Offers to Creditors

SerenaGoode

Genuinely depressed to be posting this, but the National Debtline has advised me to make reduced offers to my creditors, and I may have to choose this option. Just wondered if I could get any advice from people who have been down this path before.

Here's a brief summary:

Take home £2120 (with irregular extra freelance payments, averaging maybe £200-300)

Mortgage £1032 (repayment)
Priority bills (council tax, service, utilities, TV, phone) £500

Outstanding mortgage £158K
Outstanding unsecured debt £55K
(HSBC, Egg, Black Horse, MBNA, Momentum cards. HSBC and Black horse unsecured loans).

I wanted to roll the debt or most of it into the mortgage and had an offer from Abbey in April (they valued flat at £250K). They shillied and shallied and took three months to decline it (even though no information had changed from when they accepted it). Then a secured loan might have helped, but by then the valuation given was down to £225K and this meant a secured loan would not have been enough to help.

I really don't want to refuse to pay the debt - I feel I ought to have a way to pay it, but the credit crunch is making this very difficult - rates are rising and there is no consolidation available. I have to face the fact my outgoings (£1100 on top of the priority £1532) are higher than my income even before I spend money. Also the MBNA card was on a rate offer but will change to their evil 35% rate in October, which would be the last straw). We've cut back to the bone but I think I'll have to try the offers to creditors route.

A few questions:

HSBC are my bank, mortgage provider and also have £25K of the debt. Does this mean they will be especially difficult? I have a clean account opened elsewhere, so can use that to stop them taking money I can't afford, but worry about how they will react. Part of it is also a £2K overdraft which I'll also have to offer on.

I hear bad things about MBNA's debt chasing - anyone know about that?

If I can persuade everyone to freeze interest I can probably offer about £300-400 between the creditors. This means it will take about 15 years to reduce the debt to zero - I don't mind that as I'd been assuming I'd be paying the debt off for years via a mortgage - but is that too long for them to accept - is there any other endpoint, where the debt is written off?

Would an IVA be a better option for me, as it cuts the debt?

Any advice appreciated. Desperate not to lose the home. It's nothing grand, but my daughter is happy and the school is OK.

Valley's_girl

Hi sorry I don't have any advice I can give but someone will be along shortly who will be able to advise you.
Good luck
Ally x

SerenaGoode

Valley's_girl wrote: »

Hi sorry I don't have any advice I can give but someone will be along shortly who will be able to advise you.
Good luck
Ally x

Thanks - I appreciate it.

windswept

From my understanding of an IVA, they aren't the "answer" to debts that the adverts would have us all believe, if you have any kind of equity in your home, in the 4th year of an IVA , you are meant to hand over your equity to clear your remaining debts, so in effect they aren't wiped out after 5 years at all - quite how you get hold of your equity if no one will let you remortgage - I don't know.
From what I have read of a DMP, 10 years or less is the ideal repayment time, but I've read people saying that after a few years of paying a DMP, they have managed to save a good amount and then will offer their creditors a "full and final" settlement.
I'm sure you will get lots more advice from people who've been through similar.

Cleosmum

Can you do a more accurate SOA? http://makesenseofcards.com/soacalc.html that way we may be able to see other areas in which you can cut back/save.

SerenaGoode

Cleosmum wrote: »

Can you do a more accurate SOA? http://makesenseofcards.com/soacalc.html that way we may be able to see other areas in which you can cut back/save.

I've got a complicated spreadsheet of spending I work from - basically there are still some small areas where we've identified we might cut spending, but there's just no way it will close the gap from where we are to where we need to be, so I don't think there is any solution other than this. Apart from anything else, the rates on the cards are all escalating all the time, and any savings we make seem to get eaten by hiked rates.

SerenaGoode

OK, I did a quick one - might have a few inaccuracies, but it's basically about right

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2320
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2320

Monthly Expense Details
Mortgage................................ 1032
Secured loan repayments................. 0
Rent.................................... 0
Management charge (leasehold property).. 80
Council tax............................. 100
Electricity............................. 50
Gas..................................... 50
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 30
Mobile phone............................ 10
TV Licence.............................. 10
Satellite/Cable TV...................... 15
Internet Services....................... 10
Groceries etc. ......................... 60
Clothing................................ 20
Petrol/diesel........................... 15
Road tax................................ 10
Car Insurance........................... 32
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 40
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 28
Buildings insurance..................... 70
Contents insurance...................... 12
Life assurance ......................... 24
Other insurance......................... 26
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 40
Holiday................................. 30
Emergency fund.......................... 10
Total monthly expenses.................. 1874

Assets
Cash.................................... 0
House value (Gross)..................... 225000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 226000

Secured Debts
Description....................Debt......Monthly...APR
Mortgage...................... 158000...(1032).....0
Total secured debts........... 158000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
MBNA...........................14300.....190.......20
Momentum.......................6300......160.......30
HSBC Overdraft.................2500......40........15
HSBC credit card...............8800......170.......17
HSBC flexiloan.................4250......170.......17
Egg card.......................3500......67........21
BLack horse card...............500.......25........15
BLack Horse loan...............7500......198.......14.9
HSBC loan......................9500......263.......6.9
Total unsecured debts..........57150.....1283......-

Monthly Budget Summary
Total monthly income.................... 2,320
Expenses (including secured debts)....... 1,874
Available for debt repayments........... 446
Monthly UNsecured debt repayments....... 1,283
Surplus(deficit if negative)............ -837

Personal Balance Sheet Summary
Total assets (things you own)........... 226,000
Total Secured debt...................... -158,000
Total Unsecured debt.................... -57,150
Net Assets.............................. 10,850

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

======== Enter any other useful information below ========

e.g. the number of adults & children in the household, the number

of cars included in the SOA or anything else that may be useful.

poppyg_2

I have debts with Natwest and I sent them a letter with a statement of affairs and they accepted my offer of repayments without any problems approx 3 months ago, they have not so far been in touch to try and get more money out of me, no harrassing phone calls etc so this might be your best option with your creditors as long as they can see that you are offering fair pro rata payments they should hopefully be willing to accept as you're showing a genuine commitment to pay the debts

My brother has been on a DMP via Payplan due to high level debt (approx £30k) for approx a year and has now just been accepted for an IVA but he has no assets so nothing to lose - an IVA was something Payplan suggested could be an option for him after he'd been on the DMP and his creditors accepted it but obviously you're in a different position

SerenaGoode

poppyg wrote: »

I have debts with Natwest and I sent them a letter with a statement of affairs and they accepted my offer of repayments without any problems approx 3 months ago, they have not so far been in touch to try and get more money out of me, no harrassing phone calls etc so this might be your best option with your creditors as long as they can see that you are offering fair pro rata payments they should hopefully be willing to accept as you're showing a genuine commitment to pay the debts

My brother has been on a DMP via Payplan due to high level debt (approx £30k) for approx a year and has now just been accepted for an IVA but he has no assets so nothing to lose - an IVA was something Payplan suggested could be an option for him after he'd been on the DMP and his creditors accepted it but obviously you're in a different position

Thanks - it is nice to come here and know that I'm not the only one with debts to sort out.

Edit: Just realised my SOA is wrong as the groceries should be more like £200...

Useless_with_wonga

Re your question about MBNA our IVA proposal has just failed as MBNA held 29% of the vote and voted "No". 6 Creditors in total 5 voted "Yes" . We were offering 46p in the pound. MBNA were not the biggest creditor either.
We owe a similar amount to MBNA as yourself. Not sure what happens now

SerenaGoode

Useless_with_wonga wrote: »

Re your question about MBNA our IVA proposal has just failed as MBNA held 29% of the vote and voted "No". 6 Creditors in total 5 voted "Yes" . We were offering 46p in the pound. MBNA were not the biggest creditor either.
We owe a similar amount to MBNA as yourself. Not sure what happens now

Very sorry to hear that and best of luck.

I'm hoping to avoid an IVA by doing the DIY debt management, but I don't know if it will work, and I'm worried about problems if people refuse to accept offers or keep adding interest - or if there is hassle from DCAs and so on.