In need of debt advice

nallamas

Hi,
New to site and looking for best solution to a long running problem,
I have credit card (3) debts totaling some £25k none of which i have used in over 12 months but the interest is crippling, i also have a current account mortgage which has 12 years to run on which i still owe £120,000, this has a limit of £150,000 but i cant make a dent in the mortgage with the amount i pay out each month in interest on the cards. Do i make a call to the credit card companies and offer a percentage of what i owe and add it to my mortgage ( how much would they accept as a % ) or do i opt for an IVA or even bankruptcy. I have let this problem run far too long and have kept this pretty much away from my wife as she believes that this is all my fault but i have grown the debt over years not on lavish living just on trying to keep pace with people providing extras for the kids etc but nothing extravagant, i dont smoke,gamble and drink in moderation so its not been spent there either, but yes i have spent it. There will i'm sure be answers along the lines of your wife must have taken part in whatever family activities this money has paid for and she has but i am trying to have a plan i can lay out for us both that will hopefully put this problem to bed as it plays on my mind every day. Any advice will be much appreciated. Thank You

National_Debtline

Hello there,

The first thing to do is to make yourself aware of all of your debts. Compile a comprehensive list and work out how much you owe in total. One of the key reasons for doing this is to ensure you choose the most appropriate route forward that meets your needs.

The next step is arguably the most important of all. You should complete an accurate financial statement. Before you consider what you might be able to offer your creditors you should ensure that you have enough money to meet your essential outgoings such as housing costs, bills, housekeeping and travelling costs. You can see an example financial statement on our website: http://www.nationaldebtline.co.uk/england_wales/pdf/personal-budget-sheet/your-personal-budget-sheet.pdf

The financial statement needs to be realistic, it’s important to ensure you have enough money to live on until you next get paid. The aim is that you will never need to borrow again. The figures do need to be reasonable, creditors may reject a budget if some of your outgoings are too high. There are general guideline figures, some of which you can see on page 18 of our self-help pack: http://www.nationaldebtline.co.uk/england_wales/pdf/self-help-pack/step-2-working-out-your-personal-budget.pdf

The aim of the budget is to help you calculate how much money you have left once you have accounted for your essential outgoings. The money you have left is called your ‘surplus’. This is the amount you can then offer to your creditors.

We have a very useful online advice tool called My Money Steps. It can help you create you financial statement and can also provide you with tailored advice about the best options for you. Please take a look: http://www.mymoneysteps.org

Alternatively, you can put your budget on to this forum by using the following calculator: http://www.stoozing.com/calculator/soa.php

That way, the folks here on MSE can offer you guidance and pointers.

We place debts into two general categories, priority and non-priority. In essence priority debts are those that if you do not pay would cause you to lose something. Typically they have an effect your property, liberty or utilities if not paid. Priority debts include mortgage/secured loan arrears, rent arrears, council tax arrears, gas/electricity arrears, hire-purchase arrears or any court fines. If you have priority debts it is vital to get arrangements in place with these before you look at making arrangements with credit debts such as loans, credit cards, overdrafts, payday loans and catalogues.

Credit debts are classed as non-priority debts. Non-priority creditors have limited options available to them when it comes to chasing payment. The main option they have is to ask for the money via telephone calls and letters, this is why they can often bombard you with their demands. As a worst-case scenario the creditors could consider using legal action to recover their money, this really should be used as a last resort. If you have a creditor that is threatening court action or if you receive court papers in the post it is important that you seek further advice straight away.

If you fall behind or miss payments on your debts it can have an effect on your credit score. Any marks on your file would stay on there for six years.

Once your budget is completed, any surplus income would be used to pay these non-priority debts. This figure should be divided up on a pro-rata basis amongst the creditors, this would mean that the people you owe the most to would get the largest share and whoever you owe the least to would get the smallest share.

If your budget sheet shows that you have very little or nothing remaining for your creditors, you should offer each creditor a token payment of £1 each per month.

If your budget sheet shows that you can meet your contractual minimum payments you should continue to do so. If you can overpay you should try and reduce the debt with the highest interest rate first, once that one has been cleared move on to the debt with the second highest interest rate – and so on.

On our website you can find some sample letters which can be used to write to the creditors asking them to accept the new payments and to freeze any interest and to stop any further charges being added. Always include a copy of your personal budget so the creditor can see they are being offered a reasonable amount. It may take a few attempts to get the creditors to agree. It’s recommended that you contact your creditors in writing rather than via the telephone. Here are our sample letters: http://www.nationaldebtline.co.uk/england_wales/debt_advice.php#6

If you currently hold a bank account with someone you have a credit agreement or overdraft with you stop using it and open an account with a new "safe" bank or building society. Banks have the ability to remove money from current accounts to satisfy any arrears owing on credit agreements, a safe account would stop this from being possible and safeguards the income you receive.

There are various options that can help you deal with your debts, we have written a brief guide to them all here: http://www.nationaldebtline.co.uk/england_wales/page.php?page=35_options_for_dealing_with_your_debts

The guide outlines the benefits and implications of all options. It is important to research all possible routes forward to help you arrive at an informed decision about the best way for yourself. Do ask as many questions and research as much as you can. Never feel rushed in to making any important decisions.

How much is your property worth?

Best wishes,
David @ NDL.

glasgowsaver2011

For me the simple answer would be to pay off the credits card completely with the mortgage.

surely.

and then cancel the accounts for the credit cards.

you can then overpay the mortgage at a much lower rate of interest than the credit cards would cost you...

Growurown

Hi nallamas. You could try the step change website and go through their debt remedy. It will give you an idea but I think you need professional advice so give them a call.

Goodwinners

Hi i left university as a year 2 student as me and my girlfriend were expecting a little boy..... i had too leave university to allow me to work more to provide more for my little family. He was born 1st january 2013 and whilst leaving university and getting more hours in work i managed to build up a £1200 overdraft which at the moment is interest free until August which i need to pay off i earn on average of £950 a month but with £500 worth of rent to pay im not left with much and im constantly stressed aand unhappy because of this situation and embarressed to speak to family and the bank