Barclaycard are recommending to default. Is this a good course of action??

moatmeister

Wifey has had long term barclaycard with a very large limit, always paid on time often with my help, probably paid £1000s in interest over the years to them, but has fallen into "persistant debt", current balance about £13k. Min payment about £320,  of which £200 is interest charged. They have offered a paydown plan which reduces interest rate by 4%  to 15.9% but has a fixed min payment of £369. This is becoming increasingly unaffordable in the current climate. As suggested in the letter, she rang to try to negotiate a better deal with the "Specialist Persistant Debt Team", but although sympathetic and helpful, after going through full income and expenses and coming out with a disposable income for her of £40, they were only able to recommend a "zero offer", which means to default, freeze the balance at 0%, and pay it down at £40/month. I understand the full implications of a default on the credit file and we could work with that if we had to, but would rather not, but is this a good course of action? I'm not sure I completely trust them and dont want the bailiffs coming knocking. They are only offering these plans because the FCA has forced them too, in the same way they are only offering coronavirus help because Boris has told them to. When the bank is recommending you to default the cynic in me says they are doing it to be able enforce their position legally

fatbelly

A freeze of interest/charges and a £40 plan is a good plan if the £40 is affordable.

The default is just a side effect of the plan. 

There will be no court action nor anything that follows that (like bailiffs).

The FCA is leaning on them to do what they should have been doing anyway

RAS

moatmeister
Do you have any joint accounts with your wife? if so, it would be wise to separate them now to preserve your credit rating. If hers tanks, it makes it harder for her to get any other credit but you'd be protected.

Does she have any other debts?

moatmeister

Thank you. Very good point well made about joint accounts.
We have a joint mortgage and I cant see an easy way out of that. I have already ordered her credit report to double check the situation but unfortunately dispite my best efforts, mine has already been irrepairably ruined for the forseeable future. 

sourcrates

Please don`t mention bailiffs, you haven`t even missed one payment yet, bailiffs can only be instructed after a very lengthy collection process that results in legal action, and then you have to refuse to pay, only then would a creditor have the option of using a bailiff, and as its a consumer credit act debt, that almost never happens, so please forget about bailiffs, and do a bit of research before you commit to any course of action here.

moatmeister

Cheers Sourcrates,
Bailiffs came into the equation because I cant work out why the bank would be recommending us to default.  I cant see it is in our interest at all. Surely  is it not better for everyone if they would but it at a zero or low interest rate and let us pay it off whilst maintaining our credit integrity? Or is there something I am missing?
Please can you be more specific about which areas I should research? Have spent ages thinking about all this but may have missed something somewhere

sourcrates

Your debt is governed by the consumer credit act, so your creditor, Barclaycard, has to work within that framework, your agreement shows a certain percentage of interest that must be charged, so in order to be fair to you, and to not break the terms of your agreement, for them to offer you a no interest option, you have to default, so ending the agreement, and thus freezing the interest.
If your credit file already contains negative information, then one more default is of no consequence.
No, you will not have bailiffs knocking on your door.

ManyWays

Min payment about £320,  of which £200 is interest charged.

Nightmare. 

If you can only afford 40 then that is much better. At least all the 40 will go off your debt. 

Do you have other cards with big balances???

moatmeister

She doesnt, I do. 

Suseka97

moatmeister said:

Thank you. Very good point well made about joint accounts.
We have a joint mortgage and I cant see an easy way out of that. I have already ordered her credit report to double check the situation but unfortunately dispite my best efforts, mine has already been irrepairably ruined for the forseeable future. 

You are right that the joint mortgage is what it is and there's no way to alter that.. but I do hope that you are looking at this in a more positive way.  Your credit file is not 'irreparably ruined' you both just need to sit down and work a way through this.  A default isn't the end of the world.  

moatmeister

Suseka97 said:

 but I do hope that you are looking at this in a more positive way.  

Yes its very positive thanks. To cut a long story short, we have ended up with a very large amount of unsecured card credit for very valid reasons, initially affordable at 0%, now much higher. I had hoped to remortgage the house to make it affordable and to that end have really struggled to keep up with the card payments. The computor said no and the mortgage lenders have been at best un cooperative, The current covid financial situation has been the last straw. I have tried to do what I considered to be the right thing and pay it off but its all a massive stress and is affecting my health and our lives. If this is the solution the other cards will be going the same way very quickly. Its not how i had planned it but if they end up not getting their money back I will have a clear conscience about it.