CAB advising me to stop paying CC

gregdedman

Hi there all,

I don't want to belittle any advice that was given to me today at the CAB, im just wanting to check that its the right advice as i dont want to get further into trouble.

I have a debt of £2000 with HSBC and my account is closed as a result of asking for a drop in my interest. Interest sits at 24.9% and with no job, no income (not even JSA at this point) and no home I just cannot afford to live and pay off the £51 minimal payments each month, £37 of that being interest!

I explained the situation to the CAB and they advised me to just stop paying them. I was told that I would be bombarded with letters demanding payment, and then it would get transferred to a debt collection agency and then the interest would freeze.

Of course, I dont want to get myself further into the mire and have thought about paying them £1 a month but the CAB said that paying nothing was easier.
Would you guys have any further advice for me before I cancel my direct debit to HSBC?

Thank you in advance, these forums are lifeline to people and the spirit here fills one with faith in humanity! I dont know where id be without them!

Greg

Kimitatsu

Hi Greg

To be honest that is just the advice I would give to you as well. Your priority debts are rent, water, gas electricity, council tax and any CSA payments. This is not a priority payment and as such you are currently paying £37 a month in interest on no income.

Why would you want to be paying that when you could have it transferred to a debt collection agency who will accept £1 a month with no interest (and if your circumstances change will take a reduced sum in full and final settlement) so that will forestall any further action.

Even if you were awarded JSA, then just under 50% of your income would go just to servicing this debt and this debt alone. Harsh as it sounds the advice is good, the money adviser is doing their job and putting you first with priority bills and this can sit waiting until there is an upturn in fortunes.

Why are you not getting JSA? This will trigger other benefit payments for you as well.

Tixy

Usually people are advised to pay a token payment rather than nothing at all, and £1 per month is usually suggested for people who are on benefits.
It is still likely that a default notice will be issued - but if you write and explain your circumstances then it should hold off them taking further action against you. By paying a token payment you are demonstrating that you cannot pay rather than don't want to.

Maybe CAB said pay nothing at all as you are not even in receipt of benefits. Are you likely to be able to claim JSA soon? have you had a look what other benefits you might be entitled to - such as housing benefit etc?

If you look here - http://www.nationaldebtline.co.uk/england_wales/debt_advice.php#6 - 3rd letter down in the sample letters list - I would consider sending a letter along those lines with your first token payment (probably not worth doing a budget if you have no income, just explain that this is the case).

This credit card debt is with HSBC - do you bank with HSBC as well? If so you'll need to open a new bank account before you have any benefits paid to you, otherwise HSBC will raid your current account to pay off the credit card (known as offsetting).

gregdedman

Thanks guys,

Im waiting for my JSA interview on wednesday, and Ive looked into Housing benefit too and will discuss it with the job centre.
Thanks for the link to the template letters, ill feel better writing to them as apposed to just letting a payment get missed.

Finally I do not bank with HSBC, im with Nationwide so it should be ok there.

Thanks again for your help

Greg

Kimitatsu

gregdedman wrote: »

Thanks for the link to the template letters, ill feel better writing to them as apposed to just letting a payment get missed.


Greg

By doing that though you will still incur interest at 24.9% rather than having the interest frozen, so your debt will grow even though you are making token payments.

gregdedman

The CAB have said that yes, the debt will be in arrears and ill get charges but it will eventually go to a debt recovery agency and then the interest will freeze.
I would then arrange a payment plan on what I can afford (token £1 payment).

Can anyone give me a 'yay or a nay' on this, if I cannot afford this monthly payment, literally, cannot afford it, should I just stop paying them and go through the bombardment of demands and charges?

immoral_angeluk

gregdedman wrote: »

The CAB have said that yes, the debt will be in arrears and ill get charges but it will eventually go to a debt recovery agency and then the interest will freeze.
I would then arrange a payment plan on what I can afford (token £1 payment).

Can anyone give me a 'yay or a nay' on this, if I cannot afford this monthly payment, literally, cannot afford it, should I just stop paying them and go through the bombardment of demands and charges?

Yep. Sounds totally normal CAB advice. You can't pay what you haven't got and 99.9% of people who are receiving benefits and want to do payment arrangements will end up doing token £1 payments........ Jobseekers is designed to be what the government feels that Mr Joe Bloggs UK average needs to pay their bare basic bills and living costs, and debt is not a priority unless it is secured on goods or where you could risk losing essential services or items so things like gas/elec, rent, tv licence etc.

If it makes you feel any better I'm a debt caseworker for CAB and what you have been told is exactly what I'd advise you to do until your benefits were in place and we could then do a full assessment of all of your options.