Large CC debt, little income, best option?

creed92

Hi. Before I begin I'd like to give you some background about myself. I'm currently in my fifth and final year of medical school, meaning from next August I will be working as a doctor and earning a decent wage.

Over the past few years I have racked up considerable credit card debt, mainly due to reckless spending on my part. I have not missed any payments, however I am now becoming aware that in the next few months I'm going to be unable to keep up with repayments. Here is a quick summary of my cards:

Barclaycard Initial (0%): £2100
Barclaycard Platinum (11%): £1900
Capital One (30%): £300
MBNA (0%): £1500
Tesco (0%): £2300
Vanquis (30%): £1300

My monthly income is around £400 a month as I recently had to give up my part-time work to commit to my studies. I have no real assets as I live with my parents and my car is paid by my father. My essential outgoings are £150 a month to my father for rent which has to be paid otherwise he himself will get in money trouble, and also fuel for my car.

I am aware that i have severely ****ed up. But that's not going to help me now. I've looked into several options. The most useful to me looks to be a DRO. As far as I'm aware I meet the criteria (<£20k debt, <£50 a month spare income, no assets). From next August I will obviously be in a much better financial situation and will be able to make payments to reduce the debts. I am not looking for debts to be written off, just 10 months breathing space. I'm also not particularly concerned about effects on a credit file.

Thanks in advance.

National_Debtline

A DRO is a legal form of insolvency and can damage your ability to get credit for 6 years (and beyond)....if it is apparent that the DRO won't complete successfully then there is no real point in starting the process. You would be better to do a SOA and work out what you can afford each month (even if it is only £1per month until things improve).


When your circumstances do improve then you can increase the monthly instalments and clear the debt quicker. Reduced payment plans will also be damaging to your credit file but not as much as a DRO. Full, free advice may be quite helpful too.


Laura
@natdebtline

fatbelly

Hmm. A DRO seems a bit heavy duty when you are pretty sure you will have it revoked in 10 months time. The Blair/Brown government were going to introduce an ERO (Enforcement Restrictions Order) which is what you are looking for. But they never got around to it.

So you have <£50 per month spare for the next 10 months. Guessing the minimum payments come to around £250. Are the cards maxed out? Would they increase the limits? Are you able to get a new card?

I know that sounds irresponsible but your debt (even £2500 of extra debt) won't be a huge amount when you are qualified, and you may find a clean credit file is important in a few years.

If you can't get more credit or juggle existing credit then just stop paying. You will eventually get defaults (3-6 missed payments) but court action is not going to get them anywhere and you can just pay off the debts (maybe at a discount) when the money comes through.

If your plans don't work out then you still qualify for a DRO. BTW to qualify the car either needs to be owned by your father or be yours but worth <£1000.

creed92

National_Debtline wrote: »

A DRO is a legal form of insolvency and can damage your ability to get credit for 6 years (and beyond)....if it is apparent that the DRO won't complete successfully then there is no real point in starting the process. You would be better to do a SOA and work out what you can afford each month (even if it is only £1per month until things improve).


When your circumstances do improve then you can increase the monthly instalments and clear the debt quicker. Reduced payment plans will also be damaging to your credit file but not as much as a DRO. Full, free advice may be quite helpful too.


Laura
@natdebtline

Thank you for your help. That does sound to be a better option. What would be the best way of arranging this? Contacting my creditors directly and hoping they accept? Or seeking advice from CAB or similar? I was suckered into paying for the Repayment Option Plan by Vanquis so I'm hoping I can use that to get my account frozen for 12 months. Other than this there's nothing else I can do to afford to pay them. I also don't have any assets (living with parents, car owned by father) so I would think it wouldn't be in their interests to send a debt collection agency around.

Also, would the fact that I am guaranteed employment in 10 months mean it's more likely they will be amenable to a deal?

creed92

fatbelly wrote: »

Hmm. A DRO seems a bit heavy duty when you are pretty sure you will have it revoked in 10 months time. The Blair/Brown government were going to introduce an ERO (Enforcement Restrictions Order) which is what you are looking for. But they never got around to it.

So you have <£50 per month spare for the next 10 months. Guessing the minimum payments come to around £250. Are the cards maxed out? Would they increase the limits? Are you able to get a new card?

I know that sounds irresponsible but your debt (even £2500 of extra debt) won't be a huge amount when you are qualified, and you may find a clean credit file is important in a few years.

If you can't get more credit or juggle existing credit then just stop paying. You will eventually get defaults (3-6 missed payments) but court action is not going to get them anywhere and you can just pay off the debts (maybe at a discount) when the money comes through.

If your plans don't work out then you still qualify for a DRO. BTW to qualify the car either needs to be owned by your father or be yours but worth <£1000.

Thanks for your advice. I am unable to acquire any more debt. The car is owned and paid for by my father, I actually have almost no assets (just a phone and macbook). I'm hoping it doesn't come to that and I can arrange some sort of deal.

National_Debtline

creed92 wrote: »

I also don't have any assets (living with parents, car owned by father) so I would think it wouldn't be in their interests to send a debt collection agency around.

Also, would the fact that I am guaranteed employment in 10 months mean it's more likely they will be amenable to a deal?

Debt collectors are very unlikely to visit - they may threaten a 'doorstep agent' but this is rare. In the unlikely event that it does happen they have no right of entry or repossession so you can simply tell them to leave.

As part of your negotiation you can highlight that the current offer should only be temporary but try and avoid any firm promises about the future because you never know for sure. Make sure to take full, free and independent advice about how to negotiate, sample letters, SOA etc. You can also take advice about any poor service you have received from your creditors and possible complaints processes. Good Luck

Laura
@natdebtline

northerner999

You say you have no real assets as you live with parents, but have you built up collections of things like CDs and DVDs? These are assets which can be realised into cash if you need. There are guides on this site for the best way to get cash for these kind of things, but Music Magpie is a good starting point just to find out the lowest rate. You say you had to give up part-time work, but finding the local car boot sale and flogging unwanted stuff could make a three-figure sum in one morning if you've got good stuff. When I was self-employed I signed up for all the online survey websites and brought in a steady tenner a week (this relied on me working from home and clicking on the links when work was slow).

I guess my point is there are simple and easy ways to up your income which don't require the commitment of a part-time job and should not affect your studies.

dktreesea

creed92 wrote: »

Hi. Before I begin I'd like to give you some background about myself. I'm currently in my fifth and final year of medical school, meaning from next August I will be working as a doctor and earning a decent wage.

Over the past few years I have racked up considerable credit card debt, mainly due to reckless spending on my part. I have not missed any payments, however I am now becoming aware that in the next few months I'm going to be unable to keep up with repayments. Here is a quick summary of my cards:

Barclaycard Initial (0%): £2100
Barclaycard Platinum (11%): £1900
Capital One (30%): £300
MBNA (0%): £1500
Tesco (0%): £2300
Vanquis (30%): £1300

My monthly income is around £400 a month as I recently had to give up my part-time work to commit to my studies. I have no real assets as I live with my parents and my car is paid by my father. My essential outgoings are £150 a month to my father for rent which has to be paid otherwise he himself will get in money trouble, and also fuel for my car.

I am aware that i have severely ****ed up. But that's not going to help me now. I've looked into several options. The most useful to me looks to be a DRO. As far as I'm aware I meet the criteria (<£20k debt, <£50 a month spare income, no assets). From next August I will obviously be in a much better financial situation and will be able to make payments to reduce the debts. I am not looking for debts to be written off, just 10 months breathing space. I'm also not particularly concerned about effects on a credit file.

Thanks in advance.

Make the minimum payments on all of them, - say this leaves you with £150 left over. With your Dad, see is there are some things he needs to pay which you can use your credit cards to pay, thus keeping free a bit of spare cash. For instance, pay his electricity bill in lieu of all or some of the rent, but put it on your card. He would have had to pay it anyway, so it should be the same to him whether the money comes via cash or a credit card.


So this way you will be using your cards as revolving lines of credit. The 0% cards are ideal for this, since they shouldn't be costing any interest for a while. Even if they have a portion costing interest, your minimum payments will go towards this portion of the debt first.


In this way, the minimum payment will go onto all your cards, but will remain available for you to use. Trust me when I say I have been through this very problem and it can need day to day micro management. But it's worth it, and the light (next August ) is at the end of the tunnel.


Overall, try to only use £390 a month to live on instead of the whole £400.


Breathe. Hold your nerve and don't panic. It's going to be okay if you can live on £400 a month. Using credit cards as revolving lines of credit on a long term basis tends to be disastrous, but for ten months with a great income at the end of it, is do-able.


Don't get a debt relief order. In the long run this can be expensive. At some point you are going to want to buy a house or flat. It's only ten months. Mucking up your credit rating at your age is, imho, crazy. What do you do for your £400 a month?