Advice for credit cards please

aderyn_tan

Hi,

I am £10K in credit card debt, and have recently been made redundant. For the last couple of years, I've 0% balance transferred some credit cards and stayed on-top of my payments.  Things have been tight for the last few months, what with the cost-of-living-crisis etc, and I was talking with one of my credit cards to give me some time to work things out just before being made redundant. This has compounded my situation, and I've just missed a payment on that card - its on my credit file. 

So, I've done a budget with yourselves and as I am still waiting to see how much I will get paid from Universal Credit (I will know at the beginning of December) I put my income at £0. This gave me one recommended option of a Payment Suspension. Could I please ask, do you think this is the best way forward for me?

I've registered with yourselves and done my budget (though I need to edit the yearly electricity as I must have put my yearly outgoings as my monthly) and I have also completed an SOA for this forum. My salary before redundancy was just under £26K, and as already mentioned, I was managing until just lately. I guess I am worried that for the foreseeable future, on Universal Credit, I will unable to afford the minimum payments across all of my cards and that things will spiral out of control, along with all that might ensue. Bailiffs etc! I want to do my best to prevent that.

I can share my SOA with you (not sure how to do that on here yet) and my Step Change report as and if required. For any other readers, I'm yet to post on Debt Free Wannabe proper, as it takes me some time to write these posts.

Thank you

aderyn_tan

Hi Everybody!

The above was and is intended for the Step Change advisors on here. So, please accept these two posts combined as my first post. I look forward to becoming Debt Free and talking with you guys!

Best Wishes, AT

RAS

Welcome, 

First things first, bailiffs rarely ever get involved in consumer debt. They might be recruited by someone with a personal beef but it makes no sense financially. What you do need to keep on top of is Council Tax. You will have to apply for any help with that separately from UC.

Secondly, you don't have the money to pay the minimums on your debts. So stop paying. Right now you need to accrue whatever emergency fund you can to deal with surprises and stuff like getting job interviews, not consumer credit.

In the short term it makes no difference if you stop paying completely, or make a token payment. In the longer term the token payments damage you credit record for longer than defaults. So aim for defaults. You'll get emails, phone calls and texts, computer generated. Just ignore them. The wheels of the debt collection industry move slowly.

Concentrate on housing, CT, food, utilities and other essentials. Cut back what you can but stop paying the cards.

Hopefully you'll be able to get back into work reasonably soon and you'll be able start paying once you've got a decent emergency fund behind you.

fatbelly

This isn't difficult. While you have zero income, you need all your resources for essentials like food.

When UC kicks in, that should cover heating, eating and rent. But it is not generous and there is not likely to be enough to support 10k of commercial debt.

So stop paying them and let them work through their standard letters. Post a soa when things stabilise

sourcrates

If you don`t have the income, then you must concentrate on your essential spending, non essential commercial debt can be ignored for the time being.

Next you must separate fact from fantasy, bailiffs rarely act on commercial debt recovery, we have a large debt collection industry for a very good reason, 99% of the time its where creditors turn too.

The process can be a long one, nothing happens very fast, so once things settle down, look again at what you can do going forward.

Brie

I would suggest that you ring the card companies and explain that you're in a tight spot (don't go into alot of details) and ask that they suspend interest while you get yourself sorted.  If nothing else at least they will know they will not be getting any payments for the time being.  Do keep a note of the time, date, who you talked to just in case they forget to record it on their system (it happens when things are too busy in a call centre).

You are doing the right thing by getting things sorted sooner rather than later.

Grumpelstiltskin

Brie said:

I would suggest that you ring the card companies and explain that you're in a tight spot (don't go into alot of details) and ask that they suspend interest while you get yourself sorted.  If nothing else at least they will know they will not be getting any payments for the time being.  Do keep a note of the time, date, who you talked to just in case they forget to record it on their system (it happens when things are too busy in a call centre).

You are doing the right thing by getting things sorted sooner rather than later.

Brie I would disagree with you, it's best never to ring any creditors, all they are interested in is getting as much money as possible from the debtor.

You will only get through to a minimum wage person in a call centre, they have no authority to do anything.

If you must communicate with them do it by snail mail.

RAS

Agree with Grumpelstiltskin. Sadly doing the right thing in this situation will not help you.

All communicating with the creditors does is extend the number of months when your account is marked Arrangement to Pay or delinquent. And encourages them to think they now have the right to contact you regularly. 

Go cold turkey. That way your credit record is repaired 6 years after the default, even if you never pay a penny again.
Collect AP markers and they wreck your credit record for 6 years after the debt is paid off. 

The person who defaulted and paid off their debt in 6 years would get a clean slate shortly after. The person who maintained payments and paid off their debt in 6 years has to wait another 6 years (12 in total) before their credit record recovers.

aderyn_tan

Thank you guys. It's taken me a while to reply here. 

I will hopefully get some redundancy money in the next couple of days, isn't it best to stay in contact with the credit card company's as my 0% deals will disappear and the likelihood of them being helpful when paying of my debt will be less. Won't they be less inclined to help me?

I guess the reason I am concerned is, stopping talking to them seems irresponsible. Obviously, you wouldn't give the advice you have if it wasn't sound. I am worried as I have stayed on top of my debt for the last four years. Should I borrow from family to keep up with payments?

enthusiasticsaver

Unsecured debt is non priority debt which is why people are suggesting you do nothing. You will need redundancy money to tide you over to pay essential outgoings until you get another job. Essential outgoings are rent, utilities, council tax and food.  Don't be tempted to kick the can down the road by using your payout to cover unsecured debt. If you default then interest will be suspended and eventually you can sort out an affordable monthly payment when you are in a position to. I would not borrow from family. That just gives you more debt and you cannot borrow your way out. 

In all honesty if you have had £10k of debt for several years and done several BTs on to other cards then you have been over spending for some time and the redundancy is the catalyst to make you realise that. 

ManyWays

Dont borrow from family, it is much easier to sort out a debt situation without family debts being involved.