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  • Hi. Looking for some advice please. 

    I am £53,000 in debt with credit cards and loans, plus owe a further £7000 to my mum. 

    Got myself into this mess through a series of bad choices. One being to invest in a property with my ex partner (who is a property mentor and investor) which turned out to be a bad investment. 

    I also bought a house to live in, which is affordable for me but needed a lot of work. I did the work using credit cards thinking I’d be able to remortgage after I had done the work and pay off the credit cards. Unfortunately it didn’t work out that way. 

    I’m self employed, and my business has done well for the past 5 years, with take-home pay of around £56,000 per year (which allowed me to buy the house I now live in). Business was doing well, until this year. 

    At the beginning of this year my business took a downturn. My income dwindled way down and stayed that way all through the summer. 

    This meant I didn’t have the income to support remortgaging to borrow more from my house and repay the credit cards. 

    I began to panic as I have 7 creditors in total and the 0% deals were coming to an end. I was juggling with balance transfers and things but knew it wasn’t sustainable. 

    So I reached out to Payplan for advice and support. They suggested a DMP. 

    I am in month 1, and have made the first payment, but have now had letters from most of my creditors stating that they’re going to put defaults on my credit file, which I didn’t realise would happen. I’ve researched it now, so I understand now, but probably wouldn’t have gone onto the DMP if I had understood this, because I am selling some assets to allow me to pay towards the debt. 

    Facts of the situation: 

    > £53,000 in unsecured debt on credit cards and a loan. 

    > £7000 owed to mum (but she’s not in a desperate hurry to get it back). 

    > I have 1 rental property I own myself, which I’m selling. Have a buyer and it’s in the conveyancing process, but not a done deal yet. All told I may get between £15,000 and £20,000 profit after fees and capital gains tax, hopefully within the next couple of months. 

    > Ex-partner is due to buy me out of the property I invested in with him. This will be £15,000 back to me. He says it’s imminent, but this has been going on for nearly 2 years, so I’m not counting on it. 

    > Estimate I have about £40,000 of equity in my home, since doing the improvement work. 

    > Have had a better 2 months’ income in my business, so it looks like that is improving again (although not back to the previous levels before the trouble). 

    > I’m also exploring getting a job, as part of the problem is the variable income in my business. 

    > Currently have an emergency fund of £1200 and about one month’s worth of expenses covered, but that’s it. 

    > I’m currently doing sales for a client, and this is my only source of income currently, and it’s completely commission based. Am working on securing other sources of income. 

    I’d rather avoid getting defaults on my credit file, but I feel completely overwhelmed with all of this, and have no idea what to do for the best. Wondering if I should try to meet the contractual payments this month to buy some time? Or… what to do. 

    It feels like to many moving parts. 

    Thanks in advance. 

  • StepChange_Aidan
    StepChange_Aidan Posts: 278 Organisation Representative
    Fifth Anniversary 100 Posts Name Dropper

    Hi. Looking for some advice please. 

    I am £53,000 in debt with credit cards and loans, plus owe a further £7000 to my mum. 

    Got myself into this mess through a series of bad choices. One being to invest in a property with my ex partner (who is a property mentor and investor) which turned out to be a bad investment. 

    I also bought a house to live in, which is affordable for me but needed a lot of work. I did the work using credit cards thinking I’d be able to remortgage after I had done the work and pay off the credit cards. Unfortunately it didn’t work out that way. 

    I’m self employed, and my business has done well for the past 5 years, with take-home pay of around £56,000 per year (which allowed me to buy the house I now live in). Business was doing well, until this year. 

    At the beginning of this year my business took a downturn. My income dwindled way down and stayed that way all through the summer. 

    This meant I didn’t have the income to support remortgaging to borrow more from my house and repay the credit cards. 

    I began to panic as I have 7 creditors in total and the 0% deals were coming to an end. I was juggling with balance transfers and things but knew it wasn’t sustainable. 

    So I reached out to Payplan for advice and support. They suggested a DMP. 

    I am in month 1, and have made the first payment, but have now had letters from most of my creditors stating that they’re going to put defaults on my credit file, which I didn’t realise would happen. I’ve researched it now, so I understand now, but probably wouldn’t have gone onto the DMP if I had understood this, because I am selling some assets to allow me to pay towards the debt. 

    Facts of the situation: 

    > £53,000 in unsecured debt on credit cards and a loan. 

    > £7000 owed to mum (but she’s not in a desperate hurry to get it back). 

    > I have 1 rental property I own myself, which I’m selling. Have a buyer and it’s in the conveyancing process, but not a done deal yet. All told I may get between £15,000 and £20,000 profit after fees and capital gains tax, hopefully within the next couple of months. 

    > Ex-partner is due to buy me out of the property I invested in with him. This will be £15,000 back to me. He says it’s imminent, but this has been going on for nearly 2 years, so I’m not counting on it. 

    > Estimate I have about £40,000 of equity in my home, since doing the improvement work. 

    > Have had a better 2 months’ income in my business, so it looks like that is improving again (although not back to the previous levels before the trouble). 

    > I’m also exploring getting a job, as part of the problem is the variable income in my business. 

    > Currently have an emergency fund of £1200 and about one month’s worth of expenses covered, but that’s it. 

    > I’m currently doing sales for a client, and this is my only source of income currently, and it’s completely commission based. Am working on securing other sources of income. 

    I’d rather avoid getting defaults on my credit file, but I feel completely overwhelmed with all of this, and have no idea what to do for the best. Wondering if I should try to meet the contractual payments this month to buy some time? Or… what to do. 

    It feels like to many moving parts. 

    Thanks in advance. 

    Hi Carmen,

    Thanks for your post.
    Because you’re paying a reduced amount to the debts, DMPs will result in defaults on your credit file after a few months. The only way to avoid this is to continue paying the contractual payments to the creditors.

    Once the debt defaults, interest and charges are stopped and the debt will drop off your credit file six years from that date. There’s some more information about defaults here.

    Your priority bills and living costs are much more important than debt repayments, and I’d only suggest paying what you can to the unsecured debts, even if this does affect your credit file. Is there a particular reason why you need to avoid defaults?

    I’d recommend contacting a debt advisor to review your situation and options in more detail. As you’re self-employed, please get in touch with Business Debtline, who will be able to give specialist advice.

    Regards,

    Aidan
  • Hi Aiden, 

    Thanks for your reply, I really appreciate it. 

    The reason I want to avoid defaults on my credit file is because I thought they were bad, and in case I want to get a mortgage, or remortgage, in the next 6 years. 

    Also, as I am getting some lumps sums soon, which will allow me to significantly pay down the debts and make them manageable, it didn't seem to make sense to me to get defaults on my file. 

    Does that make sense? 
    Julie. 
  • gazfocus
    gazfocus Posts: 2,466 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    edited 3 October 2024 at 3:03PM
    Hi, 
    I wondered if you could help with this. I’ve posted a separate thread but wanted to post here for some advice from step change. 

    I have an old energy account with Eon Next that they’ve recently defaulted without any notification. I was unaware of the debt because I’d moved house (gave them my new address when I gave the final meter readings but they never changed the address). 

    Anyway, since defaulting the account on my credit file, they have listed a completely new account on my credit file with the same ‘account opening’ date, and the same outstanding balance as the now ‘default’ account and just changed the account number. 

    I have challenged Eon Next and they are saying what they’ve done is correct and because the original account was defaulted, they had to open a new account and they are saying therefore the shares with the CRA’s are valid. 

    Is this correct and are they allowed to do this? If not, what is my best recourse?

    Thanks in advance. 
  • StepChange_Aidan
    StepChange_Aidan Posts: 278 Organisation Representative
    Fifth Anniversary 100 Posts Name Dropper
    Hi Aiden, 

    Thanks for your reply, I really appreciate it. 

    The reason I want to avoid defaults on my credit file is because I thought they were bad, and in case I want to get a mortgage, or remortgage, in the next 6 years. 

    Also, as I am getting some lumps sums soon, which will allow me to significantly pay down the debts and make them manageable, it didn't seem to make sense to me to get defaults on my file. 

    Does that make sense? 
    Julie. 
    Hi Julie,

    That makes sense, and I understand your reasons for wanting to avoid a default, but I’d only recommend continuing to pay the full contractual payments if you can afford to do so. Are there any living expenses that could be reduced or put on hold for a few months to allow you to do this?

    I can see that you’ve already had plenty of good advice in your other thread, but if you haven’t already, I’d also suggest giving Business Debtline a call to discuss your options.

    Regards,

    Aidan
  • StepChange_Aidan
    StepChange_Aidan Posts: 278 Organisation Representative
    Fifth Anniversary 100 Posts Name Dropper
    gazfocus said:
    Hi, 
    I wondered if you could help with this. I’ve posted a separate thread but wanted to post here for some advice from step change. 

    I have an old energy account with Eon Next that they’ve recently defaulted without any notification. I was unaware of the debt because I’d moved house (gave them my new address when I gave the final meter readings but they never changed the address). 

    Anyway, since defaulting the account on my credit file, they have listed a completely new account on my credit file with the same ‘account opening’ date, and the same outstanding balance as the now ‘default’ account and just changed the account number. 

    I have challenged Eon Next and they are saying what they’ve done is correct and because the original account was defaulted, they had to open a new account and they are saying therefore the shares with the CRA’s are valid. 

    Is this correct and are they allowed to do this? If not, what is my best recourse?

    Thanks in advance. 
    Hi,

    There doesn’t appear to be a valid reason why a second account was opened. I can see from your other thread that you’ve already raised a complaint to E-on. If you’re not happy their response, the next step would be to escalate it to the Energy Ombudsman.

    Regards,

    Aidan
  • saving_88
    saving_88 Posts: 31 Forumite
    10 Posts First Anniversary Name Dropper
    Hi There, 
    So i have been on here a while. My aim is to now save. My Debts have defaulted so interest is paused etc. So i have lowered my DMP payments from 100 to 48 pounds a month. I have also gone to self managed for PRA via their website. I understand i have to pay debts, But as they are defaulted right now. I may as well have a good quality of life for 6 years until defaults disappear and save some. 
    Now one creditor has not defaulted. I hope this makes them too. 

    My question is, can creditors reject the new payment and take legal action etc. 

    Ideally a dro is the best option for me as i have no property or assets, Only thing is my car cost a lot and i am not giving that up as its a luxury i enjoy 
  • StepChange_Aidan
    StepChange_Aidan Posts: 278 Organisation Representative
    Fifth Anniversary 100 Posts Name Dropper
    saving_88 said:
    Hi There, 
    So i have been on here a while. My aim is to now save. My Debts have defaulted so interest is paused etc. So i have lowered my DMP payments from 100 to 48 pounds a month. I have also gone to self managed for PRA via their website. I understand i have to pay debts, But as they are defaulted right now. I may as well have a good quality of life for 6 years until defaults disappear and save some. 
    Now one creditor has not defaulted. I hope this makes them too. 

    My question is, can creditors reject the new payment and take legal action etc. 

    Ideally a dro is the best option for me as i have no property or assets, Only thing is my car cost a lot and i am not giving that up as its a luxury i enjoy 
    Hi,

    Thanks for your post.

    Creditors can still reject your offer and could take court action to recover a debt, although this is usually taken only as a last resort and is less likely to happen when you’re in a DMP.

    Most types of debts become ‘statute barred’ six years after the default date, the date of the last payment or the last time you acknowledged the debt in writing – Whichever was the most recent. When this happens, the creditor can no longer take any court action to enforce the debt. If you live in Scotland, the debt would be ‘Prescribed’ after five years, which means it no longer legally exists.

    If you’re interested in applying for a DRO, I’d recommend contacting a debt advisor to confirm you’re eligible (if you’d like to check with StepChange you can use our online tool here).

    Please be aware that you won’t qualify for a DRO if your car is worth over £4,000 (or £2,000 if you live in Northern Ireland).

    I hope this helps,

    Aidan
  • saving_88 said:
    Hi There, 
    So i have been on here a while. My aim is to now save. My Debts have defaulted so interest is paused etc. So i have lowered my DMP payments from 100 to 48 pounds a month. I have also gone to self managed for PRA via their website. I understand i have to pay debts, But as they are defaulted right now. I may as well have a good quality of life for 6 years until defaults disappear and save some. 
    Now one creditor has not defaulted. I hope this makes them too. 

    My question is, can creditors reject the new payment and take legal action etc. 

    Ideally a dro is the best option for me as i have no property or assets, Only thing is my car cost a lot and i am not giving that up as its a luxury i enjoy 
    Hi,

    Thanks for your post.

    Creditors can still reject your offer and could take court action to recover a debt, although this is usually taken only as a last resort and is less likely to happen when you’re in a DMP.

    Most types of debts become ‘statute barred’ six years after the default date, the date of the last payment or the last time you acknowledged the debt in writing – Whichever was the most recent. When this happens, the creditor can no longer take any court action to enforce the debt. If you live in Scotland, the debt would be ‘Prescribed’ after five years, which means it no longer legally exists.

    If you’re interested in applying for a DRO, I’d recommend contacting a debt advisor to confirm you’re eligible (if you’d like to check with StepChange you can use our online tool here).

    Please be aware that you won’t qualify for a DRO if your car is worth over £4,000 (or £2,000 if you live in Northern Ireland).

    I hope this helps,

    Aidan
    Thanks, DRO is best to avoid payments and save, My car is worth a lot more. But as its on finance its not mine. I have been told by the Car finance company that any DRO, Bankruptcy wont effect my car. As long as i pay the finance company and stick to my agreement with them, then no creditors can take it. Its in my terms. But i still wouldn't risk it. They advised don't include it on list of debts. For now i am on a DMP. have lowered payments there. So if they don't agree i will adjust it. 
    Defaults atm don't bother me. My credit record is screwed. But id rather have more living money then paying debts off all the time. 

    So after 6 years, all these defaults, i wont have to pay and they cant Chace me then. 
  • StepChange_Aidan
    StepChange_Aidan Posts: 278 Organisation Representative
    Fifth Anniversary 100 Posts Name Dropper
    saving_88 said:
    saving_88 said:
    Hi There, 
    So i have been on here a while. My aim is to now save. My Debts have defaulted so interest is paused etc. So i have lowered my DMP payments from 100 to 48 pounds a month. I have also gone to self managed for PRA via their website. I understand i have to pay debts, But as they are defaulted right now. I may as well have a good quality of life for 6 years until defaults disappear and save some. 
    Now one creditor has not defaulted. I hope this makes them too. 

    My question is, can creditors reject the new payment and take legal action etc. 

    Ideally a dro is the best option for me as i have no property or assets, Only thing is my car cost a lot and i am not giving that up as its a luxury i enjoy 
    Hi,

    Thanks for your post.

    Creditors can still reject your offer and could take court action to recover a debt, although this is usually taken only as a last resort and is less likely to happen when you’re in a DMP.

    Most types of debts become ‘statute barred’ six years after the default date, the date of the last payment or the last time you acknowledged the debt in writing – Whichever was the most recent. When this happens, the creditor can no longer take any court action to enforce the debt. If you live in Scotland, the debt would be ‘Prescribed’ after five years, which means it no longer legally exists.

    If you’re interested in applying for a DRO, I’d recommend contacting a debt advisor to confirm you’re eligible (if you’d like to check with StepChange you can use our online tool here).

    Please be aware that you won’t qualify for a DRO if your car is worth over £4,000 (or £2,000 if you live in Northern Ireland).

    I hope this helps,

    Aidan
    Thanks, DRO is best to avoid payments and save, My car is worth a lot more. But as its on finance its not mine. I have been told by the Car finance company that any DRO, Bankruptcy wont effect my car. As long as i pay the finance company and stick to my agreement with them, then no creditors can take it. Its in my terms. But i still wouldn't risk it. They advised don't include it on list of debts. For now i am on a DMP. have lowered payments there. So if they don't agree i will adjust it. 
    Defaults atm don't bother me. My credit record is screwed. But id rather have more living money then paying debts off all the time. 

    So after 6 years, all these defaults, i wont have to pay and they cant Chace me then. 
    You have the option to exclude a Hire Purchase (HP) agreement from a DRO application if the car is essential, the payments are reasonable and not in arrears.

    I just want to clarify – If you’ve been making payments to the debts through a DMP, creditors will still be able to pursue them after the six years. They would only become Statute Barred if there’s been a six-year period after the default date in which you’ve not paid anything to the debt or acknowledged it in writing, and the creditor hasn’t taken court action to enforce it.

    Regards,

    Aidan
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