Advice on defaulting

intheblack_sheep

Rob5342 said:

Leicsbob said:

ByzantineByron said:

You proceed when all creditors default. If you go ahead sooner then you run the risk of some creditors saying 'I'm alright Jack' and just saying no.

It goes against the grain of everything we're told, because we're brought up to pay what we owe. But you can no longer afford to pay, so don't. If some default slower then that's more rainy day money for you.

What will happen is the creditors will sell the debt off to a third party for pennies in the pound. These debt collection agencies will try to contact you (they have no more legal powers than the milkman so refuse to engage) and some may offer a cut price deal to clear the debt. It works for them as they'll make a profit and works for you if you've got the cash to pay it. Otherwise just wait until they all default and offer a DMP based on what you can realistically afford while living a comfortable life (Stepchange can be of help here)

Creditors will hound you, but just ignore the phone calls, file the letters and only pay attention to the ones that come before Legal Action

And what would I do if I was threatened with legal action? When do I call it 'quits' and proceed to the next stage? 

Legal action is rare if you are paying something towards them. The original creditors usually sell debt on for a small fraction of their value instead of taking legal action. The companies buying them do so as an investment. As they buy them for so little, a relatively small monthly repayment could see them doubling their money in a few years so there is little incentive for them to take legal action if they have money rolling in for nothing. 

If I'm waiting for the default notices though I wouldn't have been making a payment at that point. What I mean is, if creditor is getting to the point of taking legal action, yet others still have defaulted, should I just go ahead at that point with the DMP?

Rob5342

Just treat them individually. If one defaults then start paying that one and hold off on payments to the others until they do. That's easy if you manage it yourself, Stepchange just complicate the whole process. 

In answer to your previous question then essentially you do wsnt to pee your crediors off so they give uo on you and default you. At that point interest will be stopped and they will likely sell the debt ti someone else for a small fraction of its value and at some point down the line they will accept a reduced settlement offer. It's completely counter intuitive but if you talk to the original creditors and ask for help then you actually get treated far worse in the long tun. 

ByzantineByron

This is the important thing. If you have a £15k debt with a creditor and they sell it to a company for £3k, then the new company doesn't need £15k, it just needs to make a profit on the £3k they spent, so sometimes you can cut a very good deal with them.

Rob5342

ByzantineByron said:

This is the important thing. If you have a £15k debt with a creditor and they sell it to a company for £3k, then the new company doesn't need £15k, it just needs to make a profit on the £3k they spent, so sometimes you can cut a very good deal with them.

And if you pay say £125 a month towards it they have got their money back in two years and anything after that is profit. From your point of view you are making a much reduced payment but from theirs its money for nothing. 

intheblack_sheep

Thank you for all of your advice! 😁

Rob5342 said:

Just treat them individually. If one defaults then start paying that one and hold off on payments to the others until they do. That's easy if you manage it yourself, Stepchange just complicate the whole process. 

In answer to your previous question then essentially you do wsnt to pee your crediors off so they give uo on you and default you. At that point interest will be stopped and they will likely sell the debt ti someone else for a small fraction of its value and at some point down the line they will accept a reduced settlement offer. It's completely counter intuitive but if you talk to the original creditors and ask for help then you actually get treated far worse in the long tun. 

So as soon as one defaults I should kind of begin my DMP - offering them the amount that I would if I was dealing with all my creditors at that point? 

If the other creditors see that I'm making payments to another, but still haven't to them (as I'm waiting for them to default), will that change anything?

intheblack_sheep

And thank you everyone for all of your advice so far ☺️

intheblack_sheep

Which credit report companies should I use to keep an eye on my accounts for defaulting etc?

sourcrates

Leicsbob said:

Which credit report companies should I use to keep an eye on my accounts for defaulting etc?

All of them.

intheblack_sheep

intheblack_sheep said:

My husband and I have realised that we can't carry on the way we are and need to tackle our debt. It is about 45k between us (husband has 2 personal loans, about £10k each, I have CC £12k, then various other smaller debts).
It's got to the point where we are having to use CC for food etc as our disposable income has to cover the repayments! Vicious circle. 

So, I created a budget on Stepchange that I thought was manageable, and just need to agree to the DMP.

Then I discovered this forum and I'm now unsure what to do! 😭 

At the moment we are not behind on any payments, we haven't defaulted on any CC or loans. 

But I've now read that it is best to do this before starting a DMP? And to use the money that would have been paid to build up an emergency fund? 

My question is - if we did this, are our creditors less likely to stop interest/charges when we proceed with the DMP?

I really need our creditors to stop the interest so we can clear this (if they do, expected to clear in just under 5y with DMP).

And I'm concerned we will pee them off if we default, and less likely to accommodate? 

Please any advice before we proceed with the DMP!! Thank you 

OK, so we stopped all DD for our loans, CCs etc - last payments were Aug/Sep 2024. 

My OHs 2 CC have finally defaulted (appeared on credit report). His HSBC is with Moorcroft, and Barclaycard is with PRA Group.
At this point - should I bother with asking for the CCA from the DCAs? As HSBC and BC have told him the companies that they sold/transferred the debts to? Or just set up payments now?

My OH has 2 loans with First Direct. Are they likely to ever default? They just seem to be 'hanging around'!!

We both have a small overdraft with First Direct (we set up new accounts with a different bank when we started this). Do overdrafts default? Or should we just start paying small amounts to it?

My HSBS CC has apparently been transferred to Wescot, but hasn't shown on my credit report yet, so I won't take any action yet.


Thanks in advance!!

RAS

OK, Moorcroft and PRA will write to OH and ask him to contact them to make payments. Ideally you want them to also provide the bank account details into which he needs to pay and the account reference. 

You'll need to do a proper calculation but roughly 10/45 is about 22%. So he sets up monthly payments equivalent to about 22% of the amount you can afford to pay towards your debts. Probably be wiser to go towards 20% as that ensures you maintain your emergency fund.

The new creditors might get in touch next week, or in several months. Meantime, keep saving that money into your emergency fund.