Treading water, but the debt is winning...

Stu4rt

Hi all,

I am 36, currently unemployed and suffer with mental health issues. I have accumulated roughly £30K in debt across various high interest bearing credit cards, overdrafts and loans. 

I currently receive £875 in Universal Credit although my rent is £975PCM +++

My PIP was declined even though I have mental health and health issues (ADHD, Complex PTSD, Sleep Apnoea, Depression and Anxiety).

I owned my a business but has been unemployed since April 2023. I have run up the debts mainly trying to survive as I always believed I would be back in work much sooner and that utilising loans and credit cards would be a short term solution. 

Unfortunately, I have reached that critical mass where as of this month I can no longer borrow any more money or obtain any further credit to cover my bills. 

I have however been offered a life line from a family member on the proviso that I do not enter into an IVA and that my debts are cleared and accounts are closed with a view to helping me move forward positively without crucifying my credit.

They have amazingly offered to loan me 50% maximum of all of my outstanding debts up to the tune of £15K. 

I am at a complete loss at the moment as to how I navigate this. I have around 12 companies to which I owe money to and with the huge interest rates I have already paid vastly over the amount that I ever borrowed. 

I would hugely appreciate any advice as to how I can settle these debts with no further payments without having to go bankrupt or enter an IVA etc. I feel due to the amount of interest that I have already paid there must be a solution that supports this. 

My thanks in advance for any advice.

Best wises

PurpleMouse5

Hi, 
You say your income is £875 but your rent is £975, which sounds like a really hard situation. Are you taking on more debt each month just to cover your rent? Can you make a budget here and post it so we can see more about your situation? SOA Calculator (lemonfool.co.uk) 
Also if you haven't you might want to appeal the PIP as a lot of cases get refused but then overturned on appeal. 

EssexHebridean

The benefits board might be able to help on making sure that you get everything you are entitled to - it’s a crazy situation that even your first priority bill is unaffordable! 

There is a big red flag around the offer being made to you, for me. Although an IVA wouldn’t be suitable for you anyway, why is your relative so set on a solution for you that enables you to be in a position to maintain a clean credit file?

when you do the SOA make sure you accurately total your debt as that 30k figure could be significant. 

enthusiasticsaver

Don't take the loan from your relative as you obviously cannot afford to repay it as you cannot even make your rent.  Defaulting on the debt is your only option until you manage to get back into work if you are able to.  If you are too ill to work then they may write it off.  You do not need an IVA as you have no asset to protect given you rent. You cannot keep borrowing on credit cards to live and I suggest you take further advice on what benefits you are entitled to as that UC figure does not  look right given the amount your rent comes to. Can you approach a charity like Mind to help you claiming PIP or DLA. I would post on the benefits board as well. 

kimwp

I can't see how the loan would help. You would still have 50% of your debt to pay as now (when you don't have enough for priority bills) and you would owe your relative money- a lot harder to write off than a standard unsecured debt!

MEM62

Stu4rt said:

I currently receive £875 in Universal Credit although my rent is £975PCM +++

Then you have no spare income with which to make repayments to your relative.  That makes this unsustainable from day one.  That is probably just as well as it is not a good idea to drag relatives into your financial situation.  Of course, we only have some of the details but it looks to me like your issue is your income.  You need to find a way to improve that to cover your living costs.  Once you have done that then you can consider a plan for your debts. 

sourcrates

How are you managing to live, given your essential rent by itself is £100 more than your entire income, what about food/council tax/utilities/and everything else you must spend money on?

This offer will not benefit you in any way, shape or form, you will still be in exactly the same position as you are now.

The figures you have given us just don`t add up.

Andyjflet

Can you ask your creditors for full and final settlements to pay the debts? However you need to raise your income before borrowing unless the lender is aware you cant pay them back as you have no spare income.

Am I missing something? Do you have additional savings or income you haven't mentioned? 

stu12345_2

when you get universal credit, it includes a housing allowance,it seems it is included in the £875, is that right.

is it that there is a limit on the max housing allowance they will pay for your area and your rent is above that.

something doesn't add up cos with housing allowance and personal allowance, your universal credit should be over £1000 a month. even if the max housing allowance was say £165 a week 
then you add in the personal allowance on top of that

Stu4rt

Thank you for all the helpful comments. I'll try to cover as many points as possible to expand on my situation. 

• I was hoping to use the offer of the loan to get settlements on the loans and credit cards, it's not a situation I have been in before but because I am no longer able to afford the payments, I wonder if high interest charging lenders who often have automatically increased my limits may accept partial settlement in full due to the amount of interest I have paid back.

• The loan would be taken against future inheritance providing it would be enough to clear at least the majority of my debts. 

• I have checked my UC claim and the total I receive is as follows:-

• Total - £926.94 (Standard single allowance £368.74, Standard housing allowance £598.51, -£40.31 Deduction for advanced first payment) - I am not exactly sure what planet they based the housing allowance on, but certainly for this area the average 1 Bedroom studio, and I am not talking about anything fancy at all is £750 - £850 if you can even find one.

• I will look into contesting my PIP - thank you for the advice here it would make a huge difference.

• Yes, I did have some savings previously, but ended up having to utilise loans and credit cards to support a basic standard of living I do get some support from my family with bills and food at the moment but it is very draining and embarrassing to be in this situation. I have also sold off assets like jewellery etc to help cashflow as much as possible.

Thank you in advance. 

sourcrates

These are non essential debts, and as you are currently unemployed, you should not be paying anything towards them.

Write/email, and explain your circumstances, they will put your accounts on hold.

Original creditors have zero morals, and won`t offer anything by way of discount, especially as the debts have not yet defaulted, so you are still contractually liable for the whole lot.

Settlement of the full amount for half the money is never going to work, if they were old, sold on accounts, that had been bought for peanuts, and you had a good 6 months to spare negotiating, then you might achieve it, but in your current situation, it would be impossible, its never going to happen.

Save your relatives money, bite the bullet, be proactive, and look at obtaining a debt relief order instead.