50k Unsecured debts and can't see any way out.....

exponential

Floss said:

exponential said:

I just want to do the right thing that's all. Either make token payments with no interest or charges knowing that my income will allow me to clear the debts fairly quickly or just default and make no payments at all.
The thing with the defaults is the threat of legal action.....that's the scary bit and the only thing stopping me from just doing it without much more thought.

Is any of your debt secured on your home?

If not, then defaulting is unlikely to result in legal action. Threats of, yes, but they are generally hot air until you get a Letter Before Action. That is the letter that you need to take notice off & respond to.

Hi Floss.

All debts are unsecured. Overdraft, credit cards and 2 loans. I've already opened a Monzo personal account in anticipation of my main bank account being closed as a few of my debts are with the Lloyds group including my bank account (including overdraft). Going to start transferring all DD's over to Monzo in the coming days.

sourcrates

exponential said:

ManyWays said:

For a mortgage from a high street lender, the important thing is that the default is over 3 years ago and that it has been settled more than two years ago. It doesnt matter if the default is still on your credit record which it could be if the DMPp started 5 years ago and only took 3 years to pay everything off.

Forgive my inexperience here but when you say a default has been "settled", does that mean I have paid it off myself or the creditor has written the debt off? I though the whole point of just defaulting is that you make no payments at all?? Sorry for not understanding this...

I just want to do the right thing that's all. Either make token payments with no interest or charges knowing that my income will allow me to clear the debts fairly quickly or just default and make no payments at all.
The thing with the defaults is the threat of legal action.....that's the scary bit and the only thing stopping me from just doing it without much more thought.

To achieve a default, you make no payments, that`s correct, but once defaulted, you can then make arrangements to pay off the balance, the defaults will stay for 6 years on your credit file, but on occasion some people have cleared the debt before the default has dropped off their file.

This results in the default/account showing as satisfied, prior to the default dropping off automatically.

Its a pig in a poke, it looks marginally better to a potential mortgage lender.

JadedAngel88

exponential said:

JadedAngel88 said:

exponential said:

fatbelly said:

I agree with the above. If you do have £500 per month available, save that somewhere unconnected to your debts as an emergency/fighting fund and you are giving yourself options, while you get into a stable situation.

I'd say the only letters that matter are formal preaction protocol letters and it could be years, or never, before you get one.

The only thing that I'm a bit unsure about is the impact of a default vs an AP on your credit files. Surely an AP is seen by other creditors as a positive thing as at least you've made an attempt to pay your debts off instead of just defaulting on them?

Am I missing something here? 

Say if it takes you 10 years to clear the debt ok. So an AP marker will disappear in 16 years. 

If you default but it still takes 10 years to pay off the debt. The defaults disappear in 6 regardless if the debt is fully paid or not.

Ok, I understand that now.

The question behind all of that is how is a default seen as opposed to an AP in terms of seriousness?
I completely understand that with defaults, you're pretty much a no-go area as far as creditors are concerned btu how do they see an AP? Yes, it stays on your file for 6 years after the debt is cleared but is the AP seen as a really bad thing or just a slightly negative thing?

So, if I default, I can say goodbye to a remortgage at a better rate for 6 years but an AP, how is that seen by lenders and will they still work with you?

I can't say the difference between them as I've never had an AP mark on my credit file. I know that as time passes that the impact of the default lessens over time, regardless of if it's paid or unpaid - I have had both, and your credit rating starts to pick up again but usually only at the credit builder range of credit.

You can get a mortgage with defaults, you just need to find a decent mortgage broker. You might need a bigger deposit too but it's not impossible. This I have no experience in just what other of my family members have done.

I hope I've explained it ok with my foggy memory.

exponential

sourcrates said:

exponential said:

ManyWays said:

For a mortgage from a high street lender, the important thing is that the default is over 3 years ago and that it has been settled more than two years ago. It doesnt matter if the default is still on your credit record which it could be if the DMPp started 5 years ago and only took 3 years to pay everything off.

Forgive my inexperience here but when you say a default has been "settled", does that mean I have paid it off myself or the creditor has written the debt off? I though the whole point of just defaulting is that you make no payments at all?? Sorry for not understanding this...

I just want to do the right thing that's all. Either make token payments with no interest or charges knowing that my income will allow me to clear the debts fairly quickly or just default and make no payments at all.
The thing with the defaults is the threat of legal action.....that's the scary bit and the only thing stopping me from just doing it without much more thought.

To achieve a default, you make no payments, that`s correct, but once defaulted, you can then make arrangements to pay off the balance, the defaults will stay for 6 years on your credit file, but on occasion some people have cleared the debt before the default has dropped off their file.

This results in the default/account showing as satisfied, prior to the default dropping off automatically.

Its a pig in a poke, it looks marginally better to a potential mortgage lender.

Hi,

Thank you for replying.

So can I ask, once you have officially defaulted after say 3 months or so, who do you make arrangements to pay off the balance with? The creditor or whoever they sell the debt on to?

I know a fella who works for a major bank in their debt recovery department (business banking) and he has mirrored what you guys have been saying. Default is better for your credit files in the long run but can be quite a   stressful journey if you allow the pressure of it all to get to you.

It is a very strange feeling heading down this path as I feel an overwhelming obligation to make some sort of payment. I have mixed feelings about deliberately defaulting but I certainly do understand the reasoning behind doing it.

I will have to carefully consider the two options as my wife is really stressing about me just defaulting regardless of my explaining the pro's & cons vs an AP.

The way I see it is this, if I can be sure to actually pay off the debts within say 2 years, an AP will be preferred as it will prevent the sale of debts to a third party who have no qualms at all in harassing me and potentially heading down the CCJ route which would be a disaster.

Or, just default and it all be done within 6 years but have the added stress of knowing a DCA will start contact.

This is not a nice feeling at all....

exponential

JadedAngel88 said:

exponential said:

JadedAngel88 said:

exponential said:

fatbelly said:

I agree with the above. If you do have £500 per month available, save that somewhere unconnected to your debts as an emergency/fighting fund and you are giving yourself options, while you get into a stable situation.

I'd say the only letters that matter are formal preaction protocol letters and it could be years, or never, before you get one.

The only thing that I'm a bit unsure about is the impact of a default vs an AP on your credit files. Surely an AP is seen by other creditors as a positive thing as at least you've made an attempt to pay your debts off instead of just defaulting on them?

Am I missing something here? 

Say if it takes you 10 years to clear the debt ok. So an AP marker will disappear in 16 years. 

If you default but it still takes 10 years to pay off the debt. The defaults disappear in 6 regardless if the debt is fully paid or not.

Ok, I understand that now.

The question behind all of that is how is a default seen as opposed to an AP in terms of seriousness?
I completely understand that with defaults, you're pretty much a no-go area as far as creditors are concerned btu how do they see an AP? Yes, it stays on your file for 6 years after the debt is cleared but is the AP seen as a really bad thing or just a slightly negative thing?

So, if I default, I can say goodbye to a remortgage at a better rate for 6 years but an AP, how is that seen by lenders and will they still work with you?

I can't say the difference between them as I've never had an AP mark on my credit file. I know that as time passes that the impact of the default lessens over time, regardless of if it's paid or unpaid - I have had both, and your credit rating starts to pick up again but usually only at the credit builder range of credit.

You can get a mortgage with defaults, you just need to find a decent mortgage broker. You might need a bigger deposit too but it's not impossible. This I have no experience in just what other of my family members have done.

I hope I've explained it ok with my foggy memory.

Thank you. I really appreciate the input on this!

It's all good knowledge to add to the final decision. 

RAS

Once the default is issued, you can start paying the creditor or their collector. They are unlikely to bother paying the cost of a CCJ if they know they are getting an affordable payment anyway. The ones about whom to be careful are credit unions and Creation.

What you and your wife need to do is sort out your Statement of Affairs aka annual budget divided by 12 and spend the next few months stress testing it. It's only when you've identified the bits missing initially that you really know what you can afford to pay.

And hopefully in two or three years you can get some settlement offers at a reduced price.

sourcrates

As per the post above by RAS, once defaulted, creditors have to then decide how best to collect the balance, or not in some cases.

Some may make a commercial decision and write the debt off, another strategy is to do nothing, that sometimes happens, and the debt just goes statute barred.

Some lenders sell the debts to debt purchasing companies, and you then have to deal with them, but by far the majority will just assign a collection company, a debt collector, they will then tell you to deal with them only.

Some accounts can go through all or none of these stages, there is no knowing what collection activity may happen until it does.

ManyWays

I just want to do the right thing that's all. Either make token payments with no interest or charges knowing that my income will allow me to clear the debts fairly quickly or just default and make no payments at all.
The thing with the defaults is the threat of legal action.....that's the scary bit and the only thing stopping me from just doing it without much more thought.
The advice on this page is about clearing your debts as fast as possible. If it is important to you that you get a mortgage as soon as possible, that is a different sort of target. Is it genuinely realistic, will you ever have a deposit until the debts are gone? A lot too many people are obsessed with the idea of protecting their credit score for a mortgage which is just a mere daydream. If you have a serious chance of a mortgage in the next few years, then you need to get the debts settled as fast as possible.  If you havent, then just settle down to debt clearing and forget about your credit record.

exponential

I'm a homeowner with mortgage and no equity to release. 

You're right of course, credit report is meaningless in my situation anyway. 

RAS

Thanks. Unless you are a mortgage prisoner, you can choose your next mortgage from those offered by your current provider without a credit check. Hopefully when you come to renew the second time you can explore the whole market because your credit record is clear. If not, it may be worth speaking to an independent mortgage broker who can do soft searches and check informally as there may be better offers around.