Huge amounts of debt, advice on DMP needed

Keezing

Hi All,

A couple of months ago my wife dropped a bombshell that she had hidden around 50k of credit card debt from me. She had been juggling the minimum payment, but after we had our daughter her funds depleted and she had to fess up.

I also have around 50k of debt on Unsecured Loans which I was using to renovate our home. This was affordable, well-managed debt. I have a house with a mortgage with approximately 70k of equity in it. i have a job where going bankrupt would cause problems.

I managed to clear 10k of her debt and shift around 25k of the credit card debt onto zero percent cards, but it is inevitable that I will eventually be unable to meet the minimum payments on this debt.

My wife continues to suffer with PTSD following a traumatic birth, and her going back into employment is not currently an option, although we hope to work towards that.

I've completed the SOA with Stepchange and they have recommended a DMP.

Given that we are currently just scraping the minimum payments and will inevitably be unable to in the near-term, it seems like if Stepchange can convince our lenders to freeze interest this would be beneficial.

Having never missed a payment on anything in my life the thought of trashing my credit file terrifies me, but I've come to terms with it being inevitable and understand the implications.

The lenders are as follows:

Credit Cards:

AMEX: 16k
MBNA: 10k
MBNA: 15k
Barclaycard: 10k

Loans:

Barclays: £30k @ 6.2% 4.5 years remaining
Zopa: £19k @ 7.2% 4 years remaining

After household expenses Stepchange estimate we have £800 per month spare to allocate to the lenders.

I have a number of questions:

• Given the large amount of debt, is it likely that the lenders will pursue bankruptcy? Do we have to send a list of ALL outstanding debts to each lender? My concern is that they will see all the debts and my house and pursue bankruptcy.
  
• Is it always better to pay a token amount, or stop payments completely in the hope that they will default ASAP so I can come out of this in 6 years time with a clean credit file?
  
• We hope to live in this house forever. I understand it's likely we will receive CCJs and Charging Orders, how likely is a Force of Sale?

All of the debts are modern and will be enforcable through the courts.

Thanks everyone for the help.

ratrace

Hi i dont have much to add, the 50k that your mrs spent on the cards can she help you out by selling the stuff she bought on them via ebay,gumtree etc... ifs she not working it will also give her a responsibility that may help her get back into work even if its only part time

also fill in a soa with all your income and expenses so the folks on here can see where you can make cuts backs etc...

sorry dont have a lot to add at the moment hope she gets better soon

sourcrates

Hi,

Welcome to the MSE debt free wannabe forums.

A statement of affairs (SOA) is a good starting point here :

http://www.stoozing.com/calculator/soa.php

Put down everything in black and white, then suggestions can be made regarding a way forward, and there will be a way, it's just about finding it.

You seem to be pretty well informed already so that's half the battle won.

Orders for sale are rare, and there are numerous court stages to the process, where your points of view are heard, I would not worry about that for the time being.

Keezing

Thanks all. I will work on the SOA later.

I understand that forced sales are rare, but I guess defaulting on 100k is also rare, so trying to work out if we are prime candidates for forced sale (or forced bankruptcy) before I proceed.

DrWatson1

Keezing wrote: »

I also have around 50k of debt on Unsecured Loans which I was using to renovate our home. This was affordable, well-managed debt. I have a house with a mortgage with approximately 70k of equity in it. i have a job where going bankrupt would cause problems.

This suggests you have two houses? is that the case, or do you just have one??

Keezing

Just the one house, sorry for not being clear.

January2015

Keezing wrote: »

Thanks all. I will work on the SOA later.

I understand that forced sales are rare, but I guess defaulting on 100k is also rare, so trying to work out if we are prime candidates for forced sale (or forced bankruptcy) before I proceed.

Hi

Just wanted to say I am 2 years into a DMP which started at just under £95k. There have been others with debts over £100k. You're not alone and it can be dealt with. We have never been so happy and settled as we are since we started our DMP - we know there is light at the end of the tunnel and we will be debt free eventually.

Good luck

Keezing

January2015 wrote: »

Hi

Just wanted to say I am 2 years into a DMP which started at just under £95k. There have been others with debts over £100k. You're not alone and it can be dealt with. We have never been so happy and settled as we are since we started our DMP - we know there is light at the end of the tunnel and we will be debt free eventually.

Good luck

Thank you! That's very assuring.

Do you have a mortgage? Did they hit you with CCJs, Charging Orders etc?

January2015

Keezing wrote: »

Thank you! That's very assuring.

Do you have a mortgage? Did they hit you with CCJs, Charging Orders etc?

We have a mortgage and a secured loan. We have about £250k equity in our home. I work in a financial role which would be seriously impacted if I had CCJs or even worse, i.e. bankruptcy, IVA.

I worried myself stupid in the run up to, and the first couple of months of our DMP. We have not had a single bad thing happen - no CCJs, no charging orders. In fact we have one debt of well over £10k which we just haven't paid in over a year now - because we believe it is not enforceable. We have had a couple of nice letters asking if we would mind paying, we have had a couple of reduced settlement offers on this particular debt but nowhere near low enough for us to consider them. We have hit a particularly bad patch recently (not financial but it impacts our finances) and I just told creditors they would only be getting £1 token payments for several months. All replied and were extremely supportive. No problems at all. Note, I didn't ask if we could pay token payments - I told them that's what needed to happen, and what would be happening.

Creditors such as banks, credit card companies etc. rarely (if ever) take out enforcement action such as CCJs. The account will linger with them for a while (sometimes a short while, sometimes a long while), but when they've had enough and realised your situation is not going to change anytime soon they will either pass the debt to a debt collection agency (DCA) to manage for them, or better still they will sell the debt at a ridiculously low rate to a DCA. Either way, the DCA will be the one collecting the debt. I have found as long as you keep in contact and make some payment regularly the DCA will happily do nothing and let the debt and payment plan tick along. I informed all DCA I was not prepared to be contacted by phone and formally advised via letter that all communications regarding my debts must be done in writing. They have all honoured that so I don't worry about phone calls at home or work now.

We now put aside money every month for repairs/maintenance/dentist/prescriptions etc etc. We really do save for what we need and then when something goes wrong we don't panic and we just draw the money from the savings.

We are so much happier with life as as a couple because we have finally been honest with each about debt and we are working together to create a debt free future (sounds corny but it's true). From our perspective taking the plunge into DMPland is the best financial move we have made in a long time, and I think you will find most of the DMPer's who post on this forum will agree.

I know it's daunting, but once you have decided what is the right way forward for you and your family, DMP or some other solution, and got the process started you will feel a whole lot better.

Keezing

Thanks a lot January2015. I must admit I just spent the last couple of hours reading through your diary and I feel much more comfortable about the whole situation.


I think I will self manage with NEDCAB. I guess the next thing I need to decide is whether I make a token payment or just stop paying altogether for a few months in an effort to expedite the defaults.

I guess I'm still concerned that my debts are larger than most other people's and I may be treated differently. I just can't imagine Barclays playing nice over that 30k loan!

On_my_way

You won't get persued for bankruptcy or CCJ's if you can make arrangements to pay.

I don't really see how you didn't know that your wife had debts of that size as where did you think the money was coming from? Anyway, that is slightly besides the point now.

May I make a few suggestions that could help you to at least meet minimum payments while you sort things out:

1. If you have any Gold that you could sell do it. The MoneyShop gives good rates - take I.D and a utility bill with you. I recently got £45 for a tiny 9ct necklace that I never use and isn't sentimental

2. Seriously reduce your bills eg grocery shopping etc

3. Sell anything that you can on ebay - remember to calculate the postage - even bundles of children's clothes that are no longer needed sell. Handbags and unused clothes sell very well. You might be able to make £1k at least like this in a few weeks if you are very serious about it. If you have computer consoles, games etc they may also be worth money

4. Have you got any old phones you can sell? Mazuma (I think) recently bought an old Samsung for £80 which was paid straight into my bank. Again possibly a few hundred to be made here

In my opinion you have got to maintain your credit file as much as you can because of your job - so you have got to find ways to get money from what you have as fast as you can.

Good luck. You can do this. Make sure you and your wife talk about this and get money saving tips from here.