Advice needed and are defaults really that worth stressing ?

sparks_2023

Hi,

I am in the mire and the stress of defaults is grinding me down into terrible misery.

I have 4 loan accounts which are 3+ months late and I simply cannot pay them without leaving myself with no food or fuel to get to work.

It is very obvious that defaults on my credit report are imminent.

But should I just take the view that life is just too short to worry ? What will be will be. Que Sera Sera.

Now I am in a VERY fortunate position of being 55 in the summer with a number of reasonable pensions. I plan a drawdown on my birthday and will pay off the debts ( ~8K including those not at default risk). I think a clean slate is a great investment in my future. Misery gone. Stress and health improved.

Coupled with this I have to get outgoings < incomings at that point and a happy future is there from summer onwards.

I looked into getting a loan based on my future pension drawdown but I got the impression that this is heavily frowed on by HMRC as they view it as trying to get around the rules. Anyway, for whatever reason, I couldn't find a loan for the 6 months from anyone that seemed reputable ( my credit file is already shot it seems ).

So, anyway, 2 questions :

(1) Should I just accept my defaults will wreck my credit file for 6 years and that there will be no more credit for the foreseeable future ( I think if I am forced to move away from debt totally this might be a great outcome anyway ) ? I just have to get beyond my own mental block that a default or 4 is terrible.

(2) Have I missed anything blindingly obvious as a solution ? ( my credit file has stopped me refinancing the debt whatever I try, although some lowlife tried to get me on a debt management plan - even though I'm sorted in 7 months with the drawdown ).


Thanks everyone. I suspect the actual answer is just to take the defaults on the chin and not worry.

enthusiasticsaver

I personally would not use your pension and would accept the defaults and do a DMP.  If you cannot afford to make loan repayments borrowing against your retirement fund is not a good move. 

sparks_2023

enthusiasticsaver said:

I personally would not use your pension and would accept the defaults and do a DMP.  If you cannot afford to make loan repayments borrowing against your retirement fund is not a good move. 

Thank you for replying.

Going into a DMP isn't the answer I wanted to hear - I just wanted an end to the stressful nightmare asap and a clean fresh start - but I'll at least think about it some more and I have half a year to make up my mind anyway.

RAS

A Statement of Affairs would be a good idea, format for MSE and post for detailed advice.

You need to ensure your salary is paid into an account with no links to any group with whom you have debts.

The non-payments and defaults will be on your credit record for 6 years anyway, even if you pay the debt off.

So protect your pension and look at the situation again at intervals.

sparks_2023

The loans are for £2,200 and will be paid off by April 1st ( well that is the last scheduled payment - whether I'll manage it is another matter ).

Credit cards and overdraft ( ~£5K ) will be ongoing. Council Tax is £800 behind.

The pension drawdown is a bit of a red herring as it isn't until late July - and the loans and Council tax should be gone by then - and I agree a drawdown to pay the cards seems a little OTT.

It is clear now that I've been floundering for a way not to get the 4 loans to default on my credit report. But my credit report is abysmal anyway as I'm unable to get any finance.

So - my plan is :

1) Pay the council tax.
2) Pay the loans when possible but not leave myself without fuel to get to work.
3) Take up to 4 defaults on my credit report on the chin and accept no more credit for 6 years - which will break my debt "habit", so a good thing.
4) Leave the pension drawdown.
5) Not enter any DMP etc. which prolongs my mental agony beyond the summer.
6) Attack the credit cards and overdraft 5K debt with a to be determined strategy in August.

Thanks all. More comments will be taken on board.

enthusiasticsaver

Your credit record must already be affected if you are in arrears with your loans.  The benefit of a DMP usually is that interest is frozen so the debt should not increase.  Are you still being charged interest? You are right in that defaults are not the worst thing and you cannot borrow your way out of debt so it is no bad thing if you cannot get further credit. 

An soa would be a good start just to see what is the best way forward ignoring the fact that you can draw on your pension after 55.  Below is a link as only when we can see what income you have and your essential outgoings is it possible to decide whether you can afford to repay the debt at all or whether there is sufficient income there to pay lower contributions to the debt. 

SOA Calculator (lemonfool.co.uk)

RAS

Your priority is the Council Tax. As that has the possibility of fees for liability orders and bailiffs

You need to get that paid off by March, whatever happens. Ignore the credit cards. You are better getting defaults sooner rather than later. 

Have you spoken to the Council to make arrangements?

EssexHebridean

sparks_2023 said:

enthusiasticsaver said:

I personally would not use your pension and would accept the defaults and do a DMP.  If you cannot afford to make loan repayments borrowing against your retirement fund is not a good move. 

Thank you for replying.

Going into a DMP isn't the answer I wanted to hear - I just wanted an end to the stressful nightmare asap and a clean fresh start - but I'll at least think about it some more and I have half a year to make up my mind anyway.

Perhaps not - but it almost certainly is the right answer, I'm afraid. 

You have to remember the amount of time your pension still potentially has to cover - for context, feasibly, the same amount of time you worked to accrue it in the first place.

As said - an SOA would be a helpful tool both for you to properly work out your budget, and if you wanted to post it here, for us to help you with identifying possible savings that might oil the wheels a little. Your priorities are not the unsecured debt though - let those go if needed. you MUST sort out the council tax - make a proper plan to work out what money you can divert to getting that debt cleared off before the new CT year begins. Do you pay over 10 months or 12 currently? If 10, then switching to paying over the full 12 months can really help with budgeting. 

The defaults are nothing really in the grand scheme of things - as others have said, there will already be markers in place on your file, the sooner the defaults appear, the better, as that will help to ensure that your file does in fact clean up after 6 years - by trickling payments here and there you're actually slowing that process down - prolonging the agony, if you like!

I'm not sure why you're still adamant that you aren't willing to go into a DMP, though? From what you've said - albeit without seeing an SOA it's hard to draw an absolute conclusion - it really sounds like it would be a great solution for you, and would certainly lower the stress levels. 

fatbelly

Your council tax is a whole different priority to the rest. You should stop paying the non-priority debts and get an arrangement with the council to clear the council tax by end-march.

If you do not communicate with them you are likely to get a liability order fee, court fee, and 2 x bailiff fees very rapidly.

I'm in agreement with the others that pension drawdown and paying off the debts is not the best strategy.

A dmp to soften up the creditors, let them default and/or sell to debt buyers, then offer full & final settlement, would be more cost-effective.

A full statement of affairs might throw up something better if you want to do it

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

sparks_2023

Thanks everyone.

It seems I must divert everything to pay the council tax immediately, even if it means Cashasap, Bamboo, Fund Ourselves, and CashFloat default me.

I'm not worried at all about the (£2850 over 5 cards ) credit cards or the £1950 overdraft - those are problems for the summer. I'll look at the SOA in the New Year once the Council Tax is paid off.

I appreciate the very valuable help - I'm fully focused now on the council tax.

EssexHebridean

sparks_2023 said:

Thanks everyone.

It seems I must divert everything to pay the council tax immediately, even if it means Cashasap, Bamboo, Fund Ourselves, and CashFloat default me.

I'm not worried at all about the (£2850 over 5 cards ) credit cards or the £1950 overdraft - those are problems for the summer. I'll look at the SOA in the New Year once the Council Tax is paid off.

I appreciate the very valuable help - I'm fully focused now on the council tax.

Yes to diverting all attention to Council tax - but once you've done that, I'd deal with the overdraft next. All the rest - well you'll maybe get some letters, perhaps the odd phone call, but probably not much more. Overdrafts are what I think of as "dangerous debt" though - as they can be recalled at any time - quite literally meaning your bank could contact you tomorrow and say "we'd like our money back please - put your account into credit". while it's not immensely likely that would happen, it CAN do, and that alone is enough of a risk to make me suggest that you make that priority #2.

Personally I also wouldn't put off the SOA, either, regardless of whether you post it here it's an invaluable exercise to complete.  In between payday loans, an overdraft, and missing CT payments, it's sounding like there is a bigger issue here than "just a bit of overspending" and it would be worth putting some time into working yourself out a proper budget so you can see exactly where you stand. I would also strongly suggest that it's worth doing this to ensure that you don't continue to put stuff onto credit cards, as that will make your situation worse.