMP than if you were to continue to make your contractual payments.

hard.to.pick.a.name · 30 May 2015 at 2:47PM

HI,
I had a debt I didn't acknowledge and was coming up to 6 years of the default. Credit expert have now taken it upon them self's to contact the debt collection company about the default with out my knowledge or permission will this affect the limitation act which would make the debtstatute barred ?

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