Looking for help in the best way of paying off large debts

Rob5342

This will only get sorted out if he takes charge of things himself, if he comes on here then we can advise directly.

On a debt management plan all interest is frozen and you repay the debt at a rate you can afford. Instinctively lending him money might feel like the right thing to do but I very strongly advise that you don't. It won't be saving him any interest, and overall he will still only be able to afford the same repayments so it won't speed anything up. There is also the highly probable danger that he'll see it as a quick fix and carry on with the same bad habits, but if he works through the dmp himself that will help him learn good habits that will stop him getting into the same situation again.

I racked up £42k of credit card debt and borrowed some money from my brother to help clear it. I was very grateful at the time but all it did was reduce things a bit and then I carried on increasing them again. It was only when I started a DMP that I got things under control. I'm now a few years down the line and have a bad credit record but I've paid things down significantly and stick to my budget each month. If my brother had said no I would have had to start my DMP earlier and would be in a better position now, so you really need to look at the big (6 years+) picture.

Mr.Generous

The only thing I don't understand is that he borrows money from family for work expenses - then when the expenses are paid why isn't he paying family back? What is he then using this money for if he has to borrow again next month?

kimwp

lilmorph said:

molerat said:

IMHO lending him money is not the answer.

Is he really 100% on board with getting out of debt or just paying lip service to it because he has no choice ?

I think he is but only time will tell. His mother and I sat down with him a couple of weeks back as he had been playing on heart strings every month and not admiting to where he was financially and as we are divorced I think he assumed we wouldn't talk about this issue. So he has now admitted to the problem, he currently can't meet the payments and live without help. So the choice is to reduce payments and spending a long time clearing these debts. He has a partner and a toddler and another baby on the way! So this needs to stop now. I am only agreeing to pay on the basis I am paying these companies and checking his account monthly.

Honestly, it sounds like he needs to do this on own to learn how to manage his money. It would be best if you kept hold of your money to help him with full and final offers in the future if he shows that he really has learned how to manage his money, otherwise it's just throwing it away.

His first step should be a proper statement of affairs (link in my signature) - we can help with advice on it if wanted.

sparks_2023

The key to getting this sorted out is to get all the debts to default. This means no interest will then be charged and payment levels can be set to livable levels. I'd not worry about an official DMP as such - just set up payments to each creditor going forward.

It will destroy his credit status for 6 years - pretty much no possibility of any more credit in that timeframe. But once that countdown has fully ticked down then happy days. And 6 years without credit is not bad just different.

I made a mistake in not letting my Capital One and Vanquis cards default when the other debts did. So I can now either default them now and reset the 6 year clock or pay the interest going forward. I'll pay the interest (£15 ish per month ) as I want to be free of all defaults sooner but what a waste of over £180 per year.

Also, don't be afraid of debt collection agencies. They huff and puff and mislead and threaten but they are paper pussycats and will get what they are given in the real world.


Honestly, put your £15K away for now. It will be of much more use making settlement offers in a year or 2. If you spend it now it's gone and you'll be back here with the same problem within the year.

RAS

lilmorph said

I assumed if the debt are moved to these debt collection agencies that is because they are defaulted? 

The original companies were Barclaycard, MBNA, Lloyds CC, Capitol One & Aqua.

He has said she is aware but not the full extent but she is doing extra work to bring in more . So that does need to be addressed and with the new baby a plan for family expenditure.

No, original creditors usually farm out debt collection after a little light effort in-house. They may sell the debt on but at this stage they might well have just contracted out the collection service.

As a starting point, you son needs to download all three credit records and check them, refer him to MSE to do that for free. 

What you are looking for is AP (Arrangement to Pay) and Default markers against the accounts. AP markers damage your credit record for far longer that defaults.

A default comes of your credit record after 6 years even if you've not paid a penny. AP markers take 6 years to fall off after the debt has been cleared! Interest and fees can still accrue against debts with AP markers.

Which if why we tell people in difficulties to stop paying, save an emergency fund and start payments once the defaults are registered. A fiver a month in the interim to sooth the creditor and salve the debtor's angst can wreck havoc for more than a decade.

Actually came on here to respond to tout last sentence but will do that later.

EssexHebridean

Hi Lilmorph - that's stressful situation for you, however, right now it sounds like it's more stressful for YOU than for your son - and that's not right. We've long said on here - "you can't have a lightbulb moment for someone else" - your son needs to want to sort things out for himself before any help you offer will be of any use, I'm afraid. Although you say he has a DMP in place, it sounds as though the debts haven't yet defaulted (this is a known issue with Stepchange - they are extremely good, but they don't encourage people to let the debts default before starting a DMP!) and so this is meaning that his payments aren't making an impact. The fact that he now has arrears on utility bills also suggests that he isn't working to a proper budget, or that the DMP that has been set up isn't affordable for the household.

If you give him money now - and let's drop the fallacy of this being a loan as it almost certainly won't be I'm afraid - then what will happen is that the spending that has caused the debt - and you've not said otherwise, so I am assuming that it IS spending - will continue as it has been, and before you know it, he will owe you the 15k (plus whatever else he already owes you and other family members) and will have another £43k of debt to clear on top. The key with sorting a debt is to tackle it from the ground up. So first off, establish the cause, and ensure that is tackled. second, put together a full household budget and learn to live with it - this is key, that everyone knows what is coming ion and going out, and that discretionary spending is budgeted for. Payments to unsecured debt almost certainly need to stop if interest is still being charged, as the debts need to default to make them more manageable and to start to build a basis for F&F's in the future. 

The best thing you can do for your son right now is to offer him help and support - in learning to budget, in solving whatever problems he may have that have lead to the debt (and bear in mind that there is a possibility that this could turn out to be something you would far sooner not have to hear about, so be prepared for this), and in working towards doing what is needed to clear the debt, but to also keep your own money firmly where it is.  he doesn't need bailing out - he's a grown adult - but he does need help, and the knowledge to sort the situation for himself. Otherwise not only do you rob him of his self-respect, but you also do so while not solving the problem anyway. 

I think he needs to stop paying to the DMP now, and then go right back to the beginning and follow through the steps in order.

lilmorph

RAS said:

lilmorph said

I assumed if the debt are moved to these debt collection agencies that is because they are defaulted? 

The original companies were Barclaycard, MBNA, Lloyds CC, Capitol One & Aqua.

He has said she is aware but not the full extent but she is doing extra work to bring in more . So that does need to be addressed and with the new baby a plan for family expenditure.

No, original creditors usually farm out debt collection after a little light effort in-house. They may sell the debt on but at this stage they might well have just contracted out the collection service.

As a starting point, you son needs to download all three credit records and check them, refer him to MSE to do that for free. 

What you are looking for is AP (Arrangement to Pay) and Default markers against the accounts. AP markers damage your credit record for far longer that defaults.

A default comes of your credit record after 6 years even if you've not paid a penny. AP markers take 6 years to fall off after the debt has been cleared! Interest and fees can still accrue against debts with AP markers.

Which if why we tell people in difficulties to stop paying, save an emergency fund and start payments once the defaults are registered. A fiver a month in the interim to sooth the creditor and salve the debtor's angst can wreck havoc for more than a decade.

Actually came on here to respond to tout last sentence but will do that later.

Thank you, very useful.

Just to clarify in my head.

Arrangement to pay on any debts today means that if the debt is cleared in 3 years, it will be another 6 yrs past that before he can start cleaning up the credit record?

Defaulted means the 6 years clock starts now. He can can then pay off parts now and maybe offer a F&F in couple of years. Does the F&F effect the credit black mark beyond that 6 yrs? Also does having an outstanding balance have any effect if he didn't clear it in 6 years? 

If he has done a reasonable DMP and he isn't stupid in the amounts he is retaining for living on then once he has defaulted can the creditors chase for larger payments asking him to reduce the amount he keeps aside for living costs?

lilmorph

EssexHebridean said:

Hi Lilmorph - that's stressful situation for you, however, right now it sounds like it's more stressful for YOU than for your son - and that's not right. We've long said on here - "you can't have a lightbulb moment for someone else" - your son needs to want to sort things out for himself before any help you offer will be of any use, I'm afraid. Although you say he has a DMP in place, it sounds as though the debts haven't yet defaulted (this is a known issue with Stepchange - they are extremely good, but they don't encourage people to let the debts default before starting a DMP!) and so this is meaning that his payments aren't making an impact. The fact that he now has arrears on utility bills also suggests that he isn't working to a proper budget, or that the DMP that has been set up isn't affordable for the household.

If you give him money now - and let's drop the fallacy of this being a loan as it almost certainly won't be I'm afraid - then what will happen is that the spending that has caused the debt - and you've not said otherwise, so I am assuming that it IS spending - will continue as it has been, and before you know it, he will owe you the 15k (plus whatever else he already owes you and other family members) and will have another £43k of debt to clear on top. The key with sorting a debt is to tackle it from the ground up. So first off, establish the cause, and ensure that is tackled. second, put together a full household budget and learn to live with it - this is key, that everyone knows what is coming ion and going out, and that discretionary spending is budgeted for. Payments to unsecured debt almost certainly need to stop if interest is still being charged, as the debts need to default to make them more manageable and to start to build a basis for F&F's in the future. 

The best thing you can do for your son right now is to offer him help and support - in learning to budget, in solving whatever problems he may have that have lead to the debt (and bear in mind that there is a possibility that this could turn out to be something you would far sooner not have to hear about, so be prepared for this), and in working towards doing what is needed to clear the debt, but to also keep your own money firmly where it is.  he doesn't need bailing out - he's a grown adult - but he does need help, and the knowledge to sort the situation for himself. Otherwise not only do you rob him of his self-respect, but you also do so while not solving the problem anyway. 

I think he needs to stop paying to the DMP now, and then go right back to the beginning and follow through the steps in order.

I have to say I don't feel stressed, I rarely get stressed. I'm treating this as a mathematical problem, which are always fun, you can never have to many spreadsheets!   This doesn’t mean I’m not taking it seriously but it isn’t something that keeps me awake at night, although I think it is quite stressful for my ex-wife.

I was asking on here because along with the mathematical side, it was understanding the process. I believe everyone has been very helpful and given some thought provoking comments. The main one being the need him to understand his problems and having the motivation in getting out of this hole and staying out of it, and driving that himself.

I think the next steps are listed below. I like bullet points too as I hate writing words compared to numbers

1)    How & why, has he ended up here. What is changing to get out of this problem. How is he going to make this work

2)    Copies of credit checks to establish his position

3)    Copies of correspondence from creditors to establish their position

4)    Decide if making all debts defaulted is the best strategy

5)    Make sure his budget is correct to allow him to create a DMP, which allows him to have the money to live on without creating more debts, while paying off the current debts in an efficient manner.

6)    Get him to come here and take advice.

7)    Take the ownership to lead himself out of debt with the support of the family (including not borrowing from the family to fund it)

Depending on how this pans out I still have the option to clear some of these either now or in a couple of years if the plan is to be defaulted and offer F&F to further clear down the debts. No I'm not soft just practical and not all assistance will be a waste in all cases but it looks like I need to ensure the points above are at a point where I can make that decision.

RAS

lilmorph said:

RAS said:

lilmorph said

I assumed if the debt are moved to these debt collection agencies that is because they are defaulted? 

The original companies were Barclaycard, MBNA, Lloyds CC, Capitol One & Aqua.

He has said she is aware but not the full extent but she is doing extra work to bring in more . So that does need to be addressed and with the new baby a plan for family expenditure.

No, original creditors usually farm out debt collection after a little light effort in-house. They may sell the debt on but at this stage they might well have just contracted out the collection service.

As a starting point, you son needs to download all three credit records and check them, refer him to MSE to do that for free. 

What you are looking for is AP (Arrangement to Pay) and Default markers against the accounts. AP markers damage your credit record for far longer that defaults.

A default comes of your credit record after 6 years even if you've not paid a penny. AP markers take 6 years to fall off after the debt has been cleared! Interest and fees can still accrue against debts with AP markers.

Which if why we tell people in difficulties to stop paying, save an emergency fund and start payments once the defaults are registered. A fiver a month in the interim to sooth the creditor and salve the debtor's angst can wreck havoc for more than a decade.

Actually came on here to respond to tout last sentence but will do that later.

Thank you, very useful.

Just to clarify in my head.

Arrangement to pay on any debts today means that if the debt is cleared in 3 years, it will be another 6 yrs past that before he can start cleaning up the credit record?

Precisely.

Defaulted means the 6 years clock starts now. He can can then pay off parts now and maybe offer a F&F in couple of years. Does the F&F effect the credit black mark beyond that 6 yrs? Also does having an outstanding balance have any effect if he didn't clear it in 6 years?

Correct, re the first part, the clock start on the date of the default. F&Fs have no impact on the credit record beyond 6 years, although they do look better than the original debt in the interim. Even if he doesn't pay a penny in the next 6 years, all record of the debt is erased in 6 years

If he has done a reasonable DMP and he isn't stupid in the amounts he is retaining for living on then once he has defaulted can the creditors chase for larger payments asking him to reduce the amount he keeps aside for living costs?

Well they will ask. But they are unlikely to get anywhere unless he gets a large pay increase. They very rarely go to court as they know they'd only get the same amount of money, after paying out all the court and legal fees.

Comments in bold above.

 One of the big differences between MSE forum and the debt charities is that we suggest people understand the long term impact of their decisions.

If they pay absolutely nothing for the next 6 years, and avoid acknowledging in writing, the debt becomes statute barred (5 years in Scotland). It still exists, but not on their credit record and the creditor can no longer take legal action to recover it. If the debtor paid the whole lot off it wouldn't be recorded, neither will it if they pay nothing.

If they pay £1 per month, after 6 years the debt's still live and AP markers will be reported each month. It's less now but there've been lots of people here "taking responsibility" for their debt, struggling to live on tiny budgets and wrecking their financial records. 

The new rules mean that creditors are supposed to take affordability into account, after allowing decent living standards. 

stu12345_2

is it possible that someone can pay nothing for 6 years and they can't get/want a  DRO or bankruptcy for some reason or another.in that their income matches their outgoings exactly.
what would happen in that case., would they get ccj saying pay nothing? for how long?
or would the creditor not go that far and just accept that they are getting nothing and the debt will be time barred in 6 years time