Redundency and Debt

buzzby

Hi

With less than 4 months until I get made redundent, I would like some advice on what to do with the debt I have.

I wont be able to clear it before I finish work. Also my redundency payment will not be sufficient to pay it all off.

What would be the best way to go about this with my creditors?
Should I contact them and see what they have to say?

Any help would be appreciated.

Thanks

Buzz

McKneff

Pay it all off your debt, surely that would be the sensible thing to do, you are facing less debt.
Hopefully you will find another job.

Good luck

Rednelly_2

I'd think carefully about this.

First off, the average length of unemployment in the UK is 36 weeks.

That's a long time to survive on benefits. You'll know whether you've a good chance of being re-employed more quickly of course.

It may be that you need to take a long hard look at how you repay your debt, because there is no doubt that creditors will start to apply pressure as soon as they stop getting their payments.

You need to look at priorities too. Are you a homeowner? Will you be able to make your mortgage payments?

How much room do you have to reduce debt repayments? I guess you have no desire to spend any more on credit until your situation improves? If most of your debt is credit card, then can you reduce the payments you are making to a more affordable level, perhaps budgeting for a year on the dole (to be on the safe side) and setting payments at a level which will reduce the amount you owe by the bare minimum each month and ensure you keep in place any promotional (zero %, etc) offers you have.

If you have unsecured loans, then a good first step would be to contact the lender and see if you can extend the period and reduce the monthly payment.

This is just a personal view, but I'd only advocate using the redundancy payment to pay down all your debt as far as possible if you are darn sure you will get a new job fast or that you will be able to survie your period of unemployment on benefits alone (or, of course, if paying down the debt means your payments become so small that you can survive on your other resources). Otherwise, just look at ways you can stay in control until you have a pay packet again.

If you do opt for the kind of solution I've outlined above, then only do it if you are sure that you can keep your debts going down, gently, over the coming low income period in your life.

If your calculations show that you will struggle and your debts may increase, then you need to look at an insolvent solution - and the earlier you do, the easier and less painful that will be.

Going4TheDream

Rednelly wrote: »

I'd think carefully about this.

First off, the average length of unemployment in the UK is 36 weeks.

That's a long time to survive on benefits. You'll know whether you've a good chance of being re-employed more quickly of course.

It may be that you need to take a long hard look at how you repay your debt, because there is no doubt that creditors will start to apply pressure as soon as they stop getting their payments.

You need to look at priorities too. Are you a homeowner? Will you be able to make your mortgage payments.

How much room do you have to reduce debt repayments? I guess you have no desire to spend any more on credit until your situation improves? If most of your debt is credit card, then can you reduce the payments you are making to a more affordable level, perhaps budgeting for a year on the dole (to be on the safe side) and setting payments at a level which will reduce the amount you owe by the bare minimum each month and ensure you keep in place any promotional (zero %, etc) offers you have.

If you have unsecured loans, then a good first step would be to contact the lender and see if you can extend the period and reduce the monthly payment.

This is just a personal view, but I'd only advocate using the redundancy payment to pay down all your debt as far as possible if you are darn sure you will get a new job fast or that you will be able to survie your period of unemployment on benefits alone (or, of course, if paying down the debt means your payments become so small that you can survive on your other resources). Otherwise, just look at ways you can stay in control until you have a pay packet again.

If you do opt for the kind of solution I've outlined above, then only do it if you are sure that you can keep your debts going down, gently, over the coming low income period in your life.

If your calculations show that you will struggle and your debts may increase, then you need to look at an insolvent solution - and the earlier you do, the easier and less painful that will be.

I have to say I agree but a decision to go down this path will be based very much on your own unique circumstances.

When I was made redundant (I have one loan but not manageable on JSA) I chose to keep my redundancy payment with a view to using it to pay the loan each month incase I was unable to find work for a long time. I know it goes against everything money saving as I was incurring interest but I felt it made me feel safer and more in control at was is and can be a very stressful time. It freed up time to focus on job hunting and also meant I had the money to travel to interviews etc. Luckily for I was fortunate enough to secure a temporary role within 9 weeks that went perm four weeks later so it was the right decision for me.

SarEl

It would possiblt be worth getting advice on the benefits board too - I may be wrong but I think you can be sanctioned on some benefits if you dispose of your capital in ways they don't approve. Which I suspect may be most ways of disposing of it.

sharonfrancis

My partner was made redundant recently - he did not receive any redundancy payout as he'd been with company less than 2 years.
He contacted his creditors to say he could not meet payments but offered a token payment which they agreed to. We had to write letters detailing his payments in / out.
Not sure how they would be if you had a pot of redundancy payout?!
Tho I am sure you can claim JSA if you receive less than 8K (I think!) payout....

Going4TheDream

sharonfrancis wrote: »

My partner was made redundant recently - he did not receive any redundancy payout as he'd been with company less than 2 years.
He contacted his creditors to say he could not meet payments but offered a token payment which they agreed to. We had to write letters detailing his payments in / out.
Not sure how they would be if you had a pot of redundancy payout?!
Tho I am sure you can claim JSA if you receive less than 8K (I think!) payout....

Contribution based JSA is not affected by savings, and is based on NI contributions and usually paid for (6 months) 26 weeks. It is not affected by your partners income, if you have one. If you have paid enough stamp for enough time then you will get it. After that, or if you don't qualify for contribution based, you would go on to Income based JSA is and the limit you can have in savings is £16k. The more you have saved the less benefit you will receive, your partners income will be taken in to account for this. I imagine that as the OP states that they will be getting a redundancy package that they should get contribution based JSA and savings wouldnt be taken in to account

SarEl

Going4TheDream wrote: »

Contribution based JSA is not affected by savings, and is based on NI contributions and usually paid for (6 months) 26 weeks. It is not affected by your partners income, if you have one. If you have paid enough stamp for enough time then you will get it. After that, or if you don't qualify for contribution based, you would go on to Income based JSA is and the limit you can have in savings is £16k. The more you have saved the less benefit you will receive, your partners income will be taken in to account for this. I imagine that as the OP states that they will be getting a redundancy package that they should get contribution based JSA and savings wouldnt be taken in to account

No, but I have heard some pretty horrific stories about people who were unemployed for more than six months and then got sanctioned for having disposed of their capital, and not on drink, fast cars and women! Which is why I think it would be well advised to get someone who really knows the rules to comment on this. It's no good clearing, or part- clearing your debts if you end up getting no money after six months. Better hang on to it and part clear when you get a job.

agrinnall

If one of your creditors is your bank then you should open an account elsewhere to have your redundancy paid into otherwise they may just take it whether you want to use it to pay off the debt or not (and generally they are allowed to do this).

buzzby

Hi

Cheers for all the replies.

Situation is I get made redundent at the end of November.

My total debt is around £6000,

My redundency is government minimum for 8 years which for me is £2700.

Could I take out any payment protection now? (Just a thought)

Going4TheDream

SarEl wrote: »

No, but I have heard some pretty horrific stories about people who were unemployed for more than six months and then got sanctioned for having disposed of their capital, and not on drink, fast cars and women! Which is why I think it would be well advised to get someone who really knows the rules to comment on this. It's no good clearing, or part- clearing your debts if you end up getting no money after six months. Better hang on to it and part clear when you get a job.

What I advised was correct and was in reply to another post suggesting that the maximum savings/payout allowed to claim benefits was 8k or so she thought. I don't mention anything about disposing of any savings in any manner and if you see from my previous comment on this thread actually advised the OP that I didn't pay of my financial commitment when I was made redundant. You have left me a little confused as to why you tagged your post on to my comment?