Struggling with debt? Ask a stepchange debt adviser a question

StepChange_Patience

HillBilly14 said:

Hi, I have a personal loan and credit card debt totalling £34k. I have put all my details into SC and at the point of selecting a solution. The best one is a DMP. I have been in a debt cycle of borrowing off credit card to pay loan - both with Tesco. The surplus available is approx £164 per month to pay off this debt under the DMP. I am not in arrears with them. I'm really worried that if I do the DMP, I will loose my home or have court action, it's mortgaged. I really don't know what to do, I want to pay my debts and not looking to get out of anything as it's my fault. But I'm worried that, by doing the DMP I will start a process that I will regret. I can't afford to pay the direct debit for these in 10 days time but I'm scared of what is going to happen to me. Appreciate your help

Hi there

Thanks for getting in touch, I'm sorry to hear that you're in a difficult debt cycle.

It sounds like you've taken the first brave step by seeking free and impartial advice, a Debt Management Plan (DMP) could be a great way to help break that cycle of borrowing to pay off debt, but I understand it's a big decision to make.

The DMP could help you prioritise your living costs and help make the debts more manageable to repay, there are risks with making reduced payments but this usually takes a long time before you're potentially looking at court action. 

You can find out more information about the collections process here. It's important to remember that while court action can happen, it doesn't automatically mean that it will. In a DMP you'll be making regular payments and will be keeping in contact with your creditors, which are both really positive things. 

Please take your time to make a decision, there will be no pressure from StepChange and we'd be happy to support you when you're ready.

I hope this has helped.

Patience

HR_Man

Hi, I am really worried. I have 11k debts on an overdraft and credit card with one bank and have applied for 'Breathing Space' but I read something somewhere that you should not do that because that warns the bank that you are in financial trouble and will freeze your account so you can no longer use it. I am really worried what I will do if that happens in my case - I regret applying for Breathing Space as I had no idea your creditor could freeze your assets and stop you functioning in terms of day to day payments by applying for this scheme. Is this a normal practice ? Help!

StepChange_Patience

HR_Man said:

Hi, I am really worried. I have 11k debts on an overdraft and credit card with one bank and have applied for 'Breathing Space' but I read something somewhere that you should not do that because that warns the bank that you are in financial trouble and will freeze your account so you can no longer use it. I am really worried what I will do if that happens in my case - I regret applying for Breathing Space as I had no idea your creditor could freeze your assets and stop you functioning in terms of day to day payments by applying for this scheme. Is this a normal practice ? Help!

Hi there 

I'm sorry to hear the the Breathing Space is causing you worry.

Breathing Space is designed to give you 60 days where your creditors can't contact you for payment, take any further action or add any interest or charges while you're seeking debt advice or setting up a solution.

This can sometimes involve your creditors stopping access to existing credit but not freezing your assets and potentially stopping direct debit for the regular payments to existing debts. You can find out more about the scheme here.

I hope this helps. 

Patience

blyth_2

Hello, I have a number of debts which I have been paying token payment to for years.
I’m possibly in a position to offer a final settlement payments.
I have had a few letters offering me a discount of 80% to pay the debt off.
Do you know if anyone has had larger discounts such as 90-95%?

StepChange_Patience

blyth_2 said:

Hello, I have a number of debts which I have been paying token payment to for years.
I’m possibly in a position to offer a final settlement payments.
I have had a few letters offering me a discount of 80% to pay the debt off.
Do you know if anyone has had larger discounts such as 90-95%?

Hi there

Thank you for getting in touch. 

It's great to hear your creditors have offered you a discount to pay the debt off and you're in a position to do this. If you were to look for a larger 'discount', that would have to be at the creditors discretion. 

You can find out more information about full and final settlements here. 

I hope this helps. 

Patience

LucySpudnik

Hello, I see here that people are advocating defaulting on loan repayments before or instead of setting up a DMP, could anybody please explain this to me?

We’re looking at applying for a DMP and have not defaulted on anything thus far. 

Thanks for support and advice 

sourcrates

LucySpudnik said:

Hello, I see here that people are advocating defaulting on loan repayments before or instead of setting up a DMP, could anybody please explain this to me?

We’re looking at applying for a DMP and have not defaulted on anything thus far. 

Thanks for support and advice 

You need to post this in the general DFW forum not this thread.

StepChange_Patience

LucySpudnik said:

Hello, I see here that people are advocating defaulting on loan repayments before or instead of setting up a DMP, could anybody please explain this to me?

We’re looking at applying for a DMP and have not defaulted on anything thus far. 

Thanks for support and advice 

Hi there

Thanks for getting in touch.

If you're looking to set up a debt management plan (DMP) I would suggest starting a debt solution straight away if it’s suitable for you. In a DMP, your creditors will normally default the accounts after 3-6 months of reduced payments.

Sometimes people may choose to default their debt before starting a plan to either build up a 'buffer' as the contractual payments won't be made and to potentially have the debts default sooner. This may mean they would  drop off your credit file sooner.

The risk with this is that your creditors wouldn't be aware of your next steps of setting up a plan to help you repay the debts, where as if you were to start your plan your creditors would be informed. 

Either way the choice would be entirely up to yourself.

I hope this helps. 

Patience

badger5672

Hello, I'm new here! Long story so please bare with me! 

I started a new job in 2022 and on my first week I discovered I was pregnant and was told by my employer I was not eligible for SMP but could get maternity allowance. Whilst on Maternity leave in 2023 and during the cost of living crisis and everything going up (not ideal on maternity leave!!) my partner and I used our credit cards more than we should have. 

We've racked up around 14k of credit card debt over a few cards. Now I'm back to work full time and we're bringing in a combined income of around 60k, I thought it would be wise to tackle our debt and consolidate it to one monthly payment. I applied for a consolidation loan recommend by clear score and was declined on the fact my childcare expenses are high so failed affordability. The monthly payment for the loan was ALOT less than the 3 separate payments we're making a month. We're just making the minimum payment on all 3 cards but it's not leaving us with much after everything has been paid. 

Do you have any advice on what else we could do to consolidate the debt? We've gone through all our outgoings and changed providers who were cheaper to save money where possible. We're homeowners so don't really want to go down an IVA route and damage the credit score although it's being damaged at the minute so I'm not sure what we could do?

Any advice/tips welcome! 

StepChange_Patience

badger5672 said:

Hello, I'm new here! Long story so please bare with me! 

I started a new job in 2022 and on my first week I discovered I was pregnant and was told by my employer I was not eligible for SMP but could get maternity allowance. Whilst on Maternity leave in 2023 and during the cost of living crisis and everything going up (not ideal on maternity leave!!) my partner and I used our credit cards more than we should have. 

We've racked up around 14k of credit card debt over a few cards. Now I'm back to work full time and we're bringing in a combined income of around 60k, I thought it would be wise to tackle our debt and consolidate it to one monthly payment. I applied for a consolidation loan recommend by clear score and was declined on the fact my childcare expenses are high so failed affordability. The monthly payment for the loan was ALOT less than the 3 separate payments we're making a month. We're just making the minimum payment on all 3 cards but it's not leaving us with much after everything has been paid. 

Do you have any advice on what else we could do to consolidate the debt? We've gone through all our outgoings and changed providers who were cheaper to save money where possible. We're homeowners so don't really want to go down an IVA route and damage the credit score although it's being damaged at the minute so I'm not sure what we could do?

Any advice/tips welcome! 

Hi there 

Thank you for getting in touch and sharing your situation.

It sounds like you've taken some really positive steps by looking at your budget and changing costs where you can. if your childcare costs are high, it may be worth checking you're getting the right help with his. You can find out more information about this here. 

When trying to consolidate it's always worth taking into account that: 

• You may be making large payments for a long time
• You may end up paying more in the long term
• Your monthly payments may not be affordable

You can find out more about consolidating debt here.

It may be worth seeking impartial debt advice to find out what would be best to support you with the debts, getting advice won't impact your credit score.

It would involve completing a budget first of all, which would also be useful to have so you have a copy of your full financial situation, this is something you can do online, at your own pace.

I hope this helps. 

Patience