Unable to pay back Debt

enthusiasticsaver

It looks like defaulting is your only option. There does not even seem to be enough to do a DMP. 

The car  is way too expensive for you and you cannot afford to send £500 a month to your mum abroad. Some difficult decisions to make. 

Andyjflet

Enough people have made constructive comments, so I just wanted to say, Half the battle with your mental wellbeing on this will be having a plan, however grim that looks we usually operate better with a plan of action. Once this is sorted then you just follow those rules and learn as you go. Once you've come out the other side I promise you your mindset should have changed and you will be much better equipped to manager your finances in the future. 

RAS

Question on the car, when did you buy it? How long was the deal and is there a larger payment at the end of the loan?

So you took out a loan in your country of origin before you came to the UK, for what purpose? What's the APR/rate on that loan.

You are going to have to default on the consumer credit in the UK, but before you do anything about the car you really need to understand what you can do that will limit the damage/amount you owe. We've seen some people return the car and still owe a lot of money, so you need to make sure you get this right, which includes using exactly the right words/legal phrases which isn't easy if English isn't your first language.

You need to go to the www.gov.uk website and read up on the rules for visa renewal. As far as I can see this includes paying the fee and health supplement plus having some money in your bank account. But you need to get proper advice.

You need to tell your mother now that you are in a lot of debt in the UK and if you are going to be able to renew your visa, may have to cut back on what you can send her. If she knows there is an issue now, she can start to plan for it. Delaying telling her could make things harder for her.

With respect to the visa, it is illegal of anyone who is not registered with the Immigration Advice Authority, or a lawyer to give immigration advice. You can find the list of approved advisors on the www.gov.uk website. You may be able to get some basic advice interpreting the immigration rules from Citizen's Advice but not all office have immigration advisors. At least if you understand if you need paid advice and the questions you need to ask, you can minimise the amount you have to pay.

kimwp

babayaga96 said:

@kimwp I pay nearly £500-£600 including both my mother and the loan I took. 

Should I consult with an immigration advisor/lawyer before I do anything?

ok, so effectively on top of your SOA is the £500-700 commission that you usually get, but this goes to your mother and the loan in your home country.

Which means you need to make further cut-backs on your SOA just to cover your basic expenses ie £120 reduction across food/clothing/entertainment, which would still leave nothing to pay back your UK debt. You are probably going to have to go "bare bones" in an effort to make some payments to the debts - only absolutely essential clothes and beans, lentils, rice, potatoes, frozen fruit/veg, tinned fish (which are all healthy), if that is needed for your visa application. 

But that would be to show efforts to pay off the debt, realistically, it looks like you will be defaulting on your unsecured debt unless you can find a way to make more money (are there opportunities to get higher commission or can you take on another job?)

It's probably a good idea to talk to someone who can advise on the impact on your visa application.
And figure out what you can do with the car to reduce the expense there.

kimwp

Just thinking about your very new debt - were you honest on your debt applications regarding your income and outgoings?

babayaga96

@RAS I bought the car in August 2024. 5 Years. No larger payment in the end. 

I took that loan last year to clear debts here. I actually did clear some debts here but I could have cleared a bit more if I managed them funds efficiently. The interest on that loan is very high and it does not work the way it works in the UK. Risky matter I must say so cannot miss payments there.

By right words/legal phrases what are you referring to? Any examples for me to understand better?

I have made decent commission in my job until December's, even though the situation was bad I had confidence that I can work myself through this but recently things have gone sideways at work and we do not get enough incentives for me to manage the show as planned.

babayaga96

@kimwp I have been as honest as I can with the SOA. This debt I accumulated is because of high earnings I had during 2nd half of 2023 and almost all of 2024 - made me feel like I have made it in life and there was no looking back, but I guess life hits you back hard when you are over confident. I will not say I am in a bad position now, better than a lot of people but just not good enough for my situation. I am thankful for what I have got but also learning how not to be in the future.

Looks like I will need to consult with an immigration advisor first and see if this will affect my Visa. I have done enough research and no where does it say that it will affect my visa. My visa will only be affected if Bankruptcy/Insolvency is filed but not for DMP, but will still confirm,.


Would you say if it does not affect my Visa then I should default and opt for DMP?

I am actively looking for a secondary job to do over the weekends. 

What new debt are you referring to?

kimwp

babayaga96 said:

@kimwp I have been as honest as I can with the SOA. This debt I accumulated is because of high earnings I had during 2nd half of 2023 and almost all of 2024 - made me feel like I have made it in life and there was no looking back, but I guess life hits you back hard when you are over confident. I will not say I am in a bad position now, better than a lot of people but just not good enough for my situation. I am thankful for what I have got but also learning how not to be in the future.

Looks like I will need to consult with an immigration advisor first and see if this will affect my Visa. I have done enough research and no where does it say that it will affect my visa. My visa will only be affected if Bankruptcy/Insolvency is filed but not for DMP, but will still confirm,.


Would you say if it does not affect my Visa then I should default and opt for DMP?

I am actively looking for a secondary job to do over the weekends. 

What new debt are you referring to?

Thanks baba, for your honesty, it is a hard way to learn not to take out debt and instead use high earnings to save money.

Regarding the new debt, I was referring to when you asked the question: "Also what will the lender feel if the loan or credit I have defaulted on is literally 2 months old and fresh? Will he file a legal case against me in the court?"
I had a thought - how did you get a new loan/credit if you had so many, were you honest on your application? I am just asking because if you weren't honest, that might cause issues with the visa. But hopefully not.

Remember that (unless we state it in our signatures), people who post on here are not financial advisors - so we cannot legally give financial advice. But if I didn't have enough money to pay my unsecured debts, I would stop paying them (continuing to pay them wouldn't be an option). And if bankruptcy/IVA/DRO would cause an issue with my visa, I wouldn't opt for those. Which leaves the informal option of a DMP - where you tell your creditors what you can afford to pay them. At the moment, you don't have any spare money to pay your creditors (which is what a DMP is), but your second job will provide this. If you can get your second job quickly and it can cover your minimum debt payments, then you may be better off paying your debts as you have been and using any spare cash from commissions to reduce them.

Something else you could consider is to open a basic bank account (no overdraft, no fees or requirements) with a bank unconnected to your creditors and manually (without using the automated CASS switching service) move your salary, rent, phone bill over. Then your account that your salary goes into is separate from the one that the debt payments are taken from, so your creditors can't take money that you need for rent, food etc. 

When talking to the visa advisor, ask if it's better to have defaults or arrangements to pay on your credit record. Usually it's better to have defaults, because they drop off a credit record six years after being registered, whereas arrangements to pay drop off six years after the debt is paid off. A default is mostly quickly achieved by completely ignoring any attempt from the creditor at contact and an arrangement to pay is most likely when contacting the creditor to come to an agreement to pay lower amounts. When a visa application is involved, it might look better if you have contacted the companies in an effort to pay off the debts, even if it affects your credit history for longer.

 

babayaga96

@kimwp It is from Very. I had to get a Laptop at any cost for me to learn a course to be able to work/freelance over weekends for extra cash. VERY - I had pre-approved credit balance that I could use anytime. Hence, I used it.


UNDERSTOOD! Correct me if I am wrong but 2 options here would be:

1) If this DMP or defaulting affects my visa - then find a way to pay off these debts without defaulting. 

2) If this DMP or defaulting does not affect my visa process - then don't pay, avoid contact until I am told that I have defaulted and then get in touch with creditors to arrange a DMP? Am I right?


What is the difference between DMP and Arrangement to Pay? After defaulting should I approach StepChange again to broker a DMP with my creditors or shall I speak to all my creditors individually? 



@RAS @fatbelly @Andyjflet @enthusiasticsaver @Grumpelstiltskin @QrizB @kimwp

If you were in my position, what would your final plan of action be? (Considering the debt, Car HP etc)

kimwp

babayaga96 said:

@kimwp It is from Very. I had to get a Laptop at any cost for me to learn a course to be able to work/freelance over weekends for extra cash. VERY - I had pre-approved credit balance that I could use anytime. Hence, I used it.


UNDERSTOOD! Correct me if I am wrong but 2 options here would be:

1) If this DMP or defaulting affects my visa - then find a way to pay off these debts without defaulting. 

2) If this DMP or defaulting does not affect my visa process - then don't pay, avoid contact until I am told that I have defaulted and then get in touch with creditors to arrange a DMP? Am I right?


What is the difference between DMP and Arrangement to Pay? After defaulting should I approach StepChange again to broker a DMP with my creditors or shall I speak to all my creditors individually? 



@RAS @fatbelly @Andyjflet @enthusiasticsaver @Grumpelstiltskin @QrizB @kimwp

If you were in my position, what would your final plan of action be? (Considering the debt, Car HP etc)

Those are two of your options, I'm not knowledgeable in whether other options are available to you eg debt relief order. 

For either of those two options, you will need to increase your income and/or reduce your outgoings because you gave a shortfall for covering your outgoings and you'll want to be paying something towards the debt in the DMP.

Just in case it's needed, obviously do not borrow money from loan sharks, or anyone dodgy as they are not regulated (ideally don't do any further borrowing)


A DMP is a debt management plan. It is an informal (which means you have no protection against your creditors taking legal action to recoup the money, but for unsecured debt, very very unlikely) agreement between you and your creditors that you will pay them reduced amounts towards your debt.

An arrangement to pay is an entry on your credit history, which your creditors have reported to the credit reference agencies. 

A default is considered worse, so if you have a default and then discuss reduced payments with your creditors, it won't change the default to an arrangement to pay. But if you have an arrangement to pay, they can later register a default (I don't know if this replaces the arrangement to pay)

You can go through Stepchange or you can do it yourself. Stepchange will want to deal with all your debts at once, and your debts will default at different times (could be months apart).