Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • fr0zen
    • By fr0zen 20th Nov 17, 3:18 AM
    • 15Posts
    • 7Thanks
    fr0zen
    I Need Help Clearing My Debts :(
    • #1
    • 20th Nov 17, 3:18 AM
    I Need Help Clearing My Debts :( 20th Nov 17 at 3:18 AM
    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.





    Last edited by fr0zen; 20-11-2017 at 4:21 AM. Reason: Minor Corrections
Page 3
    • Pixie5740
    • By Pixie5740 27th Nov 17, 5:46 PM
    • 11,196 Posts
    • 15,643 Thanks
    Pixie5740
    I thought this was a forum for offering advice, but you seem to have a different agenda. Its probably not even worth responding to you, but to clear up your issues raised;

    1. Lending, borrowing or gifting - however its phrased, someone is offering me £25,000 without the expectation of repayment. Whether I choose to repay it is a different matter entirely.

    2. I mentioned getting 15k from a family member in the OP, which is what I need to cover my immediate interest bearing debt. The additional 10k is at 0% and not repayable for 6-12 months so is not required to clear immediately.

    3. Doing a £1 accumulator is similar to someone doing the Lottery, I don't consider it continued gambling in the slightest.

    As I have mentioned before, its very easy for someone to say go for BRO, but i'll be the one living with it so I won't just jump into anything, even is the concensus is unanimous here. I'll take the constructive advice offered here, together with my own research and make a decision on what to do.
    Originally posted by fr0zen
    Itís not however it is phrased. Borrowing means the complete opposite of lending.

    The fact that you donít see a £1 football accumulator or the lottery as continued gambling in the slightest will be your downfall. It is gambling.

    I get the feeling that any advice we give will fall on deaf ears. Take the £25k and then once youíve !!!!ed that up the wall go bankrupt.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • fatbelly
    • By fatbelly 27th Nov 17, 5:53 PM
    • 11,638 Posts
    • 8,769 Thanks
    fatbelly
    I feel this thread may have reached its conclusion.
    • EssexHebridean
    • By EssexHebridean 28th Nov 17, 12:04 PM
    • 8,201 Posts
    • 43,432 Thanks
    EssexHebridean
    Frozen this is a forum for advice - and people are desperately trying to give you the correct advice for your situation but you're refusing to accept it because it's not what you want to hear. Similarly on the gambling - by your own acknowledgement YOU ARE AN ADDICT. In the same way that someone might be addicted to Nicotine, heroin, crack, alcohol or any other substance of your choice - your "substance" is gambling. Would you suggest that it was OK for an alcoholic to have "just the occasional drink" or a drug addict to inject themselves "on the odd occasion"? I'd certainly hope not - and I would also hope that if you saw a friend in that situation you would do everything in your power to try to stop that path of destruction. That is PRECISELY what people are doing here - but out of the goodness of their heart for a complete stranger.

    Stop a moment and ask yourself why it is that you think that all the folk who've offered you input on this thread - many of whom have YEARS of experience dealing with debt - are wrong, and you're right? Is that not a bit "rest of the army being out of step"?

    As I see it your options as a responsible adult are to either accept that bankruptcy is the way forward, or come up with a plan that means paying back the debt as a whole, not try to shuffle out of the bits of it that don't suit you. Essentially, you have run up the debt - you have now to deal with it. That's called taking responsibility - and sadly running oneself into 45k of debt without a sufficient income to manage it does not come totally free of pain.

    I wish you luck with your route forwards - I think you're going to need it.
    MORTGAGE FREE 30/09/2016
    Sainsbugs 0% card: 22/12/16 £1229.00/£656.45 (20/11/17)
    SOA Calculator for DFW newbies: Stoozing.com SOA Calculator
    • Max and sasha
    • By Max and sasha 28th Nov 17, 3:42 PM
    • 76 Posts
    • 58 Thanks
    Max and sasha
    Frozen

    If you don't want to go down the bankruptcy road, write to your creditors explain that you are unable to work for a while and come up with a repayment plan, then once you are better and get your 30k or more job repay them ?

    Max
    • Happier Me
    • By Happier Me 28th Nov 17, 5:54 PM
    • 390 Posts
    • 835 Thanks
    Happier Me
    When I started reading this thread I was in the bankruptcy camp too. However you are clearly dead set against this option and now the £25k is a gift and not a loan how about...

    Arranging a self managed dmp with ALL your creditors for a token sum (you're credit rating will be trashed anyway which will restrict access to credit, I see no way out of this one!).

    Get a job asap - you need to eat and fund your dmp after all.

    Bide your time and use the £25k gift to negotiate full and final settlements. Might take a while but you may save yourself some money in the process.

    The thing to remember here is there are no guarantees your creditors will agree, it could take a long time to pull off, your credit rating will be seriously damaged and you will be spending the £25k gifted to you on debt you could potentially write off...

    How much more restrictive is bankruptcy on credit than a DMP? I'm not sure to be honest!?


    Frozen, I think you need to think about why it's so important to you to have credit? This is going to be restricted regardless of what you do! I too have had access to credit all of my adult life, use it to my advantage all the time BUT it wouldn't be the end of the world for me if I had to cut up my credit cards. Admittedly I wouldn't be able to turn as many credit card points into food at the pub down the road but I'd cope.


    Having written this down I still favour bankruptcy.
    • DCFC79
    • By DCFC79 28th Nov 17, 7:59 PM
    • 30,395 Posts
    • 19,219 Thanks
    DCFC79
    I feel this thread may have reached its conclusion.
    Originally posted by fatbelly
    Agreed

    The OP feels his option is best so we should let them go with the idea.
    Last edited by DCFC79; 28-11-2017 at 8:27 PM.
    Can people stop loaning money/being a guarator to family/friends, it rarely ends well and you lose out as your money is gone or you get shafted with being a guarantor.
    • culpepper
    • By culpepper 29th Nov 17, 11:23 AM
    • 3,887 Posts
    • 7,176 Thanks
    culpepper
    Frozen , I think you probably have a gambling problem , my father had one too and never beat it.
    Why not change the 'game ' a little and start doing competitions instead?
    The excitement of winning is still there but the 'paying money' bit is gone.
    Look at the competitions board for inspiration. When you feel the need to 'have a flutter', go and hunt down a competition instead.
    As for the credit card thing, some people keep one emergency credit card but wrap it in plastic and freeze it in a block of ice. It's for emergency use only and the need to get it defrosted is a good mental check on whether 'this time' really is one.
    • fr0zen
    • By fr0zen 29th Nov 17, 12:23 PM
    • 15 Posts
    • 7 Thanks
    fr0zen
    Frozen this is a forum for advice - and people are desperately trying to give you the correct advice for your situation but you're refusing to accept it because it's not what you want to hear.
    Originally posted by EssexHebridean
    Who is to suggest the advice given is correct? I'm simply looking at options that best work for me. I take onboard the comments but if one can avoid going bankrupt, then it should be fully explored. Its by no means a clear cut decision from my perspective.

    1. I have the support available to clear 25k of my 45k debt without repayment.
    2. I will have the means to repay the remaining 20k with a long term DMP.
    3. I fully expect to be back earning a significant salary when I am ready & able to work.

    With the above in mind, a BRO that lasts 2-3 years will potentially have a major impact on my life and may cost me a significant sum of money in repayments if my earnings are as I expect them to be within that period. If I could guarantee a standard 12m BRO, then I could calculate a small repayment towards my debts before they are written off but i'm not prepared to stay on a low salary for 2-3 years.
    • tori.k
    • By tori.k 29th Nov 17, 2:03 PM
    • 2,919 Posts
    • 6,671 Thanks
    tori.k
    The advice given is on your actual current position of 45k of debt and no real income, everything else is just conjecture on ideas that are reliant on others agreeing to your terms,
    Whichever avenue you take will have an impact on credit available to you, in this case bankruptcy is the option to get you solvent and back on your feet.
    Advice can only be given on the facts.
    Debit to Credit (stage 1) 3652.34 completed 15/10/16
    Debit to Credit (stage 2) 6299.09 completed 25/06/17
    Last Castle 150,000/ 25300
    • Pixie5740
    • By Pixie5740 29th Nov 17, 2:15 PM
    • 11,196 Posts
    • 15,643 Thanks
    Pixie5740
    Who is to suggest the advice given is correct?
    Originally posted by fr0zen
    If the unanimous advice is that BRO is the best option for you based on the ever-changing information you have given us and you suggest that the advice we give is incorrect one has to wonder why you bother coming back for more advice?

    If you want a second opinion, type your information into Step Change's Debt Remedy tool. See what it comes back with although I'd be surprised if it didn't come back with BRO too.

    Something you haven't considered is the impact receiving a £25k gift will have on your UC but what would I know.
    Last edited by Pixie5740; 29-11-2017 at 2:23 PM.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • fr0zen
    • By fr0zen 29th Nov 17, 4:32 PM
    • 15 Posts
    • 7 Thanks
    fr0zen
    The advice given is on your actual current position of 45k of debt and no real income, everything else is just conjecture on ideas that are reliant on others agreeing to your terms,
    Whichever avenue you take will have an impact on credit available to you, in this case bankruptcy is the option to get you solvent and back on your feet. Advice can only be given on the facts.
    Originally posted by tori.k
    I have already agreed in principle F&F settlement terms with most interest bearing creditors of circa 75%. I haven't negotiated any short settlements on the 0% interest creditors so overall my 25k portion of the debt can be cleared for circa 20k. Obviously I am aware short settlements will show on my credit file but i'm looking to get further credit so different.

    My only stumbling block seems to be the 20k loan, which I may have to allow to default before re-attempting to negotiatie a more favourable settlement with the creditor OR setup token payments until I am in a better position to deal with this in six months.

    If the unanimous advice is that BRO is the best option for you based on the ever-changing information you have given us and you suggest that the advice we give is incorrect one has to wonder why you bother coming back for more advice?

    If you want a second opinion, type your information into Step Change's Debt Remedy tool. See what it comes back with although I'd be surprised if it didn't come back with BRO too.

    Something you haven't considered is the impact receiving a £25k gift will have on your UC but what would I know.
    Originally posted by Pixie5740
    Stepchange did suggest BRO, but also advised that based on the fact my circumstances are very likely to change, a viable alternative would be setting up a token payment DMP and re-assess the situation in six months time.

    If a £25,000 gift results in me losing £1,800 of benefits over six months, its not a big issue. With F&F settlement offers, I will save this and significantly more with the reduced payment. I'm sure there are ways that this gift which will not result in me having savings over the UC threshold is looked upon as it is intended, to service my debts.

    The BRO may end up costing me a similar amount to settling my debts if I am required to pay back £1,000 a month over three years, so why bother going bankrupt and having that on my record for six years if I can clear my debts another way!
    • StopIt
    • By StopIt 30th Nov 17, 9:13 AM
    • 1,449 Posts
    • 1,239 Thanks
    StopIt
    I have already agreed in principle F&F settlement terms with most interest bearing creditors of circa 75%. I haven't negotiated any short settlements on the 0% interest creditors so overall my 25k portion of the debt can be cleared for circa 20k. Obviously I am aware short settlements will show on my credit file but i'm looking to get further credit so different.

    My only stumbling block seems to be the 20k loan, which I may have to allow to default before re-attempting to negotiatie a more favourable settlement with the creditor OR setup token payments until I am in a better position to deal with this in six months.



    Stepchange did suggest BRO, but also advised that based on the fact my circumstances are very likely to change, a viable alternative would be setting up a token payment DMP and re-assess the situation in six months time.

    If a £25,000 gift results in me losing £1,800 of benefits over six months, its not a big issue. With F&F settlement offers, I will save this and significantly more with the reduced payment. I'm sure there are ways that this gift which will not result in me having savings over the UC threshold is looked upon as it is intended, to service my debts.

    The BRO may end up costing me a similar amount to settling my debts if I am required to pay back £1,000 a month over three years, so why bother going bankrupt and having that on my record for six years if I can clear my debts another way!
    Originally posted by fr0zen

    You wont have an IPA of £1,000 a month while on UC.


    You appear to have a few myths about bankruptcy that need to be broken.


    Firstly, a DRO will affect your credit files for 6 years exactly the same as Bankruptcy, they're both forms of insolvency. Any defaults you have will be on your files for 6 years also.


    In fact, declaring BR now, will mean you can have a clear credit file by 2024 at the latest. if you waited 2 years or so to play around with the debts you have and then get a DRO for the £20k remaining, you wont have a clear credit file until 2026.


    When you declare BR, you have to file a SOA with the OR. They then look at any surplus income you have, and any IPA you receive would be based on that surplus. If you're in UC, the surplus is basically non existent and you will not receive an IPA. Because the debts are gambling related you may receive a BRU/BRO but that restricts your access to credit for 3 years and means you can't be a company director etc, but isn't any requirement to pay what you don't have.


    I'd fill out an SOA with Stepchange, and they'll advise you if you'll be facing an IPA, but I suspect not. if that's why you're not considering that route, re-consider.
    I'm a Board Guide on the Debt Free Wannabe, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com

    In debt and looking for help? Look here for the MSE Debt Help Guide.
    Also, If you need any free and impartial debt advice, the National Debtline, Stepchange, and the CAB can help.
    • fr0zen
    • By fr0zen 30th Nov 17, 2:46 PM
    • 15 Posts
    • 7 Thanks
    fr0zen
    You wont have an IPA of £1,000 a month while on UC.

    You appear to have a few myths about bankruptcy that need to be broken.

    Firstly, a DRO will affect your credit files for 6 years exactly the same as Bankruptcy, they're both forms of insolvency. Any defaults you have will be on your files for 6 years also.

    In fact, declaring BR now, will mean you can have a clear credit file by 2024 at the latest. if you waited 2 years or so to play around with the debts you have and then get a DRO for the £20k remaining, you wont have a clear credit file until 2026.

    When you declare BR, you have to file a SOA with the OR. They then look at any surplus income you have, and any IPA you receive would be based on that surplus. If you're in UC, the surplus is basically non existent and you will not receive an IPA. Because the debts are gambling related you may receive a BRU/BRO but that restricts your access to credit for 3 years and means you can't be a company director etc, but isn't any requirement to pay what you don't have.

    I'd fill out an SOA with Stepchange, and they'll advise you if you'll be facing an IPA, but I suspect not. if that's why you're not considering that route, re-consider.
    Originally posted by StopIt
    StopIt. Very much appreciate the detailed response, very useful information.

    My concern about facing an IPA while on UC is not an issue, but as I understand it, should my circumstances change, while I am on a BRO (ie: if I have a job that pays 30k net) then my IPA will increase accordingly and I have informally calculated I will potentially have 1000 surplus income per month which I expect they would take.

    You may ask, if I have a surplus income, why should I not pay this back to service my debts under bankrupcy? From my perspective, any surplus income I make in the next 2-3 years, I want to use to give to my parents.

    A couple of years ago, they gifted me 22,500, which I personally saw as a loan that I wanted to repay them as they are approaching retirement age and could benefit from the money. So part of my motivation to get back into work would be to give them back this money.

    Unless the IPA is fixed from the time I declare bankrupcy for the entire BRO period, I cannot see a benefit in working my balls off for three years, simply to service my bankrupcy.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

4,346Posts Today

8,115Users online

Martin's Twitter