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

TheAble

I would also advocate avoiding credit entirely once you are free from your current problems (the mortgage excepted). Stick to a debit card, and save up and budget for stuff rather than turning to credit cards and loans. It can feel a hard cycle to break but far better to avoid all this stress for a third time.

exponential

TheAble said:

I would also advocate avoiding credit entirely once you are free from your current problems (the mortgage excepted). Stick to a debit card, and save up and budget for stuff rather than turning to credit cards and loans. It can feel a hard cycle to break but far better to avoid all this stress for a third time.

I fully intend to follow this advice to the letter in future. If we can't afford something then we just do not get it and that's that.
I buried my head in the sand and thought everything would be ok but things only got worse.
I am in a constant cycle of persistent debt and I just can't cope anymore....the pressure is unbearable with not sleeping and big black rings under my eyes.

I've already started cancelling direct debits and have made no payments as I am over my arranged overdraft and have no funds to pay.

I feel strengthened by the advice and support from you guys and I thank you all for that. 

RAS

You probably feel there's rather a lot going on anyway, but can you and your wife look around to see if there is anything you can sell? If it dries out, perhaps a car boot? Even a couple of hundred quid in an emergency fund could really help.

And do go over to the Money Saving Oldstyle subforum. There's a lot of people living on very little and they might be up for a store cupboard challenge (ideas what to do with whats in the cupboards and freezer), or menu planning, batch cooking. That can get a bit cheerless but you could start with one week on, one week off.

It is really important to try and build some emergency funds. And to be alert to things like deals on stable goods. You can have too many tomatoes and beans but having a few in store also helps when things get tight at the end of the month.

Superhoopza

ManyWays 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.
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.

I am hoping to be in a similar situation in 12-18 months time. Surely it is feesable to be carrying some no interest incurring debt, i.e. debt on promotional deals, whilst saving for a mortgage? 

ManyWays

I am hoping to be in a similar situation in 12-18 months time. Surely it is feesable to be carrying some no interest incurring debt, i.e. debt on promotional deals, whilst saving for a mortgage? 
Yes but not if this is defaulted debt, Mortgage lenders like you to have resolved problem debt, not unreasonably. For non-problem debt you can have some, it just affects the mortgage affordability calculations, and mortgage lenders tend to look at the amount of the credit ard debt, and ignore whether it is on 0% or not. 

Floss

exponential said

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 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....

OK... to get the accounts to be defaulted, you do not pay anything. Once you stop paying those debts, you save all your spare money into an onterest-earning account for your emergency fund. 

Defaults can take months to be achieved - it is not something you can request and there is no set timescale for them. A default stays on your account for 6 years after being registered.

An AP will stay on your file until 6 years after the debt is cleared, so potentially harming your credit record for much longer than defaults. Also, you may only get 2 or 3 months of no interest.

When your mortgage deal is up & you need a new one, you choose from those offered on your current mortgage company's website, thus avoiding using a broker.

exponential

@Floss

Ok. My first round of payments are becoming due so I want to clarify a few things before I let this happen as once I start this, there's no going back for me.

• I am to not make any payments to any of my unsecured creditors:

• 7 x Credit Cards
• 2 x Loans
• 1 x Overdraft

• I am not to respond to contact of any kind from unsecured creditors
• I am to keep all documentation received for future reference
• I am not to offer any form of payment plan 
• I am to wait it out for 3 months+ until an official letter of default is received
• I am to save as much as possible during the above 3 month+ period for the purpose of building up a cash reserve for payment of these debts
• I am to offer DCA's (not the creditor collections department) a minimal amount per month until they offer a reasonable settlement figure
• Use the funds previously saved to pay the settlements

Is the above correct? I'm really nervous about not paying these debts and am dreading the flurry of emails, texts and letters that will soon come. 

RAS

Generally OK.

You need to work out your monthly living costs, including a one twelfth contribution to annual or occasional costs. What's left over goes into your emergency fund, preferably interest bearing, but you might also want a budgeting fund for the annual and occasional costs.

The initial purpose of your emergency fund is to cover for costs you can't anticipate. If you own a house, you need to make allowances for maintenance. If you rent you need enough for a month's rent and deposit. In both cases for enough to cover living costs for a month and replacement of at least one household item.

Once you got your emergency fund in place, start saving towards settlements. You need to make sensible payments to creditors once they default. You prefer not to get CCJs, but it's important not to strip yourself of all pleasures or lurch from crisis to crisis because you failed to save to cover emergencies. You will need to revise your SOA over time.

exponential

RAS said:

Generally OK.

You need to work out your monthly living costs, including a one twelfth contribution to annual or occasional costs. What's left over goes into your emergency fund, preferably interest bearing, but you might also want a budgeting fund for the annual and occasional costs.

The initial purpose of your emergency fund is to cover for costs you can't anticipate. If you own a house, you need to make allowances for maintenance. If you rent you need enough for a month's rent and deposit. In both cases for enough to cover living costs for a month and replacement of at least one household item.

Once you got your emergency fund in place, start saving towards settlements. You need to make sensible payments to creditors once they default. You prefer not to get CCJs, but it's important not to strip yourself of all pleasures or lurch from crisis to crisis because you failed to save to cover emergencies. You will need to revise your SOA over time.

I will post an SoA on here when I get chance to. I'm self employed so my earnings are not predictable really.
I appreciate the information from you guys. Every fibre in my body is telling me that what I am doing is wrong but I just can't do this anymore. I literally have 12p in my bank account and although I'm owed money from work I've done, that comes in at various times and is not always on time.

I will avoid a CCJ at all costs as a CCJ will have implications on my ability to obtain public liability and professional indemnity insurance for my business which means I won't be able to trade. 
Also, in the distant future, a CCJ will impact my ability to become a director if I go Ltd. (I am a sole trader)

MissCarmen

Just want to say thank you for this thread. 
Sorry you're going through this Exponential, and reading this thread has really helped me too! 
I'm in a similar position to you, and am also self-employed. Not getting paid by clients has reeked havoc. 
I'm a bit further ahead in that I took a DMP with Payplan, but didn't fully understand the default thing. 
My default letters came really quickly (in the first 6 weeks and after I had made just 1 reduced payment on my DMP). I too am feeling the fear, but this forum helps. 
I've just posted about my situation. 
Wishing you all the best.