Is this a way of dealing with debt?

debtstressed

Hello all.

I after your opinions on how to deal with my debt. I am sharing my thoughts and hope my post does not upset anyone. I am in debt and it is my fault and responsibility. Below is some background information and my thoughts. Let me know what you think.

- I am now down to £35000 in unsecured debt due to past mistake from which I have learnt my lessons.
- I have no major assets or mortgage. I live in a rented flat.
- I have been paying off my debts for the last 4 years and am already living as frugally as possible (though tips on this forum)
- My debt repayments are all up to date with no defaults or late payements ever.
- Probably due to my debt load I have not been successful in getting promotional rates or balance transfer products. My credit score (I know its kinda uselss) is in the very poor catagory.
- My interest rates have been jacked up in the last month on most of my accounts and due to change at work am effectively taking less home which has made things tighter. I am living on the edge with no savings.
- At my current rate (assuming no more rate changes or emergencies), it will now take me about 4 or 5 years to become debt free.

I have read and helped by the advice on this forum. I consulted a proffessional charity who suggested a DMP lasting about 6 years. However I noted the following;
- creditors are under no obligation to accept or stay in the DMP.
- it would result in defaults on my account lasting 6 years.
- I have nothing (no savings) for the years the plan is in place.

My creditors are not willing to help or negotiate because I have no late payments or defaults. One of them demanded repayment in full after an interest rate reduction query! It made me me think....


What if I reduced my payments? What if I defaulted. I am asking as it seems (from reading various threads) the only way to negotiate. My credit profile is very poor and I am trapped in a cycle. My thoughts are to look after my creditors and myself too. I am on a wire. If lost my job, couldnt work for any amount of time, had an emergency, the car broke down, interest rates went up again, overdraft withdrawn or rent went up etc - it would all fall apart!

My thoughts are to default on all my accounts (DMP style) by reducing payments and save the money. I am thinking of staggering this. By the time the banks are will to negotiate I can then settle with them and then the next and then the next. If not I would just deal with the DCAs and try and settle with them. I need to get my life back but want to pay my creditors too. If this is the only way to negotiate what else am I to do?
Im thinking that maybe I could pay them off and actually have savings in the bank after the six years. Myabe I could have a life in the 6 years.
Im hoping that by the time my defaults or CCJs come off at least I would have some savings and settled with all of my creditors. The other option is that I carry on as I am until something gives and they all get nothing or end up on a DMP anyway. Bankruptcy is there but I am not trying to run away from my debt. I admit I made some big mistakes and am trying to rectify them.

I am trying to act before my circumstances force my hand. The banks arent helping and are actually squeezing me further. Im aware of the emotional pressure I will get but I am trying to look after myself as well my creditors. They are not looking out for me. A default after 5 years of making payments and a balance of £200 is treated no worse than a default of £10000 today.Enotionally it is not right but it is business. I am trying to view this in a business-like manner too. Ordinary people look at debt emotionally. I am trying to swim before I sink because if I drown nobody gets paid.

Does it make sense? Let me know.

Poosmate

Hi Debtstressed, I can understand where you are coming from as I've been in this situation for many years. Having used this site and gained much knowledge and common sense I've been able to start saving and manage my money much better to the point where I can now overpay on one of my credit cards.

Is there any way you can increase your income at all? Have a look at th "Up Your Income" board. It doesn't necessarily mean getting another part time job. I've managed to squirrel extra cash through doing online surveys (though I don't do them often - but the odd £20 cash or £10 voucher has got me out of a fix on more than one occasion)! Also, you can gain cashback for purchasing stuff you have to buy anyway by joining one of the cashback sites like Quidco or Topcashback. Take a look at Eager Learner's thread about earning cash through doing daily clicks, apparently you can earn £3 per day (not a lot but equates to £90 per month) and it takes about half hour a day (I guess it takes longer at first till you get the hang of it). To be honest I haven't tried it yet!

You might want to post a list of your creditors/debts with balances and interest rates so people on here could advise you the best way to tackle them.

Regarding the interest rate rises, you can refuse to accept the new terms by contacting the card issuer within a certain time of the notification. It does mean that the account will be (suspended?) i.e. you will no longer be able to use the card and will just continue to pay it off at the rate you are on now.

Hope that helps some

Poo

tygar2

debtstressed wrote: »

I am trying to act before my circumstances force my hand. The banks arent helping and are actually squeezing me further. Im aware of the emotional pressure I will get but I am trying to look after myself as well my creditors. They are not looking out for me.

A default after 5 years of making payments and a balance of £200 is treated no worse than a default of £10000 today.

Enotionally it is not right but it is business. I am trying to view this in a business-like manner too. Ordinary people look at debt emotionally. I am trying to swim before I sink because if I drown nobody gets paid.

Does it make sense? Let me know.

Interesting....I think debtbstressed is asking what makes sense in a business sense.

Assuming he has already implimented all moneysaving and money making tactics he can, it almost makes sense to me. I'm no expert but recognise the emotional aspect that debt has on people which does not apply to business.
Companies liquidate, debts are written off, company owners are made bankrupt etc. An example would be a shop having a closing down sale to raise as much as possible.

Im no expert but am really curious too. If you see it coming, and have done everything you can to try and solve it, do you wait till it falls apart or do you prepare? I reckon he can always go on a DMP later if he so chooses.

All I can say is that it makes sense to me but wait for the experts to chip in.

Good luck!

Poosmate

I forgot to add, I haven't voted in the poll. Personally, I chose to struggle on and to try to up my income and manage my finances better in order to free up that little bit more cash to pay my debts. I have no non or late payments defaults so I believe my credit rating should be quite good.

You state that if you choose to continue the way you are you should be debt free in about 4-5 years but by going on a DMP it will be 6 years (?) I don't really understand that.

I find that managing my debt myself I can choose to pay off more to one particular creditor (the one with the highest interest rate), on a DMP if you have say £100 spare one month it will go to all of your creditors on a pro rata basis regardless of whether they have frozen interest or not. Also, if you can concentrate on one creditor and pay it off you may find that they come back with an offer of 0% interest for a balance transfer just because they want your business back.

I also believe that DMP's are changing (from what I've read on here). It seems that more creditors are refusing to stop interest and charges on DMP's even when set up through the debt charities. I haven't worked out yet if that's a recent thing or if it's because some people are going on to a DMP before they have defaulted on their monthly payments.

In a recent Managing Debt article on here, Martin Lewis reckons that DMP's are for those in Debt Crisis, i.e. those who can no longer afford their minimum payments and have defaulted already.

You said, "A default after 5 years of making payments and a balance of £200 is treated no worse than a default of £10000 today."

Does this mean you have not defaulted in the last 5 years? If this is so then going on a DMP now will wreck all the excellent work you've done over the last 5 years and in just 1 year you credit rating will improve as that default drops off your file and you'll find that you may be able to shuffle your debt round to lower interest rates or even 0%/low LOB deals.

Hope that helps.

Poo

Inverness

I recommend the CAB or try http://www.nationaldebtline.co.uk/

Poosmate

Yes it does make sense in the short term. But, if the DS has got a 5 year clean record and a default will fall off their file next year, it's shortsighted and will put them back another 6 years at least (12 if they're still defaulting whilst the DMP is in process) and the last 5 years struggling has been for nothing.

It's a hard one to call without all the facts.

Poo

debtstressed

Poosmate wrote: »

I forgot to add, I haven't voted in the poll. Personally, I chose to struggle on and to try to up my income and manage my finances better in order to free up that little bit more cash to pay my debts. I have no non or late payments defaults so I believe my credit rating should be quite good.
Not neccessarily. My credit file is like yours and I cannot get any credit. I purchased the (useless I know) credit score from experian and even that said I was in the very poor category. No late payment or defaults EVER!

You state that if you choose to continue the way you are you should be debt free in about 4-5 years but by going on a DMP it will be 6 years (?) I don't really understand that.
Sorry about the confusion. I was looking at a CCCS DMP proposal from a couple of years back. I reckon a DMP drawn up today would take about 4 years as I am living very frugally (similar to DMP budget amounts).

I find that managing my debt myself I can choose to pay off more to one particular creditor (the one with the highest interest rate), on a DMP if you have say £100 spare one month it will go to all of your creditors on a pro rata basis regardless of whether they have frozen interest or not.
My point exactly. That is what I am trying to do. If I go on a DMP I will get defaults on all my accounts at the same time and lose control of the accounts. I might also lose my current account. If I manage payments myself at least I can stagger the missed payments and depending on how flexible and understanding my creditors are I might even avoid defaults altogether by raising and negotiating the settlement amounts and repayment period.

Also, if you can concentrate on one creditor and pay it off you may find that they come back with an offer of 0% interest for a balance transfer just because they want your business back.
My credit file has no missed payments or defaults. Im on the electoral role and have not moved in 3 years, I have had the same bank and employer for 7 years - yet I cannot get any 0% deals even on my existing cards. Its as though my credit file is in tatters.

I also believe that DMP's are changing (from what I've read on here). It seems that more creditors are refusing to stop interest and charges on DMP's even when set up through the debt charities.
That sort of takes away the main advantage of a DMP. Whats the point if they refuse to stop interest.

I haven't worked out yet if that's a recent thing or if it's because some people are going on to a DMP before they have defaulted on their monthly payments.
That is the main part of my argument. It seems you cannot try and resolve your situation in a way that's in everyones best interest. Creditors want to protect their money, ordinary people want to protect their credit files. We all make mistakes or fall on hard times. If the only sway to get help or the creditors attention is to perform financial hara kiri then what incentive is there for the debtor to stay motivated? I may be wrong but are there isnt much difference in how you are treated if you have 5 defaults as opposed to 2.

In a recent Managing Debt article on here, Martin Lewis reckons that DMP's are for those in Debt Crisis, i.e. those who can no longer afford their minimum payments and have defaulted already.
So if Martin is right then what is there for a debtor on the edge? Wait till you actually default and cannot pay anything because you have nothing and no starting point before doing anything about it?

You said, "A default after 5 years of making payments and a balance of £200 is treated no worse than a default of £10000 today."

Does this mean you have not defaulted in the last 5 years? If this is so then going on a DMP now will wreck all the excellent work you've done over the last 5 years and in just 1 year you credit rating will improve as that default drops off your file and you'll find that you may be able to shuffle your debt round to lower interest rates or even 0%/low LOB deals.
I think I caused so confusion. I have NO defaults or late payement - ever. That was an example. What I was trying to say was that in theory if one struggles with payments for years then defaults with only a balance of £200 they are treated the same way as someone who defaults and they owe £10000. The former persons effort and perserverence do not mean much as the credit file just states the truth - you defaulted, no emotion, no nothing.

Hope that helps.

Poo

Thanks for your input Poo. These are my thoughts, purely theoretical stuff. Im just trying to look at my situation from a different angle, the non-emotional angle, the practical angle. I am paying, and have been for years. However I am in so vulnerable a position that it got me thinking. Im just thinking that if you see something coming are you not better of preparing?

debtstressed

Inverness wrote: »

I recommend the CAB or try

Hi Inverness

I have already spoken to CCCs in the past. What I'm discussing is a theoretical alternative approach. After what Poosmate said regarding some creditors refusing to stop interest for people on DMPs, I fail to see any value in them. Will still call nationaldebtline this morning for clarification.

thanks for the tip.

tygar2

debtstressed wrote: »

Hi Inverness

I have already spoken to CCCs in the past. What I'm discussing is a theoretical alternative approach. After what Poosmate said regarding some creditors refusing to stop interest for people on DMPs, I fail to see any value in them.

Is this true? If so, what is the point of DMPs if lenders are no longer accomodating and keep adding interest and charges. Seems like they are pushing people towards bankruptcy.

debtstressed

Hello all.

According to the poll (as it stands at the moment) I should go for a DMP. Am still not convinced but am on hold to national debtline and am going to ask about the various points raised here.

debtstressed

Spoke to NationalDebtline and the person I spoke to did an income and expenditure with me before explaining all the options. Thier I & E amounts are quite generous (more than Im allowing myself at the moment).He identified what I am suggesting as a self managed DMP and also agreed that lenders are not very accomodating unless the account is in arrears. He also agreed that some lenders simply refused to negotiate and went down the CCJ route as soon as they could.

He suggested that a self managed DMP can always become a managed DMP at any point so no harm in trying it myself. If I run in problems they have a 'cashflow' team who then approach the creditors on my behalf. Everyone gets pro-rata of what I can afford and the worst they can do is go for a CCJ. Defaults and CCJs fall away after 6 years.

For some reason bankruptcy was presented as a very viable option for me!:eek:

So back to my original point....seems I have to default first to get the ball rolling! Seems no-one will help me before I default or am in serious arrears.

Should I wait until it all falls apart or take the bull by the horns and start the process myself?