Bankruptcy, DMP or F&F?

Ben75

Hello all, I am a long time lurker and first time poster. As the title of the thread suggests I would like to gauge opinions on how to proceed with my debts.

Due to a combination of mental health issues and irresponsible borrowing I racked up some pretty substantial debts (£55k). I was then made redundant in 2010 and defaulted on my credit accounts. I managed to secure employment in relatively low paid job in financial services, which meant I needed to avoid bankruptcy. I made regular payments in a self managed DMP and now owe £44k and my last default was in May 2011. All my creditors were able to produce CCA's when I asked them. I had been paying around £200pcm to my creditors.

I now have a higher paid job and bankruptcy would not affect this job. I can afford to pay £500pcm towards the debts plus the occasional annual bonus (around £600-£1000)0 - though I haven't upped my payments yet. My brother has also offered me £10k towards my debts if I can settle a significant chunk of them, I would like to avoid bankruptcy as I can see that I may be able to get a mortgage in a few years if I can f&f my debts and start saving finally.

Do I need to suck it up and go bankrupt? Should I make the offer to the creditors and suggest the alternative is bankruptcy? I am slightly bewildered as to what to do, so any comments or suggestions would be appreciated.

Ta

Ben

sourcrates

Hi Ben,


Depends on a number of factors, are all the accounts with collection agency's or still with original creditors ?
It matters as only collection agencies will offer the type of discounts you would be looking for, but I seriously doubt 10k will be able to settle 44k of debt, however you may be able to rid yourself of a large proportion of it, depends on the answer to my question above really !!

Ben75

4k is still with original creditors
16k is with in house dca
14k is with external dca but still owned by original creditors
10k has been sold and being collected by a dca,

sourcrates

Ben75 wrote: »

4k is still with original creditors
16k is with in house dca
14k is with external dca but still owned by original creditors
10k has been sold and being collected by a dca,

I don't think it could all be cleared for 10k personally.

I think it's worth trying, but you would have to make exceptionally low offers, I don't know how successful that would be.

If you can throw a fair amount at them on a monthly basis, that may be better than Bankrupcy, but assuming your not a homeowner, then Bankrupcy may be an option for you.

Stepchange have a debt remedy tool on there website, you input your details and it throws out a debt solution for you, maybe give that a try, see what it suggests ?

Ben75

Thanks for the suggestion. With £500pcm available Stepchange recommend a DMP. I will send offers out and see what I get back, I am hopeful that with negotiations I can use the £10k to roughly halve my debt to around 20-24k and leave me with 40-48 months to being debt free

absolutereturn

£500 a month is probably too much and will leave you short for other things. The trick of successful F&F acceptance is to show your creditors that it will take ages to clear the debt when you're paying them, say, £20 or so a month and there's no guarantee you'll be able to keep that up forever so they'll be better off accepting a small bird in the hand rather than hoping for two larger ones to be found in the bush.

They're more likely to accept a lower F&F after a couple or so years of reduced payments and once your accounts have been sold to a debt purchaser who paid just on average 10% or less for the account.

Ben75

Of course, it is important to have some resilience in the budget in case unexpected spend pops up, so I have built a little bit of that in. Have recently acquired YNAB, and am wondering how I ever managed without it. I will review whether increasing to £500 is the right decision. Is it legitimate to build your own F&F fund?

It is slightly surprising in a way that only one creditor sold up nearly five years after defaulting, but I guess that is because I have been paying regularly. Still, am hopeful that I can get some sort of discounts either now or in the next 2-3 years.

absolutereturn

Ben75 wrote: »

Of course, it is important to have some resilience in the budget in case unexpected spend pops up, so I have built a little bit of that in. Have recently acquired YNAB, and am wondering how I ever managed without it. I will review whether increasing to £500 is the right decision. Is it legitimate to build your own F&F fund?

Why not? Nothing wrong with that, even though F&Fs are often proposed to creditors saying a friend or relative is making money available. You don't need to tell anyone (including DMP providers) that you are saving up for that purpose.

Ben75 wrote: »

It is slightly surprising in a way that only one creditor sold up nearly five years after defaulting, but I guess that is because I have been paying regularly. Still, am hopeful that I can get some sort of discounts either now or in the next 2-3 years.

It is unusual, however, it could be not just because you are paying regularly but because you are probably paying quite a bit every month. The vast majority of defaulted accounts where no payments are made or only tokens are paid or the payments are very low, get sold. The more you pay the less chance of the account being sold and/or a low F&F being accepted in the future, that's usually how it works.