Facing redundancy and in lots of debt

Ally1981

Hi, I'm new to the forum but finding it all really helpful. I'd really appreciate some advice on my circumstance. I'm currently on maternity leave and only being paid Statutory Maternity Pay so income is around £800 a month. I've got £33,000 in unsecured loans. All debts have been defaulted in the last year and I have not been in contact with any of my creditors for ages. I've just had my head in the sand while I was pregnant and with a young baby and going through a marriage breakdown. I don't have any mortgage or car or any assets, I'm renting from family on low rates and living on some savings I managed while I wasn't paying debt. I really want to avoid bankruptcy or facing legal action.

I'm in the process of being made redundant and going through a divorce, so am looking for other work but with childcare costs my future available funds to put to a DMP will be very low. Im not sure how helpful a SOA would be as I don't know how much my future income will be when I get back into work. 

My main question is can you provide any advice as to how I can avoid legal action or bankruptcy whilst I am not able to pay anything towards my debts? Im really reluctant to pay anything towards debt when Im not earning as I need my savings to tide me over until I can get back to work.

Once I'm back earning, I may have around £100 (possibly more but unlikely) per month towards a debt management plan for the next 3 years whilst I have to pay childcare costs. If, once I'm back in employment, I have anything left from my redundancy payment Im hoping I can try to settle the debt. How long can I go paying token payments as that is all I will likely afford for the foreseeable future and is there any recommended strategy for trying to get f&f settlements? 

gwynlas

You can contact one of the debt management organisations such as Stepchange for help with formulating a debt management plan. You would not be made bankrupt for unsecured credit card debt there are scores of stories on this forum from preople in similar circumstances to yourself. You have made the first srep by coming here..Is there advice from your umion regarding redundancy and payoff? Is childs fther providing support? Will you be in a position to seek employment once redundancy settled?

fatbelly

So you have no spare money at the moment, all debts defaulted, no payments being made, situation not stable.

You ask how to avoid bankruptcy. Simply do not apply for it. Creditors do not issue statutory demands these days since getting knuckles rapped by the OFT. The occasional exception is HMRC and local suppliers, legal debts etc. If you just have loans and credit cards, that's not going to happen.

You ask about legal action. Creditors have six years to start a court claim and do not like to throw good money after bad. So this is also unlikely. A rule of thumb is that about 1 in 10 abandoned debts see court action and this occurs when debt buyers have bought a debt for 10p in the £ and fear losing their investment because of the 6-year rule.

Token offers are £1 per month and are only regarded as a short-term strategy.

If you get to the position where £100 per month is available, then a dmp becomes an option but still has a long timescale. Bear in mind that once your debts get below 30k you may qualify for a DRO.

Ally1981

Thank you for your responses! It is all credit card and one bank loan so a relief to hear that they are extremely unlikely to force bankruptcy. 
I will reach out to Step change and plan on starting to make token payments to each creditor until I'm in a position to start a DMP. 
I'm expecting a reasonable financial cushion from the redundancy and notice pay and hopeful that I can start work by September. 
No contribution from children's father ( that is one big reason for the debt as I have been bankrolling him for years). 
I think this is finally the wake-up call that I need to manage my finances far better in future. 

sourcrates

Honestly token payments are a waste of time, its costs more to process the payment than its worth to the creditor.

If you have no money, and you are been chased for any of these accounts, just tell them what you have told us. Affordability is paramount these days, tell them your situation, they won`t expect payment from you, and place your accounts on hold.

That is the best strategy in your current circumstances.

Ally1981

Thank you. I have managed to call and speak to each of my creditors today to tell them my situation and put the accounts on hold for 2-3 months. I also have a call with Stepchange arranged for next week. Feeling relieved that I have some time now and don't have to worry about legal action in the meantime. Thanks for your responses. 

RAS

Legal action is most unlikely. To put it bluntly, the creditors know you had no money, so they are not going to waste £xxx going to court only to get £2 per month. Not worth it. Much better to hope that in 3 year's time you are in a better situation.

Sly72

Ally1981 said:

Thank you for your responses! It is all credit card and one bank loan so a relief to hear that they are extremely unlikely to force bankruptcy. 
I will reach out to Step change and plan on starting to make token payments to each creditor until I'm in a position to start a DMP. 
I'm expecting a reasonable financial cushion from the redundancy and notice pay and hopeful that I can start work by September. 
No contribution from children's father ( that is one big reason for the debt as I have been bankrolling him for years). 
I think this is finally the wake-up call that I need to manage my finances far better in future. 

"No contribution from children's father" if he does not than I suggets Child Maintance?