£31,000 Credit Card Debt and My Anxiety is Unbearable

RAS

It'll probably be many months before your accounts all default. Meantime you need to use the money you will in future pay each month towards your debts to create/boost your emergency fund. Because you won't have access to credit in the next 6 years, so you need to self-insure against any emergencies, whether that's something in the family, ill-health or a major repair not covered by insurance.

If you don't need it, sometime in the future, once your debts are sold, your creditors will offer you a discount to close the account. You might be able to negotiate further if you have emergency funds. So you've cleared a debt for less than the book value. 

husnu1

Grumpelstiltskin said:

As has been pointed out it will take many months before you sort out all your creditors, so don't wait to tell the children, the sooner they understand money doesn't grow on trees the better. It will help them when they do move out if they understand household finance.

Definitely, they already know about it and promised to help, but my question is, what do I do in the meantime? I have not paid my credit cards since February, and they keep calling me.

husnu1

RAS said:

Martico's right. The biggest problem with SOAs is that many people vastly underestimate the amount they, miss many of the annual payments out altogether, etc, etc. You seem to hit the items but maybe put an annual rather than monthly cost? 

One small tip, in addition to the savings/emergency fund, have what I call a budgeting account. Tot up the monthly amount you've allocated for annual spends, whether that's presents, car repairs or tax and transfer that to the budgeting account each month. Then when you've an annual bill to pay, most if not all of the money is sitting in the budgeting account.

I avoid that. If I underestimate, I will be back at Ground Zero. Like you said, I want to open a few other bank accounts, but how easy is it to do so? What sort of accounts do I need? 

LightFlare

Not being harsh at all - but out of 4 adults and their combined spending/costs, 1 person (you) is earning 80% of the household income.

The other 3 need to try and contribute more, or give stuff up to help you out

Is there any reason your partner cant work more hours and/or the 2 adult children get some casual work to help out with the household bills (I'm assuming partner isnt working a 35+ hour week - any reason why she/he couldnt?)

I think you are trying to take it all on by yourself, when in fact the situation needs be addressed as a family of 4 adults

husnu1

RAS said:

It'll probably be many months before your accounts all default. Meantime you need to use the money you will in future pay each month towards your debts to create/boost your emergency fund. Because you won't have access to credit in the next 6 years, so you need to self-insure against any emergencies, whether that's something in the family, ill-health or a major repair not covered by insurance.

If you don't need it, sometime in the future, once your debts are sold, your creditors will offer you a discount to close the account. You might be able to negotiate further if you have emergency funds. So you've cleared a debt for less than the book value. 

What do I do in the meanwhile?

Do I contact my creditors to make them a monthly offer and stop the interest? If yes, how would I do that? Do I have to answer their calls? I blocked their numbers, but they keep sending me texts.

Do I go through Stepchange or try to do it myself? Most people here seem to prefer doing it themselves.

husnu1

LightFlare said:

Not being harsh at all - but out of 4 adults and their combined spending/costs, 1 person (you) is earning 80% of the household income.

The other 3 need to try and contribute more, or give stuff up to help you out

Is there any reason your partner cant work more hours and/or the 2 adult children get some casual work to help out with the household bills (I'm assuming partner isnt working a 35+ hour week - any reason why she/he couldnt?)

I think you are trying to take it all on by yourself, when in fact the situation needs be addressed as a family of 4 adults

It's not harsh at all. I want everyone to be honest with me. They will all start helping me more. My wife only works part-time at the moment, and it is hard to find a full-time job at her age, and she has some health issues. We are all evaluating different options to help each other out.

kimwp

If you can't afford to pay your debts-

Step 1. Call your creditors and tell them not to contact you by phone and only to contact you by email or letter.
Step 2. if your payments to your creditors go from your current bank account, then it's considered best practice to open a new account and manually move (don't switch) your pay and priority bills across. This is in case your creditors accidentally take a direct debit payment after you've cancelled it. If you don't pay them by direct debit, no need for this step.
Step 3. Continue to not pay the non-priority debts until the accounts default. This could take months. Defaults will fall off your credit record six years after default. Arrangements to pay (the alternative to a default, where you agree some sort of payment plan) will come off your record six years after the debt - so will impact you a lot longer.
Step 4. While doing the above steps, build up an emergency fund from the money you now have spare. Work out whether your SOA is accurate and liveable. DO NOT pay your creditors anything until your account has defaulted and do not pay them anything more than a token amount until you have a decent emergency fund built up. (Note that if you need to use some of your emergency fund later, you can reduce the payments until the fund is rebuilt)
Step 6. If you want Stepchange to manage your payments, then best to contact them after the defaults. (Unless you just want to get something started and happy to have your credit record impacted for much longer)
Step 7 - in a few years, you can make full and final offers. 

RAS

husnu1 said:

RAS said:

It'll probably be many months before your accounts all default. Meantime you need to use the money you will in future pay each month towards your debts to create/boost your emergency fund. Because you won't have access to credit in the next 6 years, so you need to self-insure against any emergencies, whether that's something in the family, ill-health or a major repair not covered by insurance.

If you don't need it, sometime in the future, once your debts are sold, your creditors will offer you a discount to close the account. You might be able to negotiate further if you have emergency funds. So you've cleared a debt for less than the book value. 

What do I do in the meanwhile?

Do I contact my creditors to make them a monthly offer and stop the interest? If yes, how would I do that? Do I have to answer their calls? I blocked their numbers, but they keep sending me texts.

Do I go through Stepchange or try to do it myself? Most people here seem to prefer doing it themselves.

Looks lie your existing main account is fine, just check banking groups.

 Ok, some basics. 

If you arrange payments with your creditors, they mark your account Arrangement to Pay. That stays on your credit record for 6 years after the debt is paid off, and the creditor can still charge fees and interest meantime.

If you stop paying and wait for the creditors to issue a default, the interest stops and the debt is removed from your credit record 6 years after it is issued, even if you haven't paid a penny. 

Perverse, isn't it? But it's why we suggest that you go cold turkey. 

Tell the creditors to remove your phone number from their records. All important information has to be posted anyway. There will be one scary letter just before the default is issued demanding your repay the whole debt. That is a legal requirement and creditors don't expect you to pay. And even then it could be several months before they get round to telling you whether who to pay.

You just calculates this debt as a percentage of total debt= % of debt repayment to go to that company. And keep saving the rest until the next company defaults.

Stepchange do much the same but they insist you start the DMP more quickly so you end up with AP markers and you don't get the chance to save the emergency fund. So your credit record often takes longer to recover.

husnu1

RAS said:

husnu1 said:

RAS said:

It'll probably be many months before your accounts all default. Meantime you need to use the money you will in future pay each month towards your debts to create/boost your emergency fund. Because you won't have access to credit in the next 6 years, so you need to self-insure against any emergencies, whether that's something in the family, ill-health or a major repair not covered by insurance.

If you don't need it, sometime in the future, once your debts are sold, your creditors will offer you a discount to close the account. You might be able to negotiate further if you have emergency funds. So you've cleared a debt for less than the book value. 

What do I do in the meanwhile?

Do I contact my creditors to make them a monthly offer and stop the interest? If yes, how would I do that? Do I have to answer their calls? I blocked their numbers, but they keep sending me texts.

Do I go through Stepchange or try to do it myself? Most people here seem to prefer doing it themselves.

Looks lie your existing main account is fine, just check banking groups.

 Ok, some basics. 

If you arrange payments with your creditors, they mark your account Arrangement to Pay. That stays on your credit record for 6 years after the debt is paid off, and the creditor can still charge fees and interest meantime.

If you stop paying and wait for the creditors to issue a default, the interest stops and the debt is removed from your credit record 6 years after it is issued, even if you haven't paid a penny. 

Perverse, isn't it? But it's why we suggest that you go cold turkey. 

Tell the creditors to remove your phone number from their records. All important information has to be posted anyway. There will be one scary letter just before the default is issued demanding your repay the whole debt. That is a legal requirement and creditors don't expect you to pay. And even then it could be several months before they get round to telling you whether who to pay.

You just calculates this debt as a percentage of total debt= % of debt repayment to go to that company. And keep saving the rest until the next company defaults.

Stepchange do much the same but they insist you start the DMP more quickly so you end up with AP markers and you don't get the chance to save the emergency fund. So your credit record often takes longer to recover.

I need to read this a few times to grasp it fully. It all sounds terrifying. I fear they might try something sinister while waiting for the defaults, like getting a CCJ or repossessing my house or car. That would kill me. 

Grumpelstiltskin

Do not think about starting a DMP until your debts have defaulted. Why do we say this?

If you start making reduced payments before they have defaulted your credit report is marked ' Arrangement too Pay'
Then the debt isn't removed until 6 years after you make the final payment, so if it takes 4 years to pay off the debt it doesn't disappear for 10  yrs.

Once it defaults the defaults disappear after 6 years even if it hasn't been cleared.