£26k debt help

pinchez

I've just found out my partner as ran up huge debts by taking out various payday loans to cover a large bank loan she already had and her day to day living expenses.

In total she owes £18000 and on top of that I have 4 credit cards with just under £8000 that was managed and we both new about I.e. we would do a years worth of spending and then pay them off within that year if that makes sense!

Problem is my partners debt was not known to me and we can't hope to pay it back normally and the interest on these payday loans is crippling

Our joint income is £32k and I am committed to paying the £8k back on the Credit Cards so one of us will keep a decent credit record. So all my money is tied up in this.

My partner as filled in a questionear on the CCCS site and as been advised that she has £166 spare each month and as advised her to go with an IVA but also said that she could go with a DMP.

Problem is she really can't afford any more than £100 per month for at least a year until I can get these credit cards paid off then we can both concentrate on her debt. This is a massive debt that I can't see us paying off for many years.

Would they agree to take less than £166 off her and what should she go for IVA or DMP what are the pros and cons.

paulmapp8306

No. The SOA she filled out shows all her aoutgoings. Whats left is what she can afford.

IF you want to do this as an individual rather than joint, firstly you must have NO joint financial arrangements (a mortgage, or any bank account), because if you have her bad rating will also apply to you.

Secondly, if you ARE seperate financially, then you must look after your £8k debts and allow her to look after her own DMP/IVA. If that means you can no longer afford payments - a joint plan may be better. If you CAN afford it, but it means you tight - well thats unfortunate but thats the way it must be.

RAS

Read about the new rules on payday loans http://blog.moneysavingexpert.com/2012/05/28/payday-loan-self-regulation-may-be-more-of-a-stick-than-they-bargained-for/

Read saltnvinegar's excellent thread on dealign with paydayloans.

Get your GF to post her SOA on here so that we can tell if she has filled it in properly. If she has not been budgetting properly previously, there is a good chance the SOA with CCCS is also deficient.

What was the bank loan for?

paulmapp8306

Oh - Pros/cons

IVA, runs for a set timeframe (5 years I believe but could be 6) with an agreed amount payed per month. Any outstanding debt after this point is wiped. Interest is frozen. You need to declare past IVAs (as far as I know) even once their cleared. The IVA isnt flexible - what is agreed at the outset is what you pay for the complete term.

A DMP is flexible - that is you can review at any time (and will get an annual review anyway) and increases in expenses, or in income are taken into account to raise or lower you monthly payments. Lendersdo not have to stop interest, and some wont for 6-12 months, but usually after that point interest is stopped. You pay the complete debt back - even if it takes 15 years, BUT you debt will drop from your credit report after 6 years from default. You do not need to declare past DMPs in the future (in fact Im still on one which is 10 years old, and can now get a mortgage).

Which is better depends on the size of debt, what payments can be afforded, your sense of "responsibility" (ie do you take responsibilty for your debts and want to pay it all back - or are you happy going for whatever costs you the least), and how quickly (and how completely) you want your credit rating to recover once the debts are cleared.

pinchez

Thanks everyone.

The only thing that financially links my Wife and I is an old savings account that we opened just to put cheques in that were gifted to us on our wedding day. She says she'll remove me from the account (she works for the bank) before she goes through with either IVA or DMP. Would this work or would I still be financially linked?

The original loan for £11000 was a consolidation loan but details of what they were are hazy at best. We've already gone through hell and back over this and I'm pretty confident it's nothing sinister.

To be honest i new nothing about these debts till Saturday just gone when I opened one of her letter with quick quid on the envelope, knowing they're loan sharks, she's basically been paying me a half of our household bills by taking loans out with the likes of quick quid

IVA seems more appealing as there's an end in sight and they freeze interest. But does this mean she'll never be able to apply for a mortgage in the future?

Btw we're council tenants and all debts are unsecured.

paulmapp8306

You need to "de-link" with the credit reference agency not the bank (though you would need removing from that first).

im not totally sure of the rules here though - you may need to proove you are no longer linked, so as your still married and share a home Im not sure if you can.

The only thing to check, is on your credit file - check for "linked accounts" and see if your wife is on there. A savings account may not be listed anyway - as there are no credit facilities on those accounts. If its not listed on your credit file, and thats the only link - you may be seperate already.

paulmapp8306

You can get a mortgage is you have settled IVAs - but its more difficult to get a competative interest rate.

Payment via DMP at £166/month is 9 years - so more like 10 by the time interest is frozen, v 6 years on an IVA.

As i say though, when on a DMP you have flexibility. If she looses her job she can reduce payments on a DMP - but not on an IVA. You can also increase payments on a DMP so shortening the payment period if/when that becomes an option. You can also make early "full and final" payments when on a DMP - which can be as low as 10% of the outstanding debt (thout 50-80% is more normal). Again this cant be done on an IVA.

The way I look at it, if you may need the flexibility of changing payment ammounts - go DMP. If you dont need flexibility, go IVA. The reason CCCS are recommending an IVA is because of the repayment period on a DMP.

RAS

If she works at a bank, then the situation is a bit different.

She needs to contact her union rep and contact the HR department through them, anonomously at first - what if basis.

If she signs any sort of insolvency or debt managment arrangement without fully involving her employer, she will probably lose her job.

We have however seen bank employees go BR on the advice of their employer and keep their jobs.

pinchez

Thanks again for the advice,

She's going to remove me from the savings account and ask someone "who knows about such matters" at her work for advise before she makes a move.

This might sound mad I don't know! But I've applied for a personal loan to consoladate all 4 credit cards in to one payment of £200 per month over 4 years as this will give us some breathing room and I'll pay less interest on a loan at 6% than the credit cards. Even if I was to pay minimum payments on the cc's it would almost be £200 with most of that being interest.

If someone thinks this is a bad idea shout up!

I applied on line with my bank, been with them 20 years, always had money in my account, never defaulted or been late with payments but never had a loan from my bank before so fingers crossed maybe!

RAS

Consolidation only works if you close all the accounts that you are paying off.

Apparently 83% of those consolidating accounts end up with the consolidated loan and more debts.

Do not just cut up the cards, close the accounts.

paulmapp8306

Loans to pay debts are almost always bad news. HOWEVER, if your only paying minimum payments on the CCs then it may be an option in your situation - particularly at 6% interest which isnt that bad at all really.

Is your other hals £18k all PDLs? Asking as if you took the loan out - your CCs would be clear and (provided you didnt have to close the accoutns to get the loan - which is very possible if its for consolodation not just a personal loan) you have £8k spare that you could sideload PDLs too. Again not ideal BUT it will be a lot less interest than the PDLs. It may not be worth doing though unless all the PDLs could be re-located on the cards, or your wifes SOA will show she can afford what is left (as your treating yourselves as individuals).