Any advice appreciated

Emmel

Hi, just looking for a bit of advice/general consensus before I seek advice from a charity.

I reside in Scotland

I have approx £50k unsecured debts. Its becoming unmanageable, I am looking at going into a Debt Payment Plan. I have cancelled all my direct debits and moved my salary into a bank I have no debt with. Is it better to seek help from StepChange now, or wait until I have got some defaults?

The only joint debt I have is my mortgage. As it is unsecure, am I right in thinking my house is ‘safe’? Roughly 40k equity, of which £20k is my half.

sourcrates

Your mortgage is obviously secured on your house, and as its owned jointly, you are both jointly and severely liable for the full amount outstanding.

Lots of people enter debt management, its a well trodden route to repaying your unaffordable debts at a reasonable rate, a very large proportion of them are homeowners, like yourself, creditors are well used to such arrangements.

Most creditors will accept a DMP, any that don`t simply sell there debts on to 3rd party companies who will gladly take your money, legal action at this stage is very, very rare, if debts remain unpaid, they just get assigned to collectors to chase, or get sold on.

Further down the line, as long as a payment arrangement is in place, all should run smoothly, and your house, as long as the mortgage is maintained, will not be affected in any way, shape or form, as these debts are all unsecured.

There are differences between English and Scottish debt management plans, they are essentially the same, but the Scottish version gives you more protection I believe in Scotland, its referred to as a debt payment programme under the Debt Arrangement Scheme (DAS).

Stepchange or National Debtline (Scotland) can help set one up for you.

Emmel

Thanks Sourcrates,

from reading other posts I see you appear knowledgeable on how to deal with debts/defaults.

Right now, am I best to stop all payments and save this for my emergency fund?

My mortgage will always be paid on time each month as well as all other priority bills. There is definitely no way our home can be brought into it?.

My significant other knew nothing of my debts, but I braved it and owned up to it.

currently their salary goes into the bill payment account and pays the bills and we live off my salary and I had been paying my secret debts from this too (an account in my name only). I have told OH to move their salary into their own single account and only transfer half of all bills each month, and I will do the same. This will completely separate our money and allow them to not have to carry my debts so to speak.

my plan is currently to ignore all communication until debts are defaulted, save the money i would have been paying to a dmp for an emergency fund, either go through stepchange or manage dmp myself if i feel i can. Does this sound ok

sourcrates

You can never say never, as it is, theoretically possible for a creditor to take you to court for non payment, obtain a CCJ, and also a charging order, should they wish to pursue that avenue.

However, any charging order would only be applied as a restriction, as the home is jointly owned, so if it were to happen that way, that is about as far as they could go with it, so your house would be perfectly safe.

Now that would be worst case scenario, and in the real world that isn`t going to happen anyway, yet it is a theoretical possibility that you should be aware of.

Your current plan is a good one, just keep in mind that creditors these days are under FCA pressure not to default accounts if at all possible, its supposed to be a measure to help people, but if your wanting defaults, its all a bit counterproductive.

See how things pan out, you can always make complaints to lenders if they don`t default you according to guidelines.

enthusiasticsaver

Wait for the defaults and save up for emergencies in the meantime as you say. You have done exactly the right thing in telling your OH although his/her credit record may be affected given you are financially linked through the mortgage.  Your home will be untouched as the debt presumably is all unsecured? 

I think your plan is sound. 

Emmel

enthusiasticsaver said:

Wait for the defaults and save up for emergencies in the meantime as you say. You have done exactly the right thing in telling your OH although his/her credit record may be affected given you are financially linked through the mortgage.  Your home will be untouched as the debt presumably is all unsecured? 

I think your plan is sound. 

OH credit score is kind of irrelevant to them as they are very credit averse, if they dont have the money for it, its not bought. Im the one who has poor money management skills/having us living above our means. It has came as a huge shock to them, but they are very supportive. At least they will have their own money now and I have said I am happy to have them store my emergency fund and also my budget money aside. Realistically I need no material things, have plenty clothes, shoes etc. I can perhaps look into vinted and sell the trainers I do not wear/reach for that are almost new, same with any other clothes. A bit of a declutter won’t do any harm.

Emmel

sourcrates said:

Your current plan is a good one, just keep in mind that creditors these days are under FCA pressure not to default accounts if at all possible, its supposed to be a measure to help people, but if your wanting defaults, its all a bit counterproductive.

See how things pan out, you can always make complaints to lenders if they don`t default you according to guidelines.

Yes reading through other posts I see this is common, however, we will see how the next few months pan out. One of my creditors is virgin money, and i realise they can take a long time to default. But from what I understand, until they default there is nothing they can legally do to enforce the debt? 

Will my balances increase much due to non payment/fees added on? 

sourcrates

Emmel said:

 One of my creditors is virgin money, and i realise they can take a long time to default. But from what I understand, until they default there is nothing they can legally do to enforce the debt? 

Will my balances increase much due to non payment/fees added on? 

That is correct yes.

Your balances will continue to increase with added interest and late payment charges, that is unavoidable unfortunately, once a period of non payment has been established, they tend to stop adding to the debt, as a prelude to default.

However, later on down the line, when your debts have been sold on, with a large enough emergency fund set aside, you can make settlement offers to the debts owners, and hopefully settle for less than the outstanding balance, which kind of equals things out in the long run.

Emmel

I have an accurate record of all current balances so I shall just keep an eye and as you say, hopefully make settlements to near where original balance was. Thanks for your help

Rob5342

Your plan sounds good to me. Getting defaults is good as it sets things down somewhat. The interest gets frozen, you have a fixed date when they come off your credit record after 6 years and they are likely to be sold to debt collectors who will probably accept reduced payments at some point. Payment arrangements are very bad as they don't come off until 6 years after the debt is repaid, if you have to reduce your in payments at some point that might not be for 10 or 15 years.

Lenders can be very difficult about defaulting but it's worth holding out so you benefit later. I wish that I had waited for default ls before I started mine as nearly two years later Virgin still haven't defaulted me.

Stepchange are good in some ways but they are not very flexible and insist that you treat all creditors the same. That's not very helpful if you want to make a lump sum payment as they want you to split it proportionally between the debts. Doing it yourself is very easy and makes it very flexible as you have full control. There is a Derbyshire CAB site I use for creating my letters. You could always use Stepchange when you start the DMP, and switch to managing yourself later when you are more confident about the process.

EssexHebridean

Welcome aboard! You sound very organised, and very much as though you have had your "Lightbulb moment" and also had time to think things through - and that's good as it is often a better place to start from than that first mad rush of enthusiasm after the lightbulb flickers on and you think "I must do something RIGHT NOW!"

Waiting for defaults and saving while you go is a good solid plan - this is also the time that you will find out if you planned budget works OK for you as well - and can make any tweaks as you need to. You also get to get used to the buzz of seeing money accumulate, not just flowing out - as you build your EF. One word of caution on the idea of having someone else look after your EF and any budget pots you start using - firstly remember that once you had that money over to them in the eyes of the bank it is theirs - you don't mention whether you are married I don't think but if you are not, in the event of anything happening to your OH (and while I know that's never something we want to think about, practicalities mean that it should be considered) and them not having a will stipulating their assets to go to you that money they are looking after for you will be out of your reach, and will potentially end up going to someone else - so be mindful of that. Also - one of the lessons you need to start learning is how to have money in the bank and not spend it, while not being able to spend it because someone else has control of it seems like a good idea on the face of it, you're not actually learning money management by dealing with things that way. I'd suggest starting out with a compromise - something like a limited access savings account can work well for an emergency fund - because you get limited to something like 6 withdrawals per year before you get hit with an interest penalty, you'll be far less inclined to take money out other than for a proper emergency. Set up to get interest paid monthly and that also works as a great motivator, too! 

One note about using the letters as suggested above to help with self managing a DMP (DPP) - you would need to find specific versions that are intended for use in Scotland as certain aspects of the law relating to debt management are different as I think Sourcrates has already mentioned. The period of limitations is also different in Scotland - 5 years rather than our 6 down here.