Struggling with debt? Ask a stepchange debt adviser a question

Ocean991

Hello

I am after some advice please?
my husband and I currently have around 24k in debt, credit cards and loans. We currently have wages coming in which just cover the cost of living and have no surplus cash to pay off our unsecured debts. 

We have been paying the debts off and it has been pushing us into more debt to try and repay the original debt.

On Saturday I spoke to my bank and have just set up a default on the largest loan of £8,500 and also my credit card of £750.
We have £4000 in money being gifted to us from our family to help, but don’t know wether it is best to default on the other credit card that is in my name of £3500, or pay off one of the loans in my husbands name?

Would another default on a credit card make any difference? Does the amount of defaults matter, or if I have already defaulted does it not make a difference anyway and would we be better paying a loan off with the money?

any advice would be gratefully appreciated. 

Thanks. 

StepChange_Aidan

Sheepherder_36 said:

Hi all,

Thanks for taking the time to read and respond to my query. A very happy new year to one and all!

I completed my DMP in September 2023 and all debtors were settled. One of the debts was to utility warehouse regarding an account I had with them previously and the sum value of the paid debt via the DMP was circa 1K. They had liaised with stepchange on multiple occasions regarding the outstanding debt amount and had worked with them toward resolution via the DMP process.

To my surprise yesterday I received a letter from them stating that I had an outstanding amount of over £1300 on another separate electricity account that I had with them for a different property I was renting. At no point during the course of discussion with myself or stepchange in the DMP process did they ever get in touch to say about this outstanding amount nor did they declare this seperate account to stepchange or myself. I had known about the account previously and had asked them specifically to merge the two accounts together so that the debt sum could be paid off via the DMP. I was assured that this would be done but evidently it hasn't been.

Understandably I am pretty anxious about the letter and have rung them but they have been of little help other than asking for old statements from me regarding another account matter. 

My question is are they legally allowed to declare this account debt now that the DMP has been resolved as surely they should have declared it previously during their discussions with stepchange and myself so as to be transparent and open. It is a real kick in the teeth compounded by the fact that they have also informed me it is registering as an outstanding payment of over 6 months on my credit file along with the DMP thus hindering me moving forward.

All advice most welcome, and thank you again.

Hi,

Thanks for your post.

The utility company can still ask you to repay this debt, although I would suggest making a complaint to them if they previously assured you that they had merged it with your other account.

I’d recommend getting back in touch with StepChange so that we can discuss this debt and your options in more detail. If necessary, we may be able to help you set up a new payment plan to clear the outstanding balance, or there could be other debt solutions available for this debt.

I hope this helps,

Aidan

StepChange_Aidan

Ocean991 said:

Hello

I am after some advice please?
my husband and I currently have around 24k in debt, credit cards and loans. We currently have wages coming in which just cover the cost of living and have no surplus cash to pay off our unsecured debts. 

We have been paying the debts off and it has been pushing us into more debt to try and repay the original debt.

On Saturday I spoke to my bank and have just set up a default on the largest loan of £8,500 and also my credit card of £750.
We have £4000 in money being gifted to us from our family to help, but don’t know wether it is best to default on the other credit card that is in my name of £3500, or pay off one of the loans in my husbands name?

Would another default on a credit card make any difference? Does the amount of defaults matter, or if I have already defaulted does it not make a difference anyway and would we be better paying a loan off with the money?

any advice would be gratefully appreciated. 

Thanks. 

Hi,

Each creditor has their own criteria when you apply for credit. Some companies could take the number of defaults on your credit file into account, but it may not make much difference.

If you’re struggling with unsecured debt repayments, it’s best to prioritise your essential bills and your living costs. You should only offer to pay what you can to the debts, even if this leads to missed payments and defaults on your credit file. At StepChange we recommend offering each creditor their fair share of what you can afford on a pro-rata basis.

If you’re left with no surplus cash at all, you could consider suspending debt payments completely until your situation improves.

To be able to give more specific advice, we would need a budget to fully understand your situation. If you’d like to create one with StepChange, you can use our online tool or give us a call to speak with an advisor.

Regards,

Aidan

curtain8765

Hi, 

I've recently just set up a DMP with yourselves however every time I keep reading that I'm best to let my debts go to default first or id be better off managing it myself? 

What difference does doing a DMP before they default have to letting them default and going from there? 

Sorry if that's a really stupid question I'm just now panicking if I should cancel my DMP.

allystar

I’m in same position…I worry about the length of time for poor credit if accounts don’t default quickly. This will be my first month but I’ve followed forum advice and am going to let them default first.

Helloadviceplz

Hello everyone, 

I am in approx £40k debt (loan 26k and 2 cc = 13). I earn enough to cover the repayments each month but only just and I am left with not much to live with. If I continue it would all be paid in five years. I wish I could move the loan to reduce interest. I'm a shared ownership homeowner (75% share). I live with my partner who owns his own place too which he rents out. We would like to buy a house together probably in less than five years and possibly have a baby (fingers crossed). AT the moment I wouldnt be able to pay for nursery fees which worries me a lot. 

I have been advised by Stepchange and others that an IVA is my best option, because even though I am covering the debt repayment each month, the interest is a lot and I am also only just affording and unable to save a penny each month. Mortgage wise, we could hold out for six years and hope I can get on a mortgage too, or my partner gets the mortgage and my house sale supports until I can go on the mortgage too. But Im aware the IVA may then take what I make on the house if its before the end of the six years.

The main advice was, just because I can just about pay the repayments, doesn't mean I am not struggling. And also, my credit rating is so low now anyway because of the amount of debt and the fact I wont be able to get out of it for five years - an IVA would allow me to have more money over the five/ six years and then my credit rating will go up anyway around a similar time anyway if I didn't get it. And that's only IF I can afford to the repayments for five more years. 

My concerns are the following:

-  If I get an IVA I would be able to save a bit of money each month which is great, but how much is to much savings until they ask for it? 
- If we do go for a mortgage will this impact my partner even if I dont go on it?
- Can I sell my house before the IVA is over?

I'm currently leaning towards getting the IVA because I want to live more comfortably for the next five/ six years. 

Any advice would be really appropriated.

Thank you

StepChange_Aidan

curtain8765 said:

Hi, 

I've recently just set up a DMP with yourselves however every time I keep reading that I'm best to let my debts go to default first or id be better off managing it myself? 

What difference does doing a DMP before they default have to letting them default and going from there? 

Sorry if that's a really stupid question I'm just now panicking if I should cancel my DMP.

allystar said:

I’m in same position…I worry about the length of time for poor credit if accounts don’t default quickly. This will be my first month but I’ve followed forum advice and am going to let them default first.

Hi,

Thanks for your posts.

Your creditors will usually default your accounts automatically after a few months of reduced payments through a DMP, but this isn’t guaranteed, and some companies might delay registering a default if they’re happy with the amount you’re paying.

Debts will still show on your credit file for six years after the default date. Some people prefer to wait until all the debts have defaulted before starting a DMP, to make sure that all debts are gone from the credit file after six years.

There’s some more information about defaults and credit files here.

If you would like to stop your DMP payments or want to look at other options, please get in touch with our Client team who’ll be able to help you.

Regards,

Aidan

StepChange_Aidan

Helloadviceplz said:

Hello everyone, 

I am in approx £40k debt (loan 26k and 2 cc = 13). I earn enough to cover the repayments each month but only just and I am left with not much to live with. If I continue it would all be paid in five years. I wish I could move the loan to reduce interest. I'm a shared ownership homeowner (75% share). I live with my partner who owns his own place too which he rents out. We would like to buy a house together probably in less than five years and possibly have a baby (fingers crossed). AT the moment I wouldnt be able to pay for nursery fees which worries me a lot. 

I have been advised by Stepchange and others that an IVA is my best option, because even though I am covering the debt repayment each month, the interest is a lot and I am also only just affording and unable to save a penny each month. Mortgage wise, we could hold out for six years and hope I can get on a mortgage too, or my partner gets the mortgage and my house sale supports until I can go on the mortgage too. But Im aware the IVA may then take what I make on the house if its before the end of the six years.

The main advice was, just because I can just about pay the repayments, doesn't mean I am not struggling. And also, my credit rating is so low now anyway because of the amount of debt and the fact I wont be able to get out of it for five years - an IVA would allow me to have more money over the five/ six years and then my credit rating will go up anyway around a similar time anyway if I didn't get it. And that's only IF I can afford to the repayments for five more years. 

My concerns are the following:

-  If I get an IVA I would be able to save a bit of money each month which is great, but how much is to much savings until they ask for it? 
- If we do go for a mortgage will this impact my partner even if I dont go on it?
- Can I sell my house before the IVA is over?

I'm currently leaning towards getting the IVA because I want to live more comfortably for the next five/ six years. 

Any advice would be really appropriated.

Thank you

Hi,

I can see from your other thread that you’ve now decided against an IVA, but if you want to look at other debt solutions, please get in touch with us.

Regards,

Aidan

iceandfire1

Hello, 

I am just about to get into the final steps of setting up my DMP. How long can StepChange wait before I make a decision on starting the DMP? I am scared the creditors will not default my accounts. I would like to default them first and then start the DMP. Have you have any clients from the Channel islands?

StepChange_Aidan

iceandfire1 said:

Hello, 

I am just about to get into the final steps of setting up my DMP. How long can StepChange wait before I make a decision on starting the DMP? I am scared the creditors will not default my accounts. I would like to default them first and then start the DMP. Have you have any clients from the Channel islands?

Hi,

Thanks for your post.

There’s no time limit for you to set up a plan with StepChange. You don’t have to decide at this stage, but when you’re ready, please get back in touch with us to continue.

Please bear in mind that we can’t give advice to people living in the Channel Islands. You can set up a DMP with us if you’ve lived in the UK in the last three years, all debts were incurred in the UK and you’re paid into a UK bank account, but we won’t be able to advise on what actions your creditors could take or other debt solutions available where you live. I’d recommend getting in touch with a local advice agency to discuss your options before deciding.

Regards,

Aidan