Possibly getting some money - what to do with it?

I've been posting here off and on for a while - this board has been very helpful over the last several months.

I have fairly high debts from a previous relationship, considering my income (which was low, and is now benefits since my contract ended earlier than I had hoped :( ) There is simply no way I can pay off all my debts at their true payments, and even with the help of the CAB most of the creditors are asking for obscene amounts of money.

Three of the debts are lower than the others by a long way, and there is a possibility of me getting a sum (a little over 1000) of money 'for fun'. I'm allowed to spend it however I like, but couldn't in good conscience spend it knowing I owe money.

I could wipe out two of the debts, and reduce one SIGNIFICANTLY with that money. Should I do this? The other two total about 14K, I was thinking that if I ignored them and settled the smaller ones outright, then they wouldn't keep going up with court costs and interest, and I could then, should my circumstances change in the near future, try to pay them off.

I've spoken to some agencies, and they advise bankruptcy, but I'm trying to avoid that at the moment. If things don't change in a few months then possibly, but it would feel good to get rid of some debt now.
DFW Nerd No. 140 :)
Status as of 30/11/12
[strike]Rent 2500 Council Tax 800 NlPower - 800[/strike][SIZE=-2]:j IF - 8000 :(British Gas - [strike]112[/strike] - 102 Lloyds - 1123
Barclays - 306 Barclaycard 1,123 HSBC - 200 Capital 1- 400 Barclayloan - 4500[/SIZE]

Comments

  • Willsnarf1983
    Willsnarf1983 Posts: 1,928 Forumite
    personally if it was me and lets say its 1 k

    i wud pay £750 of some debts, then put £200 into a bank for emergancies ( and u know they will come ;op and then have a treat for £50


    hope this helps a little

    Will
    SShhhhhhhhhhhhhhhhhhhhhhh
  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    Combo Breaker First Post
    If you already have an arrangement with your creditors i.e. you have agreed lower payments with them, then you MUST pro-rata the lump sum so that they all get an amount. The one that you owe the most debt to gets the biggest share.

    The smaller creditors may accept a full & final settlement. Details from the National Debtline HERE. Even if you don't use the full & final route, you should use the calculation in that factsheet to calculate how much you pay to each creditor.

    Alternatively, you could just put this in a savings account and use it to meet the minimum payments in the future.
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • saubryn
    saubryn Posts: 610 Forumite
    Thanks Debt_free_chick I thought there might be something about pro-rata-ing the payments, which is why I asked here.

    I've been trying to get something worked out with the creditors, but the three largest ones are asking for amounts I can't afford, so I'm still arguing with them *g*

    Does that change what I would be 'allowed' to do, or would they look badly if I wrote to them and said I could afford more later, but that was only because I had cleared the smaller debts?
    DFW Nerd No. 140 :)
    Status as of 30/11/12
    [strike]Rent 2500 Council Tax 800 NlPower - 800[/strike][SIZE=-2]:j IF - 8000 :(British Gas - [strike]112[/strike] - 102 Lloyds - 1123
    Barclays - 306 Barclaycard 1,123 HSBC - 200 Capital 1- 400 Barclayloan - 4500[/SIZE]
  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    Combo Breaker First Post
    saubryn wrote:
    Thanks Debt_free_chick I thought there might be something about pro-rata-ing the payments, which is why I asked here.

    I've been trying to get something worked out with the creditors, but the three largest ones are asking for amounts I can't afford, so I'm still arguing with them *g*

    Does that change what I would be 'allowed' to do, or would they look badly if I wrote to them and said I could afford more later, but that was only because I had cleared the smaller debts?

    You should only ever offer what you can actually afford to pay. If you ever have extra, then simply save it. If you get a lump sum, then you can offer pro-rata payments.

    Are you sending your budget to your creditors, showing them what you can (and can't) afford? Initially, they take a tough line as they try to separate the "can't pay" from the "won't pay" people. If you can't pay, they should eventually accept your offer, but you may have to persevere.

    Once they accept your offer, they are likely to contact you again (time varies, could be every 6 months) and ask if you can pay more. Just go through the same process i.e. send your budget, show what you can afford, pro-rata your total payment across all your creditors.

    HTH and Good Luck :)
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • Moses
    Moses Posts: 18 Forumite
    They can't get blood out of a stone and there’s no point in them locking you up. These threats and the pressure you receive are all out of a manual sitting on desk or computer, don't let it worry you to much. Debts are a serious item I like to pay all mine, but have little sympathy for the financial institutions that really are loan sharks dressed in suits with no concern for your well being just grabbing every penny they can squeeze out of us. Your problem needs thinking out, but personally if you give a little to each debtor you may as well be trying to put out a large fire with a watering can, it will all be gobbled up in charges. I would get rid of the small loans before they grow. You also reduce the problems with time and energy answering calls and post. Get a couple out the way then tackle the rest and reduce the size of the problem in one swoop.
    Look into IVA agreements as well as banckruptsy.
    All the best
    Pete
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