Drowning - Help

Lenners134

Hello,

This is my first post on here for a while and I don't really know where to start.

Essentially through many bad decisions over the years, I have racked up near £40K's worth of debt with practically nothing to show for it.

I have multiple loans and although I'm not behind on any of them, I'm having to use my credit card regularly as once the loans and all the household bills have all been paid, there's practically nothing left and I'm back to using the CC to make it through until payday.  And I'm now approaching my credit cards limit so this cannot continue for much longer.

I have been looking and reading about DMP's but I don't really know where to start.  I see some people suggesting that I should try and save up an emergency fund as once I enter a DMP, my access to credit will not longer be available but as I'm struggling already, I'm not sure that I can really save up much in the way of an emergency fund.

If I do decide to go down the DMP route, do I just cancel my direct debits until the loans default or should I just revert to token payments until I get my finances under control a bit better?  I know my credit rating will suffer if I do default but with the amount of debt I've got now, I'm not sure it can really be that much worse

Sorry if this is a bit rambly but I think I have finally had my lightbulb moment and I cannot continue to just stick my head in the sand and feel like this is not happening.

Any help or guidance on the best way forward would be greatly received.

Rob5342

Normally the advice here is to stop paying them until they default and then start the debt management plan. While you wait for them to default you can put the amount you would have paid into the debt management plan into an emergency fund.

It can be a bit daunting at first but you really need to take the hit on your credit file and get things sorted once and for all. I struggled for years with credit card debts of £40k, I kept telling myself it would be better next year but it just kepy getting worse. Last year I started a debt management plan and with a combination of that and refunds from affordability complaints I've now got it down to £30k, and after making some CCA requests I've found that only £5k of that is enforceable. 

fatbelly

As above. If you're heading for a dmp or insolvency, stop paying these non-priority debts and save an emergency fund and generally get your bits and pieces in order while they default you.

Please post  a statement of affairs so that we can help you choose your best option or whether you're being a bit pessimistic here.

https://www.lemonfool.co.uk/financecalculators/soa.php

Link is to a calculator - please format for mse

RAS

Hi 

You're in a debt spiral and need to get your priorities right. And stop the spiral.

Lenners134 said:

I have multiple loans and although I'm not behind on any of them, I'm having to use my credit card regularly as once the loans and all the household bills have all been paid, there's practically nothing left and I'm back to using the CC to make it through until payday.  And I'm now approaching my credit cards limit so this cannot continue for much longer.

You need to pay all the household bills, and your other essential costs (travel, emergency fund etc) , and then you pay what you can afford towards your debts.

The correct choice of debt management depends on your personal circumstances but the important things are:

You get proper advice from a debt charity (stepchange, national debt line). Don't speak to any of the debt companies who push you into an IVA because they get a fee for referring you to an Insolvency Practitioner who charges you £9K.

Once you make that decision, you won't be able to access more credit. Scary as that may sound, it will be a relief to get off the treadmill.

To prepare for that, you need a safety net, created by putting much of the money you have been paying to the loan and card providers into your emergency fund. Obviously, you need to pay your essential expenses first but you aim to have enough to survive if something breaks or you have a family emergency.



And if you stop paying your debts, the providers will default your accounts, which means that they stop charging interest. And that your credit record gets cleaner sooner than if you make arrangements to pay.

As fatbelly suggests, the best thing is to do your SOA, so that people can advise you on a sustainable budget. Once that's sorted, you'll know how much you have left over to pay your debts

Lenners134

Hi All,

Thanks for the responses.  Am working on an SOA today so will post that later.

One question I do have is that if my current bank is one of my debtors, will they close my account if I default on the loan?

Of the loan payments I have, that one is the cheapest and most affordable so is it an idea to keep paying that one?

mark55man

Not sure so better to wait for a more informed poster - but I have seen advice that it is a good idea to get a basic bank account away from your existing providers - and do that before you start defaulting

elsien

You need to set up another bank account with a bank which is not in the same group as your current one, and start putting your emergency fund in there. Then they can’t touch it. 

RAS

Hi Lenners134

Banks generally have the right to off-set any credit (money) in your account against any debts you owe them, depending on the wording of your account. This may extend to any provider in the same group not just the one where you bank.

You need another bank account with a provider that is not associated with any of your creditors. Use the soft searches on here to see if you can get a main-stream one. 

If not, most offer basic accounts that do not require a credit check. These include a debit card and DDs etc but not an overdraft.

Then shift your salary, benefits, DDs etc to the new account and transfer any surplus before you default on that loan, or any other in the same group.

sourcrates

A basic, first step into debt management is always to never bank where you have debts.

You must open a new, basic bank account, with someone who has no ties to your existing bank.

Your old account provider then becomes just another creditor, you are the debtor, the people you owe money too are your creditors.

EssexHebridean

Get the new basic bank account sorted immediately - advice on that above but I will add that if you get paid at the end of the month tell your employer NOW that you will be changing banks, and that you will not be able to access money paid into your old account in order to make sure they don't pay you there. As soon as you have the new account details then let them have those, that way this next month's money will be a "start afresh". Provide the new account details for those taking priority payments like Council tax, energy, water plus things you want to be able to continue with like landline and mobile phone and, subject to how tight things are, internet and TV provider. Also anything like insurances which have to continue to be taken. In the first instance anything being taken from the old account you could just transfer the money over anyway. 

Stop the Direct Debits for any debt payments that are for non-secured debt. (Anything secured on your home you must continue to pay if possible). 

Get that SOA done and let's see what we can help you to sort out, shall we?! 

Lenners134

Hi All,

Thanks for the responses so far, very helpful.  I have setup a separate bank account with First Direct.  If offered me an overdraft which I said no to so hopefully that is a start of better things to come.  

I have completed my SOA and it is here.  Doesn't make for pretty reading and looking at it now, I can't believe I've got myself into this mess.  

As always, thanks for the help and advice, it really is helpful.

Wages	£2,800.00
Essential Payments
Rent	£850.00
Council Tax	£127.00	10 month arrangement.  Last Payment Feb 23
Gas\Electric	£58.00
Water	£30.00
Sky TV\Broadband	£100.50	18 month contract, cannot change currently
EE Mobile Phone	£81.10	24 month contract.  Expires in Feb 23
Food	£120.00
AIG Life Insurance	£15.54
Cineworld	£18.40
Apple Subscription	£0.79
Amazon Prime	£7.99
Food	£120.00
Travel	£200.00	I can claim some of my travel expenses back if I'm travelling for work
Hair Dressing	£30.00
	£1,759.32
Unsecured Debts	Monthly Payment		Total Amount Left	Last Payment Date
Tesco Bank	£273.59		£7,934.11	25/11/2024
AA Loan	£367.33		£4,407.96	25/09/2023
Updraft	£258.82		£9,325.39	25/12/2024
Updraft	£214.81		£11,201.07	23/10/2025
Santander	£126.00		£1,555.83	01/08/2023
Halifax	£155.00		£5,200.00
Starling	£15.65		£750.00
Santander	£17.16		£750.00
	£1,428.36
Total Outgoings	£3,187.68	Outstanding Balance	£41,124.36
Shortfall	-£387.68