A difficult decision...

[Deleted User]

Ok...I'm looking for some guidance here as to what to do regarding my debt.

I owe £2700 to a credit card company. They are offering to turn it into a rescheduled loan but the repayments are going to be in the region of £30 a month.

I am on ESA as I've got ill health. I previously was making repayments to the credit card by using my overdraft. I know that is stupid but I just wasn't facing up to the reality of my budget.

In December I received a payout from my previous employers who fired me due to ill health - it was enough to clear all my debts, including this one, but it wouldn't leave me with anything left.

I live on my own and have no other way to support myself financially. I don't know when I will be returning to work, or when I do, what sort of salary I will have, as I know that I can't go back to the work I used to do.

I know that Martin always says to clear the debts rather than keep savings, but this assumes that the person will be able to rebuild their savings - which in my case isn't likely to happen for a while, if ever.

So, now that I've given you an outline of my situation I have a few questions:

Is it wrong to ask the credit card company to accept a token £1 payment, as thats all I can afford, until I'm back on my feet?
Or should I repay the whole lot and render myself very vulnerable to not cope with future problems (eg. my car failed its MoT last week and cost £600 to repair...)
Or do I use the money from the Tribunal payout to make the repayments monthly?

I will pay off this credit card debt - I just feel the need to try to protect myself a bit financially, so will be happy to make repayments once I know what my future holds ie job etc.

Please don't judge me too harshly - I'm already beating myself up.

dancingfairy

I don't know what a rescheduled loan is but any form of loan is generally a bad idea as it costs you more in the long term and often they will try and secure it against your house.
Hmm - difficult this one. Maybe you could keep an emergency fund of say 500 pounds and pay the rest off the card?
Any of the options you suggested could be viable really.
df

dancingfairy

Are you getting all the benefits you are entitled to - ie you may be eligible for council tax benefit, housing benefit etc?
df

[Deleted User]

Hi Dancingfairy,

Yeah I'm on all the benefits that I am entitled too.

I'm still on the lower level ESA as its in the appeal process, but at the moment I am currently £149 over on my budget each month and that doesn't include presents, or going out. I've sold my TV and got rid of my TV licence to try to cut down monthly outgoings.

A rescheduled loan is just a way for them to get the money in the end - they turn the debt into a loan and charge 3% APR, which is variable to change. I'm not going to be able to get credit in the future and wouldn't want it anyway, but I also know I might have to finance a course to retrain so that I can get a job...

Oh its all such a pickle!

zarazara

please do a SOA [statement of affairs] and then post it on here. We can all see whre there are areas to cut back on or jiggle. makes the advise more relevant.

brians_daughter

my idea would be to approach them for a full and final settlement figure, They may take 70% of the value lump sum for full and final payment. ie you pay 70% and they write the 30% off. That way you have paid the debt but have the other 30% as your cushion should you need it?

who is the cc company? this may help others advise better- also SOA would be good

dancingfairy

In that case - perhaps you need to pay the minimum monthly payments on the card at the moment - this should at least buy you some time and not mess your credit rating up which should last you for quite a while before you need to make any drastic decisions. I guess it all really depends on how your health goes over the next 6 months or so and what you plan to do and how you plan to retrain really.
Perhaps you could get some help from a credit union and get a loan from them instead? - they may be easier to deal with and may be able to offer you a low rate loan?
df

DarkConvict

I would do a Income sheet at national debtline, and use one of the national debtline letters to offer token payments of £1.

http://www.nationaldebtline.co.uk/england_wales/debt_advice.php

dancingfairy

Lol - I guess it's one of the those questions with no definitive answers.
To Dark Convict the OP has said that they may want to get finance to retrain and offering token payments of 1 pound may damage their credit file however it would of course let them keep some of their payout for emergencies etc.
df

[Deleted User]

Income Monthly
Statement of Account:

Income
ESA 278.63
Housing Benefit 449.58

Total 728.21


Expenditure
Rent 450.00
Electricity 52.00
Water Rates 20.93
Telephone/Broadband 30.00
Pet Insurance 10.00
Car Insurance 20.83
Car Tax 2.92
Car Mot 4.50
Car Repairs 50.00
Diesel 60.00
Food & Toiletries 100.00
Clothing 5.00
Pet Food 19.00
Pet Vaccinations 5.00
Pet Meds 6.67
Mobile Phone 10.00
Contact Lenses 15.00
Haircuts 4.00
Drama Club 0.63

Total 866.48


Monthly Balance -£138.27

I've already drafted a letter re the £1 token payment. My credit rating is already shot to pieces as I didn't make the full payments for the last five months so protecting my credit rating isn't a priority. The company is M&S.

As for cutbacks: I've already cut everything down to the bare minimum!!! The only thing that will be able to be changed it the Telephone/Broadband costs once my contract runs out with Virgin, but thats got a few more months left yet. Even if I do switch to a new contract for phone/broadband it will only take about £10 out of my over spend a month...

DarkConvict

The only things i can spot are.

You have a mobile and a telephone, can you drop down to just a landline.
Dpending on your hair, can you grow it longer and cut it shorter, the recession cut as my neighbour calls it.
The monthly cost of the bet bills seems quite high.
You rent is as high as i was paying for a flat in a popular area of outer London, can this be reduced?

Given time credit files repair, sometimes they repair quicker than your health. Keeping healthy is what is most important, and stress from debts can have untold issues.