Credit Cards - Close to Default. Will a Single Token Payment Delay it for Another 6 Months?

debtslave2024

Hi. I am very close to defaulting on 3 credit cards, that Ive not paid towards for months (though have been in constant communication with card companies.)

Things were looking up when I got a 3 month contract in a supermarket. However when I joined I was not aware of the extent of the supermarket’s problems. We were led to believe that we would have the possibility to go permanent at the end of the 3 months. I am only 3 weeks away from the end of the contract, and became increasingly anxious that nobody had told me either way if I would be retained or let go.

This morning I asked the Manager outright if I would be retained, and was told “probably not.” So, I now take it as a given that they are planning to dispatch me in the next few weeks. It took me many months, and over 100 applications just to get this miserable job, so things are not looking good, and my finances will plummet once again into chaos.

My question, is if I make a token payment to each credit card that is on the verge of default, will default then be warded off for a further 6 months? I am not comfortable with the idea of the cards defaulting.

Brie

yes a payment would stop the default for now.  why do it?  

surprised that the manager won't retain you given that Christmas is coming and this is hiring time at supermarkets (& most shops).  But given the comment made perhaps you should start looking at other stores near you?  You have a perfectly good excuse for jumping ships - you weren't going to be made permanent and to avoid any issues the manager was cycling through temps.  Mention too that you are happy to temp for now but will be looking for a permanent role eventually.  

debtslave2024

@Brie. You ask “why do it,” as in try and avoid default. I am just not sure how it will affect my ability to get credit for another 6 years, and possible other unforeseen ramifications. I have also been given conflicting advice with regards to defaults. On this forum, many posters seem quite keen on defaulting, yet when I phoned a government approved. financial crisis hotline, they told me “there are no benefits to defaulting.” They also then started mentioning the bankruptcy word, which even though I know is totally over the top for the amount I owe, is ridiculous.

Brie

Ok - I get that.  A lot of people think that the best thing is to go for a debt solution of some sort. 

Bankruptcy is the extreme end and not suitable for the vast majority.  There are debt management plans (DMP) and individual voluntary arrangements (IVA) (big yuck in my opinion) and also debt relief orders (DROs, also known as mini bankruptcies).  Most involve defaulting so that the creditor is forced into a situation where they can't charge any more interest or fees and will also be more willing to have a debt solution which might possibly work in their favour.

If you aren't keen on the advice here then you might want to talk to one of the debt advice charities - NationalDebtline, StepChange, Citizen's Advice or Community Money Advice (CMA).  As in any group of people they will all have their favourite solution and defaulting may again be part of it.

What I do suggest is that if the debts are relatively minimal you might be ok with just a bit of budgeting advice.  If you start with filling out  a statement of accounts (SOA) that will help you focus on what might be possible.  If you post that back here people will give you ideas on how to trim things and how to proceed with handling your debts.  If you don't want to post it back here it will at least prepare you for talking to one of the debt charities all of which will go through a similar financial statement with you.  

Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

You might also be interested in reading up on some debt solutions on Debt Camel.  It's my go to for a lot of debt related questions.

Debt Camel · Answers to questions about debts and credit ratings - in plain English!

debtslave2024

Thanks Brie. My finances are chaotic, so that I why I could not commit to a DMP type solution, I have only had two payments from my current employer, and managed to just get my head above water with regards to a large overdraft. Today, I have learned I will lose over 60% of my income within 3 weeks. I just cannot commit to any DMP type solution when my finances are so unstable, and unpredictable.

sourcrates

It all depends on what your circumstances are whether you should default, or not.

If you are wanting to retain your financial accounts and use them again, after this "blip", then defaulting is the last thing you should do.

If however you don`t ever want credit again for the foreseeable future (a stance a lot of our posters adopt) defaulting has many benefits, it stops all interest, it gives a clear 6 year window till your file recovers, and it can also trigger the lender to offload the debt to a 3rd party who won`t be so bothered about how much you can afford to pay.

Of course the official line is defaulting is bad, but it depends on your situation, one mans terrorist is another mans freedom fighter, its all about perspective really.

fatbelly

If you have already missed 3 contractual minimum payments then they should be issuing defaults.

That is a good thing. Have a read of this thread

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take -are-here-please-read-then-ask-questions

debtslave2024

@Sourcrates. Given the employment situation, I will seriously need to consider this default option. However, can you clarify one thing please. One of the lenders suggested that if I do not start making payments to them again soon, then “I could be liable to pay the balance in full.” Which is of course impossible given my current predicament. Is this just a coercion tactic?

Thanks.

fatbelly

debtslave2024 said:

 I phoned a government approved. financial crisis hotline, they told me “there are no benefits to defaulting.” They also then started mentioning the bankruptcy word, which even though I know is totally over the top for the amount I owe, is ridiculous.

Sounds like really poor advice to me. I wonder who you phoned.

Brie

debtslave2024 said:

@Sourcrates. Given the employment situation, I will seriously need to consider this default option. However, can you clarify one thing please. One of the lenders suggested that if I do not start making payments to them again soon, then “I could be liable to pay the balance in full.” Which is of course impossible given my current predicament. Is this just a coercion tactic?

Thanks.

threats.  if you can't pay, you can't pay. 

If you can pay a bit they will be pleased.  you might end up doing a DMP and paying £1 a month to each.  If that's all you can afford then that's all they are going to get.  But defaulting will draw a line under what is owed now.  If things work out that you can pay more at some future point you can reconsider.   

RAS

debtslave2024 said:

@Sourcrates. Given the employment situation, I will seriously need to consider this default option. However, can you clarify one thing please. One of the lenders suggested that if I do not start making payments to them again soon, then “I could be liable to pay the balance in full.” Which is of course impossible given my current predicament. Is this just a coercion tactic?

Let's just clarify a couple of things.

At the moment you are probably accruing Arrangement to Pay markers on the your credit record.  Those stay on your credit for 6 years after the debt is paid off. And your accounts may still be accruing interest and fees.

Which is why a lot of people here prefer defaults. Interest and fees are halted and you have a date in 6 years when you know your credit record will recover even if you've not paid off a penny.

But by law if a creditor wants to issue a default, they have to send you a letter demanding repayment of the full figure with 14 days. Appreciate there's not a cat in hell's that you'll be able to pay it, nor could many on here, but it's a legal nicety not a serious expectation. And it doesn't even guarantee they'll get round to issuing a default.