Help with paying off debt...

ITtim

I hope someone can help, my OH got herself in a bit of a pickle and subsequently ended up owing in exces of £20k.

Last year she went on a dmp with debtline (yes the dodgy ones)

Anyway,

Despite what we were led to believe interest is growing on some of the debts and defaults are consistently being listed on her credit report.

I plan to remortgage under my name to release the capital to pay the debt. (Because of the decrease in interest rates it will cost no more each month and we will then be able to over pay)

My main problem at the moment is that we want to leave debt line without paying any fees (if possible) and secondly pay off her creditors.

Now i was advised that trying to reach an agreement on settling debt would hinder her credit rating, since its already poor would we be best of negotiating with the creditors or paying the already outstanding balances? (Obviously we would be happier paying less if possibel but not to the detriment of her credit rating)

Also if we contact her creditors can they give us a figure for us to dwell on? for example, if I can't raise the funds to pay the debt and we've agreed settlement figures will we be in trouble?

I'm just not really sure how to go about it?

Many thanks:o

podperson

First off you need to get out of the dmp with debtline, if you still have the contract with them check if they will charge you to leave and how much it will be. You can either send payments out to the creditors yourself or go through a free company such as cccs or payplan where all the money will go direct to the debts.
It sounds like you wanting to sort out full and final settlements with the creditors, check out the template letters on national debtline website for a good example of what to send. Depending on how long the debt has been owed, if it's in default and whether it's been passed to a dca would affect how low a settlement they would accept but I would always suggest starting by offering a low amount (say 25-30%) as you can always increase it later but can't decrease it. They may come back to you with an offer in the middle.
With regards to it affecting her credit then if a lower offer is accepted it will show on her credit rating as settled with a flag of partial. This is obviously not as good as settled in full but to be honest if she is on a dmp her credit is not likely to be great anyway and settled in any way looks better then unsettled in my opinion.

ITtim

thanks for the reply,

That all makes sense, she doesn't seem to think she has a contract with debtline but i'm not convinced at this stage. Is it normal practise for them to have a contract in place?

As for her credit rating, when we assumed that there were no late payments of defaults on it we were advised not to settle lower amounts.

Now we know that there are late payments and defaults I'm not to sure how much difference its likely to make.

I've been told that if her credit rating is clean for two years (ie no lates or defaults) that we can then start looking at mortgages etc. I wouldn't want to risk that by offering a low amount.

By the same token, i'd obviously rather pay less if possible.

Marisco

Hi, if she has defaults on her credit report then it's trashed anyway for 6 years from the date of the default.

ITtim

So essentially we couldn't make it any worse?

Pott5y

I wouldn't think it would make matters worse.

In fact at least any accounts would be satisfied and means that any further defaults could not be added to your file.

Also I would say that the money is coming from a family member then you could always retract the offer when you have some idea, and just say that unfortunately the money is no longer available. Also they could not expect you to just up your payments to them as the money is not yours to give!!

bottleofred

Hi ITtim,

Defaults make it more difficult to get credit, but don't make it impossible regarding getting a mortgage. However, while your OH may be offerred a mortgage, the interest rates will be much higher than are currently available for someone with a good credit record. Get out of debtplan as soon as possible and go with the cccs or other organisations who provide the same service free of charge, hence all the money goes toward the debt.

ITtim

Thanks for the replies guys, my main aim is to pay the debt off, its come about because we thought we may be able to move and pay off the debt, now the defaults and the true situation have come to light.

I gather a mortgage for us both will be more obtainable two years after the debts are settled. So that at the moment is my aim. I'm just worried about making her credit record worse. However as has been said, its probably not going to make much difference so i'll see if we can negotiate something lower.

NorthernLas

OP: I think it would be useful to separate out the two issues.

1. Moving from a fee paying DMP to another one: This should be relatively simple and there should be terms and conditions on their website as to how you do this.

2. Investigating ways to paying off the debts: If you remortgage you are turning an unsecured debt into a secured one, which may not be a good idea.

Are you financially linked to OH (joint accounts etc?), if you are then your credit rating will be affected. If you are not then don't.

Once your OH has defaults, they will stay on the record for 6 years. Although the debt being settled might help, the defaults will make it more tricky for up to 6 years.

ITtim

Thank you for your reply, see below.

NorthernLas wrote: »

OP: I think it would be useful to separate out the two issues.

1. Moving from a fee paying DMP to another one: This should be relatively simple and there should be terms and conditions on their website as to how you do this.

Looking at debtlines website it does seem that this is possible, although they have told my OH that by not going through debtline paying off the debt direct with the creditors means paying the entire balance. I suspect this is a lie. Am i correct?

This is a quote from DL "Of course if you choose to pay your creditors directly to settle the debts this is fine and we can close your account for you. However you will have to pay the full outstanding balance owed for each debt."

2. Investigating ways to paying off the debts: If you remortgage you are turning an unsecured debt into a secured one, which may not be a good idea.

I appreciate your concern, at the moment we're saving £400 per month and paying £400 to debt line. We'll be using that excess cash to overpay on the mortgage and hopefully bring the extra amount from the debt down at the same time. Because of the change in interest rates from when we took out our mortgage the monthly payment will be the same so it seems a good idea in order to get the debt clear.

Are you financially linked to OH (joint accounts etc?), if you are then your credit rating will be affected. If you are not then don't.

I guess we are, we have a joint bank account and a joint mortgage.
I'm not sure how much impact it will have on me but when we tried to obtain a mortgage last week it was my wifes credit score which was the problem and our advisor seems to think he can get the mortgage for me.

Once your OH has defaults, they will stay on the record for 6 years. Although the debt being settled might help, the defaults will make it more tricky for up to 6 years.

Yes I noticed that on the experian report, more reason to get the debt cleared. The sooner its gone the sooner the report can clear.

ITtim

Also, out of curiosity, i'm not listed on 'Fiancial Associations' on her experian report. Should I be?