Unemployed with over 3k debt

UnbearableBear

Hi everyone, 

I unfortunately got made redundant in June of last yr and due to poor mental health and the current job market I have been unable to find work. I had debt before I was made unemployed but I was paying it off but due to my unemployment I am unable to continue to pay off the debt I was already in and I am now in even more debt, it’s a vicious cycle. 

I can’t pay any of this debt, I get less than £500 a month to live off, I can’t file for bankruptcy because I don’t have that kind of money. I was researching and found out there is something called an DRO (Debt Relief Order) and I was wondering if you guys thought that this would be something I should go for, I was thinking of making an appointment with my local citizen advice to talk about this but I thought I would get some other peoples opinions on the matter. 

Thank you all for reading my mess of a rant which probably makes no sense. 

ManyWays

Are you renting? Do you have a car on finance or do you own one, if you do what is it roughly worth? 

UnbearableBear

ManyWays said:

Are you renting? Do you have a car on finance or do you own one, if you do what is it roughly worth? 

Hi, I live with a parent who I give lodge to every month but I am not renting, I just pay towards the rent and bills and no I do not own a car. 

RAS

You say you have over £3k debt? Do you mean less than £4k debt?

UnbearableBear

RAS said:
 You say you have over £3k debt? Do you mean less than £4k debt?

Yes that is correct I have just under 4k of debt 

RAS

Thanks.

First thing. When you are in a hole, stop digging.

Please sign up for a new basic bank account, or an on-line on like Monzo or Starling, these don't require credit checks although they need ID. Are you on the electoral roll?

Get you UC paid into the new account and stop paying all DDs except current phone and stop taking out any new debt.

The sky won't fall in if someone with as little debt as you stops paying. You'll get automated reminders to pay, by phone, text and email but no humans will even know for quite a while. 

There are a few issues.

1. You need to put whatever you can after paying your parents and essentials like food, self hygiene, travel, phone into a separate savings account. That's for emergencies like dental care or shoe failure.

2. If you start by making token payments, you get AP markers that damage your credit record far longer than defaults.

3. Defaults take a little while but they halt interest and fees, and they drop off your credit record in 6 years.

4. You may be able to meet the DRO criteria whilst you are in UC but that would mean you couldn't vary your income until the DRO completed. Given how long DROs are taking that effectively means you would be unable to start work during the next 15 months unless you accepted the DRO failed. So you'd be registered as insolvent but still owing the money.

5. A DRO would make moving out of your parents house in the next 6 years very difficult as you'd be on the public Insolvency Register.

So take a deep breath, stop paying your creditors, let their automated processes play out, save some emergency funds.  Keep looking for work but protect your mental health as well.

By all means if you are still not working, and still experiencing mental health issues in a couple of years, you can still do a DRO.

Do come back for support and advice whenever you get any communication that worries you.

And keep opening the mail once a week as all important legal communications have to be sent by mail. File and forget anything other than Letters before Action and court papers. You probably won't get those but just might.
 

UnbearableBear

RAS said:

Thanks.

First thing. When you are in a hole, stop digging.

Please sign up for a new basic bank account, or an on-line on like Monzo or Starling, these don't require credit checks although they need ID. Are you on the electoral roll?

Get you UC paid into the new account and stop paying all DDs except current phone and stop taking out any new debt.

The sky won't fall in if someone with as little debt as you stops paying. You'll get automated reminders to pay, by phone, text and email but no humans will even know for quite a while. 

There are a few issues.

1. You need to put whatever you can after paying your parents and essentials like food, self hygiene, travel, phone into a separate savings account. That's for emergencies like dental care or shoe failure.

2. If you start by making token payments, you get AP markers that damage your credit record far longer than defaults.

3. Defaults take a little while but they halt interest and fees, and they drop off your credit record in 6 years.

4. You may be able to meet the DRO criteria whilst you are in UC but that would mean you couldn't vary your income until the DRO completed. Given how long DROs are taking that effectively means you would be unable to start work during the next 15 months unless you accepted the DRO failed. So you'd be registered as insolvent but still owing the money.

5. A DRO would make moving out of your parents house in the next 6 years very difficult as you'd be on the public Insolvency Register.

So take a deep breath, stop paying your creditors, let their automated processes play out, save some emergency funds.  Keep looking for work but protect your mental health as well.

By all means if you are still not working, and still experiencing mental health issues in a couple of years, you can still do a DRO.

Do come back for support and advice whenever you get any communication that worries you.

And keep opening the mail once a week as all important legal communications have to be sent by mail. File and forget anything other than Letters before Action and court papers. You probably won't get those but just might.
 

Thank you for such an in-depth reply, this has been so much more helpful than reddit which was basically just get a job it isn't that hard. 

Thankfully I realised the errors in my ways a couple of months ago and I have cut up my credit cards and thankfully I never applied for any loans. I have opened a Monzo account which I will use to get my UC in and yes I am on the electoral roll as I voted this year.

I will stop paying and I have opened a small savings account with monzo which I will use to put a small amount of emergency fund in a month. 

I am mostly worried about going to court, I was working in the education field before being redundant and my mental health taking a turn for the worst as something being shown on a DBS would basically ruin any career I could have in education. 

I am currently going through the process of getting PiP so I am hoping that ends up being successful. 

I will keep an DRO in mind but as I do at some point want to get back into work even if it is part-time, so it seems getting a DRO may not be in my best interest right now. 

Thank you again for taking the time to reply to me. 

Brie

as RAS has said defaulting looks to be the right first step currently.   No one is likely to take you to court for a few small debts - it costs them too much money.

Try to you get your PIP sorted (refer to citizen's advice if you get turned down, it seems lots of people do on first application) and when you feel stronger you can start looking for work. 

If you get a decent job and then can reconsider what to do about your debts.  You can leave them as they are until they fall off your credit history and become statute barred (6 years from default).  You can start repaying them (which will reset the statute barred clock).  Or you can go for a DRO (which will be obvious on your credit history).

The DRO will be a red flag for some landlords as well as employers (not heard of it being an issue in education, more if you are in accounting or finance).  It will definitely be an issue for a while with getting any further credit.  But only for 6 years when it too will drop off your credit history.

Good luck!

RAS

Thanks for your clarification.

The two creditors who seem inclined to go to court are Creation and credit unions. 

Your debt levels are so low that it really is unlikely and anyway CCJs end up on your credit record, not in criminal records. So no need to worry on that count.