Struggling with debt? Ask a stepchange debt adviser a question

fatbelly

Was it something I said?

StepChange_Aidan

CharlieD2k said:

Hi I have set up a DMP yesterday with StepChange. I am not going to be able to afford my non-priority debts this month due to a massive reduction in income which won't be resolved until end of June. I was advised to cancel direct debits to non-priority debts due out at the beginning of June. Does this sound right? Do I need to contact the creditors before I do this or after? If I pay all these I will have to borrow further just for food, fuel etc. Thanks

Hi Charlie,

Yes, that’s right. We’d recommend that you cancel any direct debits for your non-priority debts as soon as possible. Any available money that you have right now needs to be set aside for your essential living costs.

Once the DMP has been activated StepChange will be able to contact your creditors and set up payment arrangements on your behalf. Until then, you could contact the creditors directly to let them know that you’re setting up a DMP or you may qualify for the Breathing Space scheme to put a hold on contact and collections action for up to 60 days.

I hope this helps,

Aidan

StepChange_Aidan

AliceDunn26 said:

Hi all,

I took out a credit union loan and I have 6,000 left on it. I'm trying to pay back as much as I can and I will be receiving taxback soon. Part of me wants to save the taxback instead of paying the loan in one go because my savings are low at the moment. I get paid 450 a week and I pay my parents rent and the rest on the loan. Do you have any tips on how I can be more frugal/pay off my loan quicker/save better?

Hi Alice,

Usually, I’d suggest using a windfall to clear or reduce your debts before putting any money aside for savings, but this depends on what you’re currently saving for, and the interest rates that are being charged on the loan.

Aside from the rent payment, do you have any other outgoings? For example, transport to work, mobile phone bills, sports or leisure costs? We’d need more information to be able to give specific tips on saving money, but there is a general guide here.

I’d recommend putting together a budget so we can fully understand your situation and can then highlight any areas of spending that could be reduced to clear the loan faster. If you’d like to do this with StepChange there’s an online tool on our website.

Kind regards,

Aidan

StepChange_Aidan

Hi,

Thanks for your post.

Deleted_User said:

Hello everyone,

I am seeking assistance for my brother's financial situation, and I would greatly appreciate your input. He is 47 years old, has two children, lives in rented accommodation, and is burdened with nearly £50k in debt. Currently, he works part-time and earns around £1,200 per month, in addition to receiving approximately £1,100 from Universal Credit. I am trying my best to help him escape this predicament, but I am unsure of how to handle unmanageable debt.

Most of his debts have already been defaulted on, except for regular payments towards his car loan. He is considering an Individual Voluntary Arrangement (IVA) through a company called Bailiff Rescue. Let me break down the various types of debts and their significance. Please let me know if you require more details.

The largest debt he has is for his car, which amounts to £19k. Additionally, he has arrears of £3k, which he is paying separately. The car's value is approximately £12k, and the interest rate on the loan is an exorbitant 30% or higher. He is currently under a hire purchase agreement. My primary concern regarding this particular debt is whether there is a way to terminate the agreement, such as returning the car. According to a quick Google search, this is typically possible when half of the loan amount has been repaid. Is there any way to resolve this loan earlier? What would be the most effective approach? He does require a car, although it doesn't have to be the fancy one he currently owns. Presently, he pays over £1,100 monthly for loan payments, insurance, and fuel, whereas the expenses for a standard car should be significantly lower. The initial loan amount was £21k.

Your brother has the option to terminate the HP agreement himself at any point, although if he’s paid less than half the total amount owed, he’s likely to have to pay a shortfall. However, this would be a non-priority debt which can be repaid in affordable instalments or included in a bankruptcy/IVA.

Deleted_User said:

He also has loans totaling £21k from four other lenders, and many of these are in default. Interestingly, he mentioned that some of these debts appear on his credit report but have not pursued him for payment. One of the debts dates back over 20 years. Any advice concerning this specific situation would be appreciated.

If any of the debts defaulted more than six years ago, the creditor hasn’t taken court action and in that time your brother hasn’t made any payments or acknowledged it in writing, it could be statute barred. This means that the debt still exists, but the creditor can no longer take court action to recover it, it is effectively written off.

Deleted_User said:

Lastly, he has several smaller debts amounting to over £2k. These primarily consist of unpaid or defaulted mobile phone bills and a council parking ticket.

I have suggested a plan to address his monthly expenses, such as switching to a SIM-only contract, canceling his premium TV package, and exploring ways to reduce his £650 monthly grocery bill. However, I am uncertain about the best course of action regarding the debt. I have a limited understanding of an IVA, which seems like a form of debt consolidation where someone else is repaid with interest. Additionally, there is bankruptcy, which I am not entirely familiar with either. How does bankruptcy work, and what impact would it have on his employment (he works in a school), housing, and phone contracts? Any assistance or advice regarding the specific situations or overall situation would be immensely helpful.

Thank you all for your support.

An IVA (Individual Voluntary Arrangement) is a type of insolvency where someone agrees to pay a monthly amount towards their debts over a five- or six-year period, and at the end the remaining amount is written off. 

IVAs can be effective in the right circumstances but based on the information you’ve provided about your brother it doesn’t seem like a good option for him. Please be aware that there are some companies presenting as debt advice organisations that will make commission recommending people to IVAs regardless of whether it’s suitable for them or not.

Bankruptcy another type of insolvency where most types of debt are simply written off. There are restrictions that usually last for 12 months, and he may be required to make payments over a three-year period.

Bankruptcy can affect some jobs, although typically these tend to be in the financial or legal sector. If he’s unsure, I’d recommend he checks his employment contract or gets confidential advice from his HR department or Union rep.

Some tenancy agreements (usually private ones) can have an insolvency clause which can end the tenancy in bankruptcy/IVA. If there is such a clause in your brother’s tenancy agreement this doesn’t necessarily mean that his landlord would act on it, but he would need to check. Also, a record of insolvency could make it harder to start a new tenancy in the future.

I can see that you’ve already had a lot of good advice in your other thread. Ultimately, your brother will need to get full debt advice before he makes a final decision. If he’s like to get help from StepChange he could use our online tool or give us a call to speak with an advisor.

I hope this helps,

Aidan

StepChange_Aidan

sourcrates said:

CharlieD2k said:

Hi I have set up a DMP yesterday with StepChange. I am not going to be able to afford my non-priority debts this month due to a massive reduction in income which won't be resolved until end of June. I was advised to cancel direct debits to non-priority debts due out at the beginning of June. Does this sound right? Do I need to contact the creditors before I do this or after? If I pay all these I will have to borrow further just for food, fuel etc. Thanks

AliceDunn26 said:

Hi all,

I took out a credit union loan and I have 6,000 left on it. I'm trying to pay back as much as I can and I will be receiving taxback soon. Part of me wants to save the taxback instead of paying the loan in one go because my savings are low at the moment. I get paid 450 a week and I pay my parents rent and the rest on the loan. Do you have any tips on how I can be more frugal/pay off my loan quicker/save better?

Deleted_User said:

Hello everyone,

I am seeking assistance for my brother's financial situation, and I would greatly appreciate your input. He is 47 years old, has two children, lives in rented accommodation, and is burdened with nearly £50k in debt. Currently, he works part-time and earns around £1,200 per month, in addition to receiving approximately £1,100 from Universal Credit. I am trying my best to help him escape this predicament, but I am unsure of how to handle unmanageable debt.

Most of his debts have already been defaulted on, except for regular payments towards his car loan. He is considering an Individual Voluntary Arrangement (IVA) through a company called Bailiff Rescue. Let me break down the various types of debts and their significance. Please let me know if you require more details.

The largest debt he has is for his car, which amounts to £19k. Additionally, he has arrears of £3k, which he is paying separately. The car's value is approximately £12k, and the interest rate on the loan is an exorbitant 30% or higher. He is currently under a hire purchase agreement. My primary concern regarding this particular debt is whether there is a way to terminate the agreement, such as returning the car. According to a quick Google search, this is typically possible when half of the loan amount has been repaid. Is there any way to resolve this loan earlier? What would be the most effective approach? He does require a car, although it doesn't have to be the fancy one he currently owns. Presently, he pays over £1,100 monthly for loan payments, insurance, and fuel, whereas the expenses for a standard car should be significantly lower. The initial loan amount was £21k.

He also has loans totaling £21k from four other lenders, and many of these are in default. Interestingly, he mentioned that some of these debts appear on his credit report but have not pursued him for payment. One of the debts dates back over 20 years. Any advice concerning this specific situation would be appreciated.

Lastly, he has several smaller debts amounting to over £2k. These primarily consist of unpaid or defaulted mobile phone bills and a council parking ticket.

I have suggested a plan to address his monthly expenses, such as switching to a SIM-only contract, canceling his premium TV package, and exploring ways to reduce his £650 monthly grocery bill. However, I am uncertain about the best course of action regarding the debt. I have a limited understanding of an IVA, which seems like a form of debt consolidation where someone else is repaid with interest. Additionally, there is bankruptcy, which I am not entirely familiar with either. How does bankruptcy work, and what impact would it have on his employment (he works in a school), housing, and phone contracts? Any assistance or advice regarding the specific situations or overall situation would be immensely helpful.

Thank you all for your support.

Hi,
You all need to re-post on the debt free wannabe forum if you want your questions answered.

This is the stepchange debt advisors thread, and they appear to be busy, as they have not answered a post for over a month.

If you want answers, then please re-post, its easy, just copy your post, go to the DFW forum, click new post, and paste your old thread to it.

thanks.

Hi,

Just to confirm, me and Patience are still checking in every few days, although we haven’t had any new questions on this thread since the end of April until last week.

If anyone needs any help from us, please don’t hesitate to post below 😊

Regards,

Aidan

Howdytree

New to the forum, 

just after a bit of advice, with Covid and many other issues, have found myself in 60k of debt. Loans and credit cards. 

I have been looking at an IVA. But I wanted some advice on a DMP instead.

I believe I could pay a reasonable amount each month £600. It would take me 8.3 years to clear. 

Would the above sound sensible, or would I just be safer in an IVA. 

StepChange_Aidan

Howdytree said:

New to the forum, 

just after a bit of advice, with Covid and many other issues, have found myself in 60k of debt. Loans and credit cards. 

I have been looking at an IVA. But I wanted some advice on a DMP instead.

I believe I could pay a reasonable amount each month £600. It would take me 8.3 years to clear. 

Would the above sound sensible, or would I just be safer in an IVA. 

Hi,

Welcome to the forum.

I’d need more information to be able to give specific advice, but in general if you can afford to repay the debts in full over 8-9 years, I’d normally suggest a Debt Management Plan, as it gives you more flexibility. If your situation changes over time, you can contact your DMP provider to update your budget and increase or decrease your monthly payment.

In an IVA your debts are written off after 5 or 6 years, but it is more difficult to change the terms of the agreement after it’s been approved. Typically, an IVA is more of an advantage to people with assets to protect, such as their home.

If you’d like to get full advice from StepChange you can use our online tool or give us a call to speak with an advisor.

I hope this helps,

Aidan

BadgeMishop

Hello, I'm currently living on a lower income due to a variety of factors including caring for a relative who has just come out of hospital after three months, as well as my own health issues and a bereavement. Travel to visit my relative (and also a large vet bill) wiped out my savings and I do not have enough to cover my monthly debt repayments once all essentials are accounted for.

I have filled in my details on the StepChange website and a DRO or IVA would be my best options, but before I go down that route I was wondering if there would be any benefit in contacting my lenders / credit card companies and offering to pay them a smaller, regular amount for the next six months or so, to give myself time to get back to some semblance of normality?

I don't know if there is any particular wording or legislation I could quote in such a case. Thank you.

StepChange_Aidan

Hi,

Thanks for posting.

You can set up a temporary payment arrangement with your creditors and pay a token amount towards the debts for now as a goodwill gesture. I’d only advise this as a short-term measure to give you some time until your situation improves. When it does you could then update your budget and re-review your long-term options.

There is a template letter that you can use to set up a temporary arrangement with your creditors here.

If you’re not expecting a significant change and definitely want to move ahead with a DRO or IVA there’s no real benefit in delaying it, but if you'd like to discuss your options in more detail please get in touch.

I hope this helps,

Aidan

Line_In_The_Sand

Hi, apologies if this has been asked before. My husband and I have had a DMP with StepChange since 2019. Our annual review is coming up, and I think we're going to have to massively reduce our StepChange payment this year. We've been running on a bare-minimum budget for four years, but it isn't sustainable anymore. Is there a point at which StepChange say the amount we can offer isn't enough, and what happens then?