Credit card debts

enthusiasticsaver

You stop making payments to the creditors in order for them to default you. You need that to happen first so it hits your credit file asap because they drop off 6 years later. You also need the interest to stop which it should once you have defaulted. Most people use this time to save for emergencies as they are not making debt repayments.

Once the debts are defaulted they may be sold on and by then hopefully you have worked out your budget and know how much you can afford to pay to the debt so you can either do a managed DMP through stepchange or do a self managed one where you tell each creditor how much you will pay them monthly. In general it should be offered proportionally to the amount owed so the largest payment should go to the biggest debt. After a point you may ask for full and finals where they settle on a lower amount but usually in a lump sum so saving for these is sensible and may get it repaid quicker. 

enthusiasticsaver

Have you explored taking other employment where the income is more regular and stable than self employment? Given you live in a ULEZ area and your van is not compliant it must be costing you a lot to run  and the income you get from self employment is not high. What about your tax and NI situation? Do you owe money there? 

tigergambit

enthusiasticsaver said:

Have you explored taking other employment where the income is more regular and stable than self employment? Given you live in a ULEZ area and your van is not compliant it must be costing you a lot to run  and the income you get from self employment is not high. What about your tax and NI situation? Do you owe money there? 

I  think OP will be below thresholds for both once legitimate business expenses are removed.
 

Looking4silverlining said:

Thanks to all of you, I am starting to understand how this all works now.
Yes I am looking into the possibility of getting a full time job but am also trying to set up a new small business which has been getting a lot of very positive feedback and someone has even offered me 40 hours a week paid that should be ongoing. Things might be looking up!
I have been told by a friend to offer token payments to the cards but keep paying one off and using it. Then offer them final settlements etc at some point. But I don't think she has defaulted on the cards. Is thes possible? I mean is there a way that I would be able to keep a bank account for use?

I  think OP will be below thresholds for both once legitimate business expenses are removed.

@Looking4silverlining

Don't overthink things. If you have debts with your current bank open a new one unconnected with any of your debts. Don't be tempted to keep a card open.

I really think your getting full time employment is the key to solving your financial problems. Self employment does not have many advantages for you at the moment. (As someone who was self employed for many years I have to say that there are not many opportunities left where self employment is a real advantage). 

Trying to start a new business without proper funding is not a good idea. Could you get the person who has offered you 40 hours to put you on the books for a year? Or could you get a job and start the new business part-time in the evenings/at weekends?

I think you should stop paying all unsecured debts immediately. Go to National Debtline who will help you get an SOA on current earnings without committing to a DMP immediately and do as much as possible to get a full time role whilst waiting for defaults. You will then have some better options for the future.  

RAS

Unless you've got a CIFAS fraud marker or been de-banked for failing know your customer rules, or lack a stable address, almost everyone can keep a bank account and many sorting out their debts have more than one.

You need to apply for a new basic bank account which is not linked to any of the banking groups with whom you have debts. That prevents banks off-setting any income against your debt, although this is not as likely as in the noughties. Traditional options include Barclays and the Co-op. A lot of people now go for new banks like Monzo which allow you to create pots for different purposes and can be opened very quickly on line.

Basic accounts include a debit card and standing orders etc. They don't include overdrafts and if you get overdrawn, the bank may close the account. Don't use the switching method as that also moves your DDs to creditors.

What your friend may be overlooking is the impact of Arrangement to Pay (AP) markers on her credit record which creditors usually record when a customer has failed to pay a debt in full each month. 

In the short-term AP and default markers have roughly the same impact on your credit record, as both indicate failure to pay a debt to the original schedule.

Defaults come off your credit record 6 years after they are issued, even if you fail to pay a penny towards the debt. Meantime, interest and fees are frozen.
AP markers stay on your credit record for 6 years after the debt is paid off. And interest and fees may still be added.

Which is why many on DFW suggest people wait until the debt is defaulted before they start making reduced payments. It ensures the debtor has a known recovery date after which their credit record rehabilitates and a known maximum value to the debt. 

Making token payments without waiting for the default can damage your credit record for over a decade.

Looking4silverlining

RAS said:

Unless you've got a CIFAS fraud marker or been de-banked for failing know your customer rules, or lack a stable address, almost everyone can keep a bank account and many sorting out their debts have more than one.

You need to apply for a new basic bank account which is not linked to any of the banking groups with whom you have debts. That prevents banks off-setting any income against your debt, although this is not as likely as in the noughties. Traditional options include Barclays and the Co-op. A lot of people now go for new banks like Monzo which allow you to create pots for different purposes and can be opened very quickly on line.

Basic accounts include a debit card and standing orders etc. They don't include overdrafts and if you get overdrawn, the bank may close the account. Don't use the switching method as that also moves your DDs to creditors.

What your friend may be overlooking is the impact of Arrangement to Pay (AP) markers on her credit record which creditors usually record when a customer has failed to pay a debt in full each month. 

In the short-term AP and default markers have roughly the same impact on your credit record, as both indicate failure to pay a debt to the original schedule.

Defaults come off your credit record 6 years after they are issued, even if you fail to pay a penny towards the debt. Meantime, interest and fees are frozen.
AP markers stay on your credit record for 6 years after the debt is paid off. And interest and fees may still be added.

Which is why many on DFW suggest people wait until the debt is defaulted before they start making reduced payments. It ensures the debtor has a known recovery date after which their credit record rehabilitates and a known maximum value to the debt. 

Making token payments without waiting for the default can damage your credit record for over a decade.

Wow you guys certainly know what you are on about. 
Do you know if a Bounceback loan can be defaulted on too? I wasn't sure if I could add this one in as its a government type loan.
I have a business bank account with Santander which is where the Bounceback loan came from. Maybe I could pay this one off before defaulting on the rest? Then keep using the account for my work payments and tax credits still?

EssexHebridean

Why not open a new basic bank account with a provider you don't have debt with right now? Don't do a switch, as explained above that means that all your DDs for debt payments will be transferred over, just open the new account and you can then manually switch your priority bill DDs across to that, and use it for your income and budgeted outgoings. It's almost unheard of these days for someone to be unable to open a bank account as it is well known that this can cause serious issues for people in being able to manage their day to day affairs - I'd say that's not something you need to worry about. 

Ignore your friend who is suggesting that you maintain one credit card and carry on using it - I'm not sure how they think that might help you, but you need to be working towards learning to work to a structured budget and step away from credit reliance. As said previously, nod, smile, ignore. 

enthusiasticsaver

tigergambit said:

enthusiasticsaver said:

Have you explored taking other employment where the income is more regular and stable than self employment? Given you live in a ULEZ area and your van is not compliant it must be costing you a lot to run  and the income you get from self employment is not high. What about your tax and NI situation? Do you owe money there? 

I  think OP will be below thresholds for both once legitimate business expenses are removed.
 

Looking4silverlining said:

Thanks to all of you, I am starting to understand how this all works now.
Yes I am looking into the possibility of getting a full time job but am also trying to set up a new small business which has been getting a lot of very positive feedback and someone has even offered me 40 hours a week paid that should be ongoing. Things might be looking up!
I have been told by a friend to offer token payments to the cards but keep paying one off and using it. Then offer them final settlements etc at some point. But I don't think she has defaulted on the cards. Is thes possible? I mean is there a way that I would be able to keep a bank account for use?

I  think OP will be below thresholds for both once legitimate business expenses are removed.

If self employed do not pay class 2/4 NI contributions do they qualify for state pension even if earnings are below the threshold? Of course certain benefits also qualify I think.  Sorry OP I think that is off subject but just wondered. 

It sounds positive on the ongoing 40 hours a week work.  I would not bother with tokens.  AP markers hang around on your file longer than defaults. That is why defaults are suggested.  Nothing to stop you still operating one card if you are self managing a DMP rather than stepchange.  If you use stepchange they do not allow you to prioritise one creditor over another so you would default on all cards/unsecured loans but you can still operate a basic bank account with no overdraft. 

Looking4silverlining

Good morning all.
I have just applied for a Starling bank account and a CO OP account so fingers crossed. I just have a couple of questions for you all.
Do you know if a Bounceback loan can be defaulted on too? I wasn't sure if I could add this one in as its a government type loan.
Who should I approach to help me with the DMP once the defaults have gone through (I am self employed) ?
Thanks in advance.

tigergambit

enthusiasticsaver said:

If self employed do not pay class 2/4 NI contributions do they qualify for state pension even if earnings are below the threshold? Of course certain benefits also qualify I think.  Sorry OP I think that is off subject but just wondered. 

My experience of this is as a subpostmaster and shopkeeper. My wife ran the business with me. In years (most!) when we did not make qualifying profit my NI was deducted from my Post Office remuneration but my wife paid an annual charge to HMRC for NI. It wasn't very much - £7 or £8 per year - but we've checked and she's paid up for the full state pension. 

I don't know whether this is still the case - as I've said elsewhere I don't think self employment now has many of the advantages it used to have as loopholes have been closed.

stu12345_2

can't help you with bounceback loans.

but stepchange deal with employees not self employed, so they advise calling
https://www.businessdebtline.org/

or you could run your own dmp if you like, with a little bit of knowledge, just make your own payments at your price via. standing orders, never direct debits.

ask creditors for their bank sort codes and account numbers, then you create a standing order with your bank and put your credit card, bankloan debt  etc account/reference number as the reference so they know where the money is going to once it reaches  the creditors