settle a credit card arguement

BigSpenderSmallSaver

this person i know owes loads of money on various different credit cards and he said he only has to pay each one £1 a month as the law allows him to do that.I argued it but he said loans are different but with credit cards thats what you can do, can anyone settle this arguement?

GeorgeUK

If they have an agreement with the creditor they can do that, otherwise they will get interest and charges applied to their account. They may be taken to court for a CCJ or Charging Order against their house or the Debt may be sold to a debt collection agency who will take court action.

Ames

You can do that, but only if you can't afford more (ie on benefits or really low income), and only if you don't mind your credit rating being trashed.

RAS

This person will have defaults on their credit record, with interest added to the amount owing and charges UNLESS they have an agreement with their credit card company. Even if they can show that this is the maximum they can afford, they may get a CCJ or charging order.

The most likely reason for the agreement is that they have a debt management plan, usually arranged via a debt charity and the creditor has agreed to temporary low payments in the hope of getting the full sum back long term. The debt management plan covers all their debts and the creditors are paid pro rata.The amount that can be afforded is reviewed every 6 months to a year and there is no guarantee that the creditors will accept the DMP or halt charges and interest, immediately or in the longer term. Some do so for 6 months or a year before starting again.

One of the conditions of this agreement is that the person takes no further credit. The fact that they have already acknowledged that they are unable to make minimum payments on their existing debt means that they are open to allegations of fraud if they take more credit.

The other time when people do this is whilst they are setting up a debt managment plan and they send a letter and a token payment to show willing whilst the debt charity contacts the creditors. That may delay or halt immediate court action.

Creditor attitudes have however hardened considerably since the credit crunch started.