6 Years Later - An update on £100k+ Debt

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Keezing
Keezing Posts: 322 Forumite
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edited 22 April 2023 at 1:49PM in Debt-free wannabe
In December 2016 I posted this thread: https://forums.moneysavingexpert.com/discussion/5573798/huge-amounts-of-debt-advice-on-dmp-needed/p1

I had just found out that my wife at the time (no longer married) had hidden £50k in credit card and loan debt (I later found more - it actually turned out to be closer to £80k) and we had a total debt position of £120k and I didn't have the income to service it.

6 Years later, all the debts are all settled, the defaults are due to drop off my credit file imminently and I'm in a new relationship preparing to buy a new house. It was quite a journey, starting with me genuinely considering that it would be better if I died so my wife would get the insurance money, worrying about bailiffs knocking on the door to now being full of hope about the future.

Before I posted on MSE I was talking to a lender about taking out a massive secured debt consolidation loan at a massive interest rate. I will always remember the person on the phone telling me that I will be paying these debts for the rest of my life if I don't take the loan. I am so grateful that I didn't and I am so grateful for the help I received from MSE about DMPs. 

I thought I would share my learnings in case anyone finds themselves in a similar position:

1. Communicate with your lenders

It's very easy to bury your head in the sand but communicating with your lenders is going to get you the best possible outcome. As soon as I told our lenders that the debts were related to my Wife's mental health most of them immediately froze the interest and accepted the repayment plan - even if it was just £1 a month. However for your own sanity I would recommend withdrawing your permission for them to call you. Keep everything in writing.

2. Open a New Bank account

If any of your debts are related to the bank you have your current account with make sure you have another current account. Do this before your credit file is trashed if possible otherwise your options will be slightly more limited. Barclays closed my bank account after I defaulted on a Barclays loan, however I had a Halifax and First Direct account ready.

3. Make a proper Budget

There are some good tools these days for creating budgets and tracking expenditure. YNAB is highly recommended, but I just used a spreadsheet and I would recommend an app like MoneyHub to track your income and spending. You can categorise your spending and it was eye opening for me. This instilled a financial discipline in me that has stayed with me today.

4. Use NEDCAB (https://nedcab.cabmoney.org.uk/splash-2.asp)

I was able to just add all my lenders and it generated all the letters for me. I see a lot of people recommending sending the letters by recorded post, but I say save your money. Send by email if you can or use a 2nd class stamp. A bunch of my letters did go missing, but they'll let you know if there's a problem and there's no rush. Get proof of postage if you're worried.

5. Don't make any repayments until they default you 

If you've accepted that you're going to miss payments, your credit file is going to be trashed anyway. Your goal at this point is to get the default as soon as possible. Most lenders will default you automatically within 3-6 months, but some will not if they are getting money from you. I had one lender that I was paying £1 a month to and they still hadn't defaulted my account a year and a half later. Only once I stopped the £1 payment did the account finally go into default, and I've had to lodge a complaint to get them to go back to change the default date.

Getting the default as soon as possible means the adverse credit will drop off your credit file sooner, and it means they are more likely to sell the debt - and the firms that buy the debts are more likely to accept a reduced settlement.

6. Only pay the minimum and save everything else if you can afford it

Once your account has been defaulted, you can start paying the token £1 per month. This will keep them off your back and will prevent the situation from escalating. You are communicating and cooperating with them so you won't have to worry about a CCJ. Save any excess in disposable income in the best rate savings account you can find and keep saving for settlement offers.

7. Settle the debts when you can afford to

Every single one of our lenders accepted a massively reduced figure to settle the debts. The biggest ones accepted 30% whereas some of the smaller debts wouldn't budge from 50%. Many of my debts were settled with the main lender - often with them offering the discount before I had even asked - but some won't settle until they have sold the debt. I paid around £45k to settle £120k of debt over the 6 year period. 

8. There is light at the end of the tunnel

Your debt does not define you. Life happens. Get more frugal if you can, but your priority is to put food on the table for your family and to pay your priority debts. Your credit file does not matter in the grand scheme of things and it will recover!

Huge thanks to @sourcrates and others - you changed my life and you had no idea. 

Comments

  • PM22
    PM22 Posts: 209 Forumite
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    Thank you for sharing your story
  • fatbelly
    fatbelly Posts: 20,492 Forumite
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    That's brilliant.

    It was interesting reading your old thread too
  • Martico
    Martico Posts: 969 Forumite
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    Thanks so much for sharing - from reading the boards over the last year or so, I've gained an understanding of the issues around large unsecured debt. To see these lessons writ large in such a personal post backs up those ideas even more. Kudos to you as well as all of those who helped you along the way.  
  • DMPJourney
    DMPJourney Posts: 12 Forumite
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    Thank you for sharing this with us. I am at the start of my journey, waiting for defaults. Its really good to hear from someone who has been there and come out the other side. I agree that the advice given on this board is invaluable. Good luck for the future.
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,594 Ambassador
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    Great hearing things ended up ok for you and so pleased you did not take that loan.  I will read your old thread now. 
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • MalMonroe
    MalMonroe Posts: 5,783 Forumite
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    Another post to say thank you for sharing. A post like yours is really helpful for those who may be feeling, as you were years ago  - and I was some years ago too, utterly defeated and depressed.  

    Congratulations on your brand new life with your new partner and all the very best to you both for the future. 
    Please note - taken from the Forum Rules and amended for my own personal use (with thanks) : It is up to you to investigate, check, double-check and check yet again before you make any decisions or take any action based on any information you glean from any of my posts. Although I do carry out careful research before posting and never intend to mislead or supply out-of-date or incorrect information, please do not rely 100% on what you are reading. Verify everything in order to protect yourself as you are responsible for any action you consequently take.
  • Soundgirlrocks
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    Lovely to hear you have cleared this and moving forward with your life. I think its hugely helpful for newbies to see success stories  :)
  • Makingabobor2
    Makingabobor2 Posts: 2,894 Forumite
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    What a lovely positive & helpful post. We have done all the things you mentioned, already had a couple of F&F offers and cleared about 4 creditors, and after 8 years since our LBM we can finally see that soon we will be in a position to clear a lot more with reduced offers. Me getting made redundant twice didn't help, but finally I think we will be on our way to freedom in the next few years....
    So glad it all worked out well for you
    Making the debt go down and savings go up

    LBM 2015 - debt £57K / Now £33,676

    Mortgage 04/24  £17,400 Officially ends June '26 but plan to be MF sooner
    Total OPs 2022 - £240   2023 - £1766
    OPs so far in 2024 £581.00


    Challenges

    EF #68  £160/£1000
    1p a Day '24 #12  £76/£667.  SPC '24 #41 £13.75
    Christmas '24 £12. 
     
    Make £5 a day - Apr £96.18/£150            
    NSDs April 9/15

    My debt free diary...https://forums.moneysavingexpert.com/discussion/6396218/we-will-get-this-debt-down-the-savings-up


  • EssexHebridean
    EssexHebridean Posts: 21,372 Forumite
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    Keezing thank you for coming back to update us - and I'm delighted that things have worked out so well for you! 
    🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
    Balance as at 01/09/23 = £115,000.00
    Balance as at 31/12/23 = £112,000.00
    SOA CALCULATOR (for DFW newbies): SOA Calculator
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