In quite a bit of debt, advice needed!

Grumpelstiltskin

If a creditor is thinking about applying for a CCJ they have by law to send you a letter before action by snail mail. This is why we say always look at anything you get through the post.

Even if it getas to that stage ( and it is unlikely ) you have the opportunity to deal with it before it gets to court so don't start panicking at the moment.

Jvoke

Grumpelstiltskin said:

If a creditor is thinking about applying for a CCJ they have by law to send you a letter before action by snail mail. This is why we say always look at anything you get through the post.

Even if it getas to that stage ( and it is unlikely ) you have the opportunity to deal with it before it gets to court so don't start panicking at the moment.

Thanks, still figuring out the best plan of action at the moment. I think mentally I'm OK with it all as long as I stay away from any type of CCJ etc. I'm also quite hesitant to go down any other route that turns my unsecured personal debts in to a law enforced debt (IVA, Bankruptcy, DMP etcetc).

Do you know if other creditors will catch on to my situation? For example if I opted to keep one credit card for 'backup', so worst case scenario. Is there a chance they close that account due to me defaulting on other debts?

Grumpelstiltskin

Look a DMP is not the same as Bankruptcy or IVA, they are the 2 forms of insolvency where a DMP is not.

Keeping a credit card ' just in case ' is the beginning of a slippery slope in most cases. We advise you to save as much as you can whilst not paying your debts so you have an emergency fund to cover when something happens. You are best not using any form of credit at all.

You have to have a completely different mindset to succeed at this, you are in control not your creditors, you pay if and when you can afford to not what they want you to pay, that's why you don't rush into anything.

Jvoke

Grumpelstiltskin said:

Look a DMP is not the same as Bankruptcy or IVA, they are the 2 forms of insolvency where a DMP is not.

Keeping a credit card ' just in case ' is the beginning of a slippery slope in most cases. We advise you to save as much as you can whilst not paying your debts so you have an emergency fund to cover when something happens. You are best not using any form of credit at all.

You have to have a completely different mindset to succeed at this, you are in control not your creditors, you pay if and when you can afford to not what they want you to pay, that's why you don't rush into anything.

Yeah great point. I would be able to save a considerable amount if I dropped all my debts overnight honestly.

I just thought it might be worth keeping 1 credit card open, I guess to naively think it would somehow help a credit report showing that I am haven't abandoned all debt and intend to pay it...

Superhoopza

Jvoke said:

Superhoopza said:

I'd recommend if you have a few hours spare to read my thread as I was in a similar situation and asked some of the same questions i.e. defaults and impact on credit file and weighed up a bigger debt but repaying it all versus defaults.

https://forums.moneysavingexpert.com/discussion/6496674/here-goes-starting-up-on-a-journey/p1

I went with repaying it all in order to 'protect' my credit file for the future. 

Thank you, I'll check it out.
I think if I can get through the next 3-4 months I don't need to DMP, so I might just try calling some of the main creditors and ask for a temp freeze on interest and repayments.

Your thread is huge! I skipped to the end and saw you got approved for some big 0% cards recently. How did you do that? Even though my credit record is immaculate (no missed payments) my credit score isn't amazing because of how much debt I have, so I can't seem to get approved on anything from compare the market/clearscore etc.

A 0% card would really help me I think.

Whilst the debt was high, I was showing that the balances were reducing each month so I guess this worked in my favour. I had also had about 5 months without any credit applications. Thirdly my 0% card was with Nationwide who you have to be a member of to get a card. To be a member you have to have a current account or savings account, I forgot I had a savings account with nothing in it for about 5 years. Also their processes are quite archiac, you have to supply income proof in branch and then someone has to manually accept/decline your application so this actually worked in my favour.

It seems generally just starting to have a plan and reducing my balances, along with a decent income, no missed payments, defaults etc worked in my favour. It happened probably 6 months earlier than I thought but shows there can be options sooner than we thought, so long as we have a plan to stick to it.

If you genuinely believe you can make payments after November, then there are ways to get to November without tarnishing your credit record, such as payment holidays (so long as they don't apply arrangement to pay markers). A DMP isn't the only option and if you want to buy in the next few years then DMP isn't the best option but for most it's the only option. You have to do what's best for you. You'll get a lot of good advice here but make sure whatever option you take you are comfortable with, unfortunately people here give the recommendation that works for the majority but there will always be cases, like mine, where it is not the best option. You can only read, ask questions and make the right choice for you.

DisabledDan

Jvoke said:

Hi guys,

So my situation is as follows:

In my early 30s.

I am in around £40k worth of debt. This debt is a mix of personal loans and credit cards. This main chunk of this debt was caused from a medical incident abroad which I got a £20k loan to cover. I've never missed a payment on anything in my life, but this large loan forced me to used credit cards more for emergency payments etc.

My salary is decent at £70k (Around £3800 take home after tax/student loan/pension) but in the past couple of months, my rent has been increased which has meant that next month it's looking like I can't meet the monthly minimums on some of my debts.

My payments and debt are as follows:

- Personal loan - 15.9k - 17.2% interest - £580 p/m (Around 3 years left)
- Personal loan - 8.2k - 22.3% interest - £189 p/m (4 years left)
- Personal loan - 1.6k - 14.5% interest - £335 p/w (Ends in November!)
- Credit card - 3.9k - 27% interest - £150-200 minimum payment
- Credit card - 3.9k - 31% interest - £150-200 minimum payment
- Credit card - 5k - 15% interest on average (Each purchase is seperate) - £570 next month, but goes down to £330 the following month and £250 after that.
Rent: £1450
Bills (everything): around £350-400

As you can see, next month is putting me almost in the red after paying all priority and non-priority payments.

I have a baby and a wife that doesn't work (looking after the baby), so supporting two people basically.

I tried contacting StepChange and they wouldn't talk to me as I am not in arrears and have a perfect credit record thus far which is annoying.

I have been doing a lot of research and my current plan is to potentially stop payments on 1-3 of my current debts to help me along the next few more expensive months. As in November I've paid a loan off so will gain £335, and my purchase credit card will go down too. If I stop paying for example the £580 p/m loan and a £200 p/m credit card, that would give me enough space to even save a bit of money.

So my question I guess, is that a sound plan or is 1 default the same as many defaults on the old credit score? If I am looking to default 1-2, should I just default all of them which would then allow me to get a way bigger emergency fund going for the eventual settlements? Or if I can afford it, just defaulting 1-2 will look better in the long run? Basically acknowledging my credit is going to be bad for 6 years.

I do eventually want to buy a property once out of this initial mess and should be earning more in 6 years with a bit of luck too.

Any advice?

I think the question you need to ask yourself first is whether the property buying ambition is a realistic option in the next 5 years, if so you need to start the plan for that, which not only means getting rid of debt but saving for the deposit.

I am not convinced that you are in DMP territory yet, I think you need to aggressively attack all your costs, not just your debts. I wonder if you have checked how much your energy company is holding, if they have £500 to £1000 then move to flexible direct debit where you pay what you owe and ask for your credit back, they must return it within 28 days.  Consider moving to Octopus to get a £50 referral and then refer your friends so you both make £50.

I suspect you are paying way too much in Rent, Utilities, Food and luxuries, this is not a judgement, it is just the impact of living on a comfortable wage.  I have nephews who earn 3x to 4x what you do, albeit that they work 18 hours a day in the city, but they really don't make any effort to save the amount of money we do because they count their time based on their income. 

Having a child and not being brutal about spending will deplete that and it will deplete your personal time.

You could move in with parents while you save for a new home or get a smaller place for £1000 a month, even if it means a longer commute.  

I am guessing you are unable to get any zero percent balance transfer credit cards?

They would be first option, do not just accept no, call them and explain you are securely employed but had high medical bills while abroad.

Ask for a £15k or £13k credit limit and transfer the three credit cards to that for a one off payment as shown on the MSE page.

Then throw all you can at that debt, the old cards should NOT be used, I would say close the accounts but you will actually have a better credit score if a percentage of your debt is unused.  

If you can't get those cards after calling them up then it will come down to looking at what other sources of income you can use to wipe out debt.  If you had a family member who would lend you £13k @ 8% you would be better off and they would be better off.  However, this is not a good idea if you do not have the discipline to keep or exceed the plan to pay this off inside a year or maximum two.

Most personal loans do not offer huge discount for paying off early, the £1.6k will be gone by November and has lowest rate so leave that but ask the £15.9k and the £8.2k lenders for a redemption figure. 

Now if you can get that family member to  lend you £13k or you can sell your car and make same, then that will improve your credit rating and may allow you to get enough to pay off the £8.2k or the £15.9k with a zero percent balance transfer.

If these all fail then then is a chance that you consider a 1 to 3 month blip. 

You could see your doctor about anxiety and stress caused by debt and seek some counselling, then apply for Breathing Space on all your debts. It is not long without medical letter but even if you only go for the month it can help you.

Assuming your 1.6k personal loan payment was a typo and is £335p/m nor p/w then the total you are paying to these debts is £1974, so if you had a one month break you could look at redistributing this or you could ask all your creditors for a payment holiday of 3 months and have close to £6k to play with.

For a start you need to reorganise your debts in priority order by interest charged.

- Credit card - 3.9k - 31% interest - £150-200 minimum payment
- Credit card - 3.9k - 27% interest - £150-200 minimum payment
- Credit card - 5k - 15% interest on average (Each purchase is seperate) - £570 next month, but goes down to £330 the following month and £250 after that.

- Personal loan - 8.2k - 22.3% interest - £189 p/m (4 years left)
- Personal loan - 15.9k - 17.2% interest - £580 p/m (Around 3 years left)
- Personal loan - 1.6k - 14.5% interest - £335 p/w (Ends in November!)

In this scenario you pay all you can raise on the 31% interest credit card and then focus on eliminating these two debts.

This would require you to post your SOA so we can advise you of the better deals 

I am on the bottom rung, I pay about £3 a month for sim, zero on internet and TV, no TVL, no holidays, no luxuries, I cut my energy to the bone last year just to see how low I could go but have eased up a bit this year.  Still I pay what I owe in full every month.  I am not suggesting you can do the same but you need to develop my mindset, which is to pay only for what you urgently need rather than what you want.

Even with need only mindset I use Freecycle to find things, sometimes I might put a cheeky ad in asking if anyone if buying that £300 65inch TV at ALDI / LIDL I would be grateful to have their old TV.  Almost everything I own has been gifted from Freecycle or other places.  I have had 5 Dysan vacuum cleaners which I re-gifted when a better one came along, 6 TV's,  2 Fridge Freezers, one only lasted 18 months but it was free.  If you take the cost of a £800 fridge over 6 years, it saved me £200 over than 18 months.  I won't tempt fate but suffice to say I have had over 6 years use of my current white goods.

Speak your other half because they must be with you on this journey, they need to cut costs to, it is not forever and it will help you realise the goal of owning your own home. You need to discuss whether you want to delay baby number 2 and see if you can make childcare viable or move in with parents to get free childcare while you save for that deposit.

If owning your own home does not add up because of your location and you can't change location then save up to buy a property where it is viable and rent it out to give you a second income stream.  It would be better tax wise to do this in a company with each of you owning 50% of issued share capital (£1 each).  Initially your other half can manage that and who knows, it might be your employer in due course.

Jvoke

DisabledDan said:

Jvoke said:

Hi guys,

So my situation is as follows:

In my early 30s.

I am in around £40k worth of debt. This debt is a mix of personal loans and credit cards. This main chunk of this debt was caused from a medical incident abroad which I got a £20k loan to cover. I've never missed a payment on anything in my life, but this large loan forced me to used credit cards more for emergency payments etc.

My salary is decent at £70k (Around £3800 take home after tax/student loan/pension) but in the past couple of months, my rent has been increased which has meant that next month it's looking like I can't meet the monthly minimums on some of my debts.

My payments and debt are as follows:

- Personal loan - 15.9k - 17.2% interest - £580 p/m (Around 3 years left)
- Personal loan - 8.2k - 22.3% interest - £189 p/m (4 years left)
- Personal loan - 1.6k - 14.5% interest - £335 p/w (Ends in November!)
- Credit card - 3.9k - 27% interest - £150-200 minimum payment
- Credit card - 3.9k - 31% interest - £150-200 minimum payment
- Credit card - 5k - 15% interest on average (Each purchase is seperate) - £570 next month, but goes down to £330 the following month and £250 after that.
Rent: £1450
Bills (everything): around £350-400

As you can see, next month is putting me almost in the red after paying all priority and non-priority payments.

I have a baby and a wife that doesn't work (looking after the baby), so supporting two people basically.

I tried contacting StepChange and they wouldn't talk to me as I am not in arrears and have a perfect credit record thus far which is annoying.

I have been doing a lot of research and my current plan is to potentially stop payments on 1-3 of my current debts to help me along the next few more expensive months. As in November I've paid a loan off so will gain £335, and my purchase credit card will go down too. If I stop paying for example the £580 p/m loan and a £200 p/m credit card, that would give me enough space to even save a bit of money.

So my question I guess, is that a sound plan or is 1 default the same as many defaults on the old credit score? If I am looking to default 1-2, should I just default all of them which would then allow me to get a way bigger emergency fund going for the eventual settlements? Or if I can afford it, just defaulting 1-2 will look better in the long run? Basically acknowledging my credit is going to be bad for 6 years.

I do eventually want to buy a property once out of this initial mess and should be earning more in 6 years with a bit of luck too.

Any advice?

I think the question you need to ask yourself first is whether the property buying ambition is a realistic option in the next 5 years, if so you need to start the plan for that, which not only means getting rid of debt but saving for the deposit.

I am not convinced that you are in DMP territory yet, I think you need to aggressively attack all your costs, not just your debts. I wonder if you have checked how much your energy company is holding, if they have £500 to £1000 then move to flexible direct debit where you pay what you owe and ask for your credit back, they must return it within 28 days.  Consider moving to Octopus to get a £50 referral and then refer your friends so you both make £50.

I suspect you are paying way too much in Rent, Utilities, Food and luxuries, this is not a judgement, it is just the impact of living on a comfortable wage.  I have nephews who earn 3x to 4x what you do, albeit that they work 18 hours a day in the city, but they really don't make any effort to save the amount of money we do because they count their time based on their income. 

Having a child and not being brutal about spending will deplete that and it will deplete your personal time.

You could move in with parents while you save for a new home or get a smaller place for £1000 a month, even if it means a longer commute.  

I am guessing you are unable to get any zero percent balance transfer credit cards?

They would be first option, do not just accept no, call them and explain you are securely employed but had high medical bills while abroad.

Ask for a £15k or £13k credit limit and transfer the three credit cards to that for a one off payment as shown on the MSE page.

Then throw all you can at that debt, the old cards should NOT be used, I would say close the accounts but you will actually have a better credit score if a percentage of your debt is unused.  

If you can't get those cards after calling them up then it will come down to looking at what other sources of income you can use to wipe out debt.  If you had a family member who would lend you £13k @ 8% you would be better off and they would be better off.  However, this is not a good idea if you do not have the discipline to keep or exceed the plan to pay this off inside a year or maximum two.

Most personal loans do not offer huge discount for paying off early, the £1.6k will be gone by November and has lowest rate so leave that but ask the £15.9k and the £8.2k lenders for a redemption figure. 

Now if you can get that family member to  lend you £13k or you can sell your car and make same, then that will improve your credit rating and may allow you to get enough to pay off the £8.2k or the £15.9k with a zero percent balance transfer.

If these all fail then then is a chance that you consider a 1 to 3 month blip. 

You could see your doctor about anxiety and stress caused by debt and seek some counselling, then apply for Breathing Space on all your debts. It is not long without medical letter but even if you only go for the month it can help you.

Assuming your 1.6k personal loan payment was a typo and is £335p/m nor p/w then the total you are paying to these debts is £1974, so if you had a one month break you could look at redistributing this or you could ask all your creditors for a payment holiday of 3 months and have close to £6k to play with.

For a start you need to reorganise your debts in priority order by interest charged.

- Credit card - 3.9k - 31% interest - £150-200 minimum payment
- Credit card - 3.9k - 27% interest - £150-200 minimum payment
- Credit card - 5k - 15% interest on average (Each purchase is seperate) - £570 next month, but goes down to £330 the following month and £250 after that.

- Personal loan - 8.2k - 22.3% interest - £189 p/m (4 years left)
- Personal loan - 15.9k - 17.2% interest - £580 p/m (Around 3 years left)
- Personal loan - 1.6k - 14.5% interest - £335 p/w (Ends in November!)

In this scenario you pay all you can raise on the 31% interest credit card and then focus on eliminating these two debts.

This would require you to post your SOA so we can advise you of the better deals 

I am on the bottom rung, I pay about £3 a month for sim, zero on internet and TV, no TVL, no holidays, no luxuries, I cut my energy to the bone last year just to see how low I could go but have eased up a bit this year.  Still I pay what I owe in full every month.  I am not suggesting you can do the same but you need to develop my mindset, which is to pay only for what you urgently need rather than what you want.

Even with need only mindset I use Freecycle to find things, sometimes I might put a cheeky ad in asking if anyone if buying that £300 65inch TV at ALDI / LIDL I would be grateful to have their old TV.  Almost everything I own has been gifted from Freecycle or other places.  I have had 5 Dysan vacuum cleaners which I re-gifted when a better one came along, 6 TV's,  2 Fridge Freezers, one only lasted 18 months but it was free.  If you take the cost of a £800 fridge over 6 years, it saved me £200 over than 18 months.  I won't tempt fate but suffice to say I have had over 6 years use of my current white goods.

Speak your other half because they must be with you on this journey, they need to cut costs to, it is not forever and it will help you realise the goal of owning your own home. You need to discuss whether you want to delay baby number 2 and see if you can make childcare viable or move in with parents to get free childcare while you save for that deposit.

If owning your own home does not add up because of your location and you can't change location then save up to buy a property where it is viable and rent it out to give you a second income stream.  It would be better tax wise to do this in a company with each of you owning 50% of issued share capital (£1 each).  Initially your other half can manage that and who knows, it might be your employer in due course.

Thank you for your reply.

Unfortunately all of the suggestions you made I can't really do.

I have a small family and none would be willing to lend me that kind of money, my parents are comfortable but retired so doubt they would be OK with it.

I don't own a car.

We already live pretty basically, but we have just moved to the UK after living in another country for a few years, so we are basically rebuilding from 0 (+ debt ).

I earn a decent wage but it's all going on debt at the moment. Like I mentioned I've never missed a payment and do regularly go without basic stuff to meet the payments. Don't have a TVL either as we aren't really TV people, we don't even have a TV in the house lol. Mobile plans are a bit expensive £35 p/m but I am paying for mine and my wife's contract.

My wife is brand new to the UK so probably won't be able to get in to work immediately as she needs time to learn the UK in general.

I understand how to approach paying down the debts, ordering it by interest, snowballing/avalanching etc. I just have no wriggle room to apply these methods. Even once I free up that £335 currently, it would have to go to buying food etc as I'm basically at 0 after paying everything each month. 

Good point about contacting them, I might do it and see what kind of pause I can get from each. If I can get 3 months freezing my debts would definitely allow me to start snowballing.

For the SOA shall I just reply to the thread or update my original post? Not sure what the etiquette is here.

EssexHebridean

The SOA goes in to this thread as a new post please - that way it's easier for people to review and comment on! 

I will echo those who have already said that you need to stop using credit immediately. And lose the idea that retaining a card "just in case" gives some positive illusion to the creditors once you have stopped paying - if anything, it would be the opposite!

You need to save an Emergency fund - then that will become your "just in case" facility. 

Jvoke

Here is my SOA, I clicked formatted for MSE but it pasted weirdly with the format tags displayed so I just formatted it myself.

I put childcare costs in to groceries as my little ones main expenses at the moment are food, formula, nappies and wet wipes, all of which we buy at the supermarket.

Statement of Affairs and Personal Balance Sheet

Household Information

Number of adults in household........... 2

Number of children in household......... 1

Number of cars owned.................... 0

Monthly Income Details

Monthly income after tax................ 3800

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0

Total monthly income.................... 3800

Monthly Expense Details

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 1450

Management charge (leasehold property).. 0

Council tax............................. 178

Electricity............................. 150

Gas..................................... 50

Oil..................................... 0

Water rates............................. 100

Telephone (land line)................... 0

Mobile phone............................ 35

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 69

Groceries etc. ......................... 600

Clothing................................ 50

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 30

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 10

Life assurance ......................... 15

Other insurance......................... 0

Presents (birthday, christmas etc)...... 45

Haircuts................................ 20

Entertainment........................... 200

Holiday................................. 0

Emergency fund.......................... 0

Total monthly expenses.................. 3002

Assets

Cash.................................... 0

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 0[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Loan...........................8200......189.......22.3

Loan...........................15950.....580.......17.2

Loan...........................1600......335.......14.5

Variable credit card...........5400......570.......26

Credit card....................3950......180.......29.6

Credit card....................3950......200.......31.1

Total unsecured debts..........39050.....2054

Monthly Budget Summary

Total monthly income.................... 3,800

Expenses (including HP & secured debts). 3,002

Available for debt repayments........... 798

Monthly UNsecured debt repayments....... 2,054

Amount short for making debt repayments. -1,256

Personal Balance Sheet Summary

Total assets (things you own)........... 0

Total HP & Secured debt................. -0

Total Unsecured debt.................... -39,050

Net Assets.............................. -39,050

Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.

stu12345_2

if interest is frozen you could repay it all in 3 years approx DMP and even faster if you got your rent, gas , electric under control, your rent is more than 30% of your pay which is never advised.

is your water every 3 months?