To be debt Free (is this how....????)

Jon2t

My name is Jon and I used to spend far more money than I earn (wow it’s like being at an AA meeting).
I am a divorced 39 year old man living in a one bedroom flat for the last 8 years. It is worth £140,000 with £100,000 mortgage. I have worked for the same company for 17 years and I earn £24,500 per year.
My problem is £37,146.75 worth of debt to 5 Creditors.
Two years ago I took the advice of money expert Martin Lewis (TV, Radio & Internet guru) to pull my head out of the sand & tackle it full on.
I went to the CAB & they put me in touch with Consumer Credit Counselling Service (CCCS).
What great advise I’m now paying less than half what I used to pay (£165 per month) & the interest has been frozen on all accounts.
They don’t do everything for you and it takes time and effort on your part, but defiantly advises you step by step and they have great influence when dealing with the big boy creditors.
I have entered a relationship as we all do and would like to get onto the next level but find myself in a catch 22 situation.
My mortgage is not on a great rate but I have to stay with the same company because of my very bad credit history & I don’t have to have a credit search. I can’t remortgage, I can’t get any loans or credit cards (thank god) but all this does limit me to move on.
I would love to clear my debits & improve my credit history, sell my flat in a year and buy a house with my girlfriend with a joint mortgage.
My plan is this, to ask my family (Mum & Dad) to get an unsecured loan of £15,000 (£220 over 8 years) with no penalties for early repayment.
I have been approached by two of my creditors to pay a third of the debit & they will cancel the debit & remove my bad credit history with them.
I have spoken to advisers at the CCCS and they have told me that this is genuine offer and that the creditor would rather have a reduced lump sum than small amounts over 11 years.
This is all well and good if you have the money and if all creditors agree.
If I can get the loan at the right rate and all 5 creditors agree to take 30% of the debit and remove the bad credit history can anyone see any foreseeable problems or any other solution.
Once done I would apply for one or two high interest credit cards e.g. Vanquis (30%) and put £50 on each per month and of course pay off on time avoiding paying the high interest. This should improve my credit history over the year.
After 1 year I could sell my flat (hopefully) & with some of the equity pay back the remainder of the £15,000.
This would leave me with a better credit history, no debit and be able to move to a life without waking up every morning depressed and with low self esteem.
My biggest worry is if I don’t do this soon, one or more of my creditors will apply for a charge on my property. Once this happens there is no way back to negotiate on the debit.
This will reduce my equity in my property dramatically and reduce the chance of a big enough deposit on a new home.
Many thanks for your time reading this and any advice would be greatly appreciated.

GeorgeUK

Before a creditor can put a charge on your property, they would need to get a CCJ. If you do not breach the terms of the CCJ, then they shouldn't be able to get a charging order.

Have you tried reclaiming any bank or credit card charges for the past 6 years?
Did any of the accounts have Payment Protection Insurance (PPI) and was this missold?

I would not advise getting your parents to take on debt on your behalf unless they are in a position to make the full payments themselves - if you were to lose your job for example they are the ones that are legally liable for the repayments, not you.

Tixy

Hi Jon and welcome to MSE. Glad you found advice when you last needed and good to hear you have your DMP with CCCS.

A couple of points I would make to your suggestion.
When anyone borrows money for you in their name you need to consider what would happen in all circumstances.
If for example you lost your job or became unable to work you would be unable to repay your parents loan. How would your parents manage? Could they afford to pay it - you don't want to run the risk of ruining their credit rating.

You may find that some of the creditors will not settle for as little as 30% - are all your debts with DCAs or are any still with the original creditor or in-house DCAs? Proper DCAs (not in-house) are the ones usually most willing to accept low offers.

Your credit rating may not be sufficently improved in a year to get a new mortgage at a good rate. How long ago were the defaults placed on your file? These stay on for 6years regardless of whether they are paid. Some creditors may agree to remove defaults but most won't and they certainly can't move all traces that you have had a bad credit history to my knowledge.

If you sell your house with £40k equity and pay off £15k debt that will leave you with around £25k. The best mortgage rates these days require a 25% deposit, so if you only have £25k you may not be able to afford a much larger house (although obviously depends on your girlfriends situation).

If you get a mortgage or any joint financial product with your girlfriend in a year your past financial history can have a negative effect on her credit rating.

Sorry these points all sound negative- I am certainly not telling you not to do this, just giving you some thoughts to see if you have considered these issues.

Jon2t

Wow thanks to both GeorgeUK & Tixy for your quick response & advice.

I agree it was only a thought of a way out of debt & to be able to move on up the ladder.

Your right i would not want to put it on my parents shoulders but i have been in the same company for 17 years & everything looks stable for now (but who knows).

I have reclaimed bank charges but dont have any PPI or credit card charges.

I would only think about it if all 5 creditors agree, i think all 5 are now not in house.

The defaults are for just over 2 years.

I don't have CCJ's & never missed a payment to CCCS.

I have never missed Mortgage, Council Tax or Utilities bills.

I know £25k is not a great deposit but thought it was a start i was even thinking 2 years to save for a bigger deposit.

Maybe need some more thought i wouldn't rush into anything just can't see a way forward.