Dealing with guilt

Norfolk_Jim

Hi, I was just wondering about how people here view the moral aspects of defaulting on my debts?
I am finding it very hard to cope with my debt at the moment. I've been trying to hang on till May 19 when I can take a pension I have with Equitable Life which might half my c£45000 of unsecured debt.
I have been through the debt remedy on Stepchange and something like it with CAP. Stepchange suggested a DMP, CAP thought I should consider selling my house (I have a lot of capital in my house) and renting. I'm reluctant but not 100% unwilling to sell but local rents look impossibly high, maybe twice my quite small mortgage.
About 50% of my total debt is on low, sub 6% LOB deals and if I go on a DMP those will revert to excruciating rates and my debt will grow at a horrific rate. For now I'm robbing Peter to pay Paul in an attempt to keep afloat till May - but I'm walking on a cliff edge - one financial disaster from total collapse.
Here's the thing
If I go on a DMP, won't they just come after my house anyway? And, I borrowed and spent all that money - its a very long story - and I feel I'm morally obliged to pay it back. I have never failed to pay an obligation in my life (I'm 54), not even a late payment, never missed a payment. I don't think I will ever want credit again (My health both mental and physical isn't good) but am I the only one who feels they would simply die of guilt if they / I defaulted on their debts? Am I just being old fashioned?

Willing2Learn

Norfolk_Jim wrote: »

... I feel I'm morally obliged to pay it back. I have never failed to pay an obligation in my life (I'm 54), not even a late payment, never missed a payment. I don't think I will ever want credit again (My health both mental and physical isn't good) but am I the only one who feels they would simply die of guilt if they / I defaulted on their debts? Am I just being old fashioned?

I don't think you are being old-fashioned. Feeling guilt is perfectly understandable and you are not alone in feeling that way. But you can only afford what you can afford. If entering into a DMP is the only realistic way to pay off your debt then that is the path you should take - guilt or obligation doesn't come into it.

Why not post your SOA so that people can give better advice?...

National_Debtline

Hi Jim


If you enter into a DMP you will actually pay back all of your debt, but your creditors will be asked to freeze interest and reduce payments so the debts are manageable and the balance starts to reduce. The type of debts included in a DMP are classed as non priority which means they don't put your home at risk. In fact that is the advantage of a DMP over an option like bankruptcy.


It's a big decision to take money from a pension pot to pay back debts and it can have long term implications on your financial future. Before making that decision make sure you have had some specialist pension advice from The Pensions Advisory Service (0300 123 1047).


As Willing2Learn points out, we can give some more detailed advice if you would like to post your SOA.


Best wishes


Susie
@natdebtline

fatbelly

Norfolk_Jim wrote: »

Hi, I was just wondering about how people here view the moral aspects of defaulting on my debts?
I am finding it very hard to cope with my debt at the moment. I've been trying to hang on till May 19 when I can take a pension I have with Equitable Life which might half my c£45000 of unsecured debt.
I have been through the debt remedy on Stepchange and something like it with CAP. Stepchange suggested a DMP, CAP thought I should consider selling my house (I have a lot of capital in my house) and renting. I'm reluctant but not 100% unwilling to sell but local rents look impossibly high, maybe twice my quite small mortgage.
About 50% of my total debt is on low, sub 6% LOB deals and if I go on a DMP those will revert to excruciating rates and my debt will grow at a horrific rate. For now I'm robbing Peter to pay Paul in an attempt to keep afloat till May - but I'm walking on a cliff edge - one financial disaster from total collapse.
Here's the thing
If I go on a DMP, won't they just come after my house anyway? And, I borrowed and spent all that money - its a very long story - and I feel I'm morally obliged to pay it back. I have never failed to pay an obligation in my life (I'm 54), not even a late payment, never missed a payment. I don't think I will ever want credit again (My health both mental and physical isn't good) but am I the only one who feels they would simply die of guilt if they / I defaulted on their debts? Am I just being old fashioned?

You need to take proper advice again as you still seem confused even after talking to stepchange and CAP. Both these organisations can set up debt management plans and creditors will be asked to freeze interest and charges as part of the deal. It's not a formal solution so this can't be imposed on them but most creditors will eventually fall into line with FCA guidance on that.

Taking your pension at age 55 as a lump sum and throwing it at your debts may not be a smart move. You also need to look into your options there. A free interview with Pensionwise is a good first step (if you have what I think they call a DC scheme). I'm frankly a bit shocked that you're still with Equitable Life. I switched away from them 10 years ago, and I was slow doing it.

Non-priority creditors (credit cards, personal loans, overdrafts catalogues etc) will NOT 'come after your house' - the only people who will do that are your mortgage lender and any secured loans that you have signed up to, if you default on them. That's why those two debt types are 'priority'. There are theoretical avenues for non-priority creditors but these are as rare as proverbial hen's teeth.

Suseka97

Okay, defaulting on a debt because you've entered into a DMP agreement - isn't like you're running away from your financial responsibilities. Far from it!

As NDL has advised - the beauty of a DMP is that it doesn't put your house at risk (like bankruptcy) and I would definitely not follow any advice that might lead you to sell your home to realise equity. I also don't think you should even consider using your retirement funds for this purpose. Your pension is there to secure your financial future, something you should not want to risk.

One of the benefits of going into a DMP is that most, if not all, of your creditors will freeze interest and charges, which allows you to pay off the actual amount you owe. So don't let the thought of escalating interest charges worry you. Some creditors take a bit of persuading, but eventually they get there

I do understand the 'guilty' aspect of this - I too felt guilty and ashamed at the beginning, but I soon got over that. Rather than ignore the issue and sink deeper into a financial black hole - people who opt to go down the DMP route are those that have taken their collective heads out of the sand and are taking ownership of their financial situation. As W2L quite rightly points out - if you have reached that 'end point' then guilt and obligation really do not come into it. Getting yourself out of debt without risking your home and/or your pension should be the main priority.

enthusiasticsaver

Entering a DMP is not defaulting. The lenders will freeze interest (or they should). I think you should add up how much interest you have paid these creditors over the years and that may assuage the guilt feelings. You are in the run up to retirement and need to sort this out now. If you have been robbing Peter to pay Paul for years then a DMP will resolve this as it will be set at an affordable amount. Don't remortgage or sell your house and I would not use your pension either. Feeling guilty or ashamed is a common response to debt but there are many reasons why people get into debt and it is too black and white to say that those of us who are debt free are good with money and those in debt bad. Sometimes it is just being lucky or unlucky. Look forward not back and use the next few years to get debt free before you retire.

sourcrates

Hi,

You are mixing business with emotions here.

No one realistically sets out to default on there debts, but circumstances can change in a heartbeat, and you must change your way of thinking in order to deal with them.

A DMP is not an easy way out, it’s a gentleman’s agreement to repay what you owe, but hopefully with all interest stopped.

Don’t be worried about the house, all your debt is non priority, so hens teeth aside, you should be ok on that score.

Debt collection takes a long time, you could stop paying now, and not be bothered too much until well after your 55, but think twice about using your pension pot to pay off debt, one option may be to downsize the house, don’t know how you feel about that, otherwise setting up a plan of what ever you can afford will keep the wolves at bay indefinitely.

Carrot007

enthusiasticsaver wrote: »

Entering a DMP is not defaulting.

Well it is though isn't it? And having been on one the sooner they default you the better. So better to stop paying until they default you and then enter a DMP.


They are a very good thing for people that need them though.

Suseka97

enthusiasticsaver wrote: »

Entering a DMP is not defaulting.....

Carrot007 wrote: »

Well it is though isn't it? And having been on one the sooner they default you the better. So better to stop paying until they default you and then enter a DMP.They are a very good thing for people that need them though.

Not necessarily no - some people have DMPs arranged direct with creditors and they don't 'default' the account, but instead mark credit reports with those awful APs and ARs. But you're right - if anyone is going to enter into a DMP it is much better to get the account defaulted (although creditors will try to persuade you otherwise). What a lot of people don't realise, until its a little too late -is that APs / ARs also affect your credit file and remain on it for 6 years after the last payment is made and the account is marked settled/satisfied or closed. Defaults fall off 6 years from the date recorded irrespective of whether the account is settled. I just wish more people would realise that.