What constitutes a debt crisis?

john10001

What constitutes being in a debt crisis?

It might seem daft that I ask this question but I am someone who is very calm, relaxed, patient, ice cold mentality, and nothing much will ever bother, worry or phase me.

This may seem like a good thing but it has a few major problems and that is I will rarely know when I have problems and need help, and even if I did and was struggling I would always want to find an honorable way to deal with it myself without accepting help or rely on others.

One other example of when it can be an issue is if I have something wrong with my health I am concerned that I would not realize it as I believe I have a higher threshold for pain than most and just the attitude of "get on with it".

If your debts are greater than your annual income after tax, even before tax would you say this was a good indicator? And what percentage of debt to your GDP would you say is manageable before you have big problems? I believe I am running at debt to GDP of 162% total but 142% excluding student loan. This is after tax. Before tax it is around 129% and 112% minus Student Loan.

Thinking about it, if I were a nation that would make me worse than Greece wouldn't it?

It is something that I want to do something about and get rid of all my debts but I think I am going to need to restructure my debts to do it if that's possible. I have too many different credit cards etc and just want to get rid of them, possibly consolidated into one loan with a plan to pay off over 5 years or so to be completely debt free.

My eventual plan is to have no credit cards whatsoever and also absolutely no bank accounts or anything like that. I am not sure if the latter will be possible or feasible though in the modern world so may have to just go with a bank that suits my needs better. I am hoping for a big shake up of banking and modernization to 21st Century needs.

The only thing that has got me to the point of reading the MSE forums and making this post is because I recently had an overdraft terminated out of the blue which has worried me slightly and I am finding things very tight at the moment.

Thanks for your input.

John

InsertWittyName

I would suggest that any debt barring student loans and mortgages is a problem that needs tackling.

As for what constitutes being in a debt crisis... I would say when you are struggling to meet minimum payments, or when you feel you are personally struggling because of the debts.

unimaginative_user_name

InsertWittyName wrote: »

I would suggest that any debt barring student loans and mortgages is a problem that needs tackling.

As for what constitutes being in a debt crisis... I would say when you are struggling to meet minimum payments, or when you feel you are personally struggling because of the debts.

Good points although I would say if you can only make minimum payments you are tinkering on the edge of a debt crisis as you are probably only covering the interest not reducing the amount borrowed.

Apart from credit cards which I repay in full each month the only debt I have is for a new bed. The repayments start in October and they are budgeted for. There is no interest on the loan (though I suspect that prices in the shop may reflect the fact that people tend to buy on credit) I don't consider this crisis debt.

When your debt levels are starting to make it hard to make ends meet unless you take out more debt then the situation needs to be tackled.

R_P_W

so you have borrowed 129% of your pre-tax income (not including your student loan)? Is that just credit cards and personal loans or does that include a mortgage as well?

If it is justs cards and loans to me that is what i would call a crisis!

chevalier

http://www.makesenseofcards.com/soacalc.html

If you have a minus figure when you have accurately filled this in, then if not in debt crisis, you are heading that way.

The having the overdraft removed, is also perhaps a signal that your credit worthiness has been reviewed, and it is thought that you have too much debt for your income (have you asked for it to be reinstated, it might be a mistake).

Also I would say debt crisis is when the only way you 'think' you can meet priority bills, is to pay for them on credit cards.. eg council tax and power bills.

good luck
chev

Anthorn

If we're talking debt crisis then that's when your outgoing funds is more than your incoming funds. If struggling with debts but you have some income left after your regular payments off the debts you can always cut back: Eat spaghetti rings instead of roast beef, grow your own veg, etc.

dancingfairy

Wether you fit a technical definition of being in crisis is in my mind neither here nor there. What if you were to fall ill (or a loved one fall ill and you had to take off to care for them, what if you lost your job etc etc). Whilst you may feel o.k now it would probably be a lot better to have a plan in place and to start tackling things now, before it becomes a major crisis and your health starts to suffer (and you have to deal with courts and bailiffs, debt collectors etc).
Best of Luck
df

poppasmurf_bewdley

What constitutes a debt crisis?

To quote Mr Micawber:

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

tallyhoh

If I lost my job tomorrow & didnt have funds to pay my debts is one way of looking at it. The other of course is not being able to cover minimum payments.