Options for managing debt?

Jiva

Hi all,

I'm hoping to try and get my debts in order this year but not sure best how to go about doing so.

Me and my girlfriend (living together with kids) have about £25k of credit card and arranged overdraft debts between us. I have about £7k of that, she has the rest.

I'm self-employed/freelance and earn about £2.5k per month/ £30k per year before tax and my gf is a stay at home mum, although hoping to start doing some freelance work on the side in the coming months.

Although in the last few months I've incorporated as a Ltd company for tax purposes. Me and the gf are both directors in the company. We just have one joint bank account between us which is the newly opened business account.

We are private tenants renting our flat. Our living expenses and debt repayments take up all of our income and we haven't missed a payment yet but are starting to struggle.

I'm going to try and take out a £25k loan with my bank to get all the debts into one place. According to the online calculator, the repayments over 7 years should be about £350 which would be a big reduction in what we pay now, plus it would have an end date, unlike the credit cards.

Due to my circumstances (only recently returned to the UK after being out of the country for a while, self-employed, low-income) I'm doubtful I will get the loan.

If I don't get the loan, what are my options?

As most of the debts are in my girlfriends name, is there any chance of me taking them into my name and then going bankrupt to clear them?

An IVA sounds good on paper, but after reading the IVA forum here, it sounds pretty restrictive. Plus again, if the debts are mainly not in my name, how would that work?

I think there are issues with a Ltd company being involved. The company has no assets as I just work from my laptop providing a service. But I would need a bank account to collect payments from clients.

We don't really have anything to sell except some furniture and a few kitchen appliances! And my laptop but I need that for work.

In short, I'm happy to take a loan to consolidate the debt so it can be paid off, but if I don't get a loan, I can't repay the payments on the multiple credit cards and something is going to give.

Any advice much appreciated.

Thanks!

sourcrates

Hi,

You cannot take on someone else's debt, period.

Debts are linked to individuals, you cannot change that.

Consolidation loans can work in some cases, but they are not widely approved of on this forum.
The temptation to re-use the existing credit can prove to be too much sometimes.
People end up coming back here in 12 months with twice the debt.

If you can be strict with your self, and close off the consolidated lines of credit, then fair enough.

If some crisis develops, and makes you borrow again, then it's a bad idea !!

All depends on how committed you are to been debt free !!

BeingDebtFreeStartsHere

Hi,

If you do get the loan, I would definitely avise that you cut up the credit cards to stop you being tempted to use them. I have been in your position and got a large consolidation loan, then used the CC i had paid off for a bit of petrol here and a grocery shop there and before you know it it is up into the £1000s again.
If you go down this route you have to be strict with yourself.

There are a number of options if you don't get the loan - it may be useful to go onto the StepChange charity website where you can fill in an online income and expenditure form and it will then give you the best options in relation to your personal situation eg DMP, IVA etc with pros and cons for each option. It is a really useful tool and can give you ideas of what may be best for you with no obligation.

There will be lots of people on here with more experience who will hopefully help you further but my first port of call would be the SC online form.

Good luck

BDFSH x

Jiva

Thanks! I've actually taken a loan out in the past to pay off a credit card and overdraft.

I did pay the loan off but ended up racking up the credit card and overdraft again.

I didn't learn the first time around but hopefully the second!

The main problem I see is that most of the debt which is on credit cards, is not in my name, so not sure what options are open to my girlfriend as she isn't working at the moment.

Will have a look on the Step Change website though.

Thanks.

sourcrates

Consolidation loans can be the spawn of the devil.

As you have been down this road once already, I would say avoid at all costs !!!

Karonher

Some of the answers can be found here. It is an old item but I cant find anything newer that is different other than the gov.uk page.



http://www.simplybusiness.co.uk/knowledge/articles/2010/11/2010-11-16-bankruptcy-and-your-business-can-i-run-a-business-while-bankrupt/


https://www.gov.uk/bankruptcy/restrictions

fatbelly

So you are considering

consolidation loan (which I agree with you you are unlikely to get) then
1. bankruptcy (actually bankruptcy x 2 as there are two of you with debts)
2. IVA

You will find current information on your options on National Debtline or their sister organisation Business Debtline

https://www.businessdebtline.org/EW/factsheets/Pages/default.aspx

Another option to throw in is

3. debt management plan, which is at least flexible and not insolvency

Which option from 1-3 you choose will largely depend on how much surplus income you have for your creditors and at the moment we don't know that figure, nor have any idea about how that might change over the next few years.

Edit: I excluded a DRO as an option because you cannot have one, and continue to be involved with the management of a limited company - You may not be involved (directly or indirectly) with the promotion, management or formation of a limited company, and may not act as a company director, without the court’s permission.

Sazzie23

Consolidate, rum up more debts, remortgage run up more debt, consolidate, run up more debt, no option to remortgage or consolidate, end up on DMP. Now dealing with debt, my history in a nutshell.

For me consolidations were not the answer. If you can't change your spending habits, probably best to steer clear.

Ellieseleven

Sazzie23 wrote: »

Consolidate, rum up more debts, remortgage run up more debt, consolidate, run up more debt, no option to remortgage or consolidate, end up on DMP. Now dealing with debt, my history in a nutshell.

For me consolidations were not the answer. If you can't change your spending habits, probably best to steer clear.

Same for me and also ended up on a DMP. I always had good intentions when consolidating but when the lines of credit are still open, circumstances arise where you find yourself using credit again.

Ellie x

enthusiasticsaver

In the majority of cases consolidation loans do not work and you will be back here in a few years time with an even bigger problem. I would not go down this route.


Post up a soa so people can suggest ways you can cut down. Try and get as many of the credit cards on to 0% deals as possible so you are reducing the balance and not just paying interest.


Stop using credit cards and do a monthly budget and stick to it.


I strongly suggest you will not be given a £25k loan anyway as you have no assets, are self employed so not a regular wage and on paper you will look like you are overcommitted as paying off debt by taking out more debt is frowned upon as they have no guarantee you will actually pay off the credit cards/overdrafts.


A DMP or IVA is an option but be prepared for it to be difficult to borrow, take out phone contracts etc in the future. Also going bankrupt should be a last resort particularly as you rent privately as this will impact on you should you need to move. You cannot take on someone elses debt.


Can your girlfriend not go back to work or work evenings or weekends when you are available to look after kids?