Heavily indebted doofus - do I default?

IndebtedDoofus

Hi all, came across this forum as a 31 year old idiot who has landed himself in a whole heap of debt. My situation is complicated and I'm hoping that as this is purportedly a judgement free forum I won't be too criticised too harshly for the situation I've landed myself in.

The long and short of it is that last year I landed myself in some serious debt thanks to crypto currencies. I was doing very well, lost it all, and then started chasing those losses with more and more reckless gambles. I already had a not insignificant chunk of debt that I was paying down and used my access to credit ti bet way more. In the end I spiralled massively and when I found myself coming to terms with everything that had happened I found myself in roughly 100k of debt.

At least a 3rd but maybe closer to half of that was borrowed in the depths of my crypto addiction. I thank the lord that I'm now back on the straight and narrow but ultimately I have to be realistic and I know for a fact that I cannot afford to repay what I owe in full without being a total debt slave for the next two decades.

My question is - should I set up a  DMP for 500 a month for the aforementioned two decades in the hopes of clearing this debt? Or should I take the advice of many posters here and default first then look to settle? I'm currently a homeowner with about 60k in equity - if I take the latter option how likely are they to try and take my house?

IndebtedDoofus

Also I would add that although I'm okay with my credit rating being screwed for the time being I do have a girlfriend I would very much like to settle down with one day. If I follow the default strategy suggested on this forum how long would it likely take me to be eligible for a mortgage together again?

fatbelly

If your surplus income is only £500 then it sounds like you cannot service 100k of debt

If you could post a soa that would make things clearer

https://www.lemonfool.co.uk/financecalculators/soa.php

If you can't afford this without debt-juggling then two things become self-evident

1. You will need to default on the nonpriority debts
2. You were given loans that were not affordable, and should complain

Your house is only at risk if you do not pay the mortgage or any secured loans. 

As a homeowner the two options you should consider are debt management and IVA, with the latter having better rules from July this year.

IndebtedDoofus

Thanks @fatbelly I could probably stretch to £750 a month but doing that for the next decade just didn’t appeal in all honestly. Not that £500 does either. 

I definitely can’t service the debt affordably and I have already filed complaints with the lenders I borrowed from at the height of my problem. 

I’ve come to terms with the fact that I will likely need to default on these loans and then begin payments until I get the chance to settle. I’ve also come to terms with the fact that this is going to annihilate my credit rating for the next 6 years plus.

Every debt is unsecured  but the real concern for me is still if I go down this route, is there any possibility of my creditors coming after my home? I have read that there is precedent of creditors taking court action in the form of charging orders or forced bankruptcy to force the sale of a property. Can anyone shed light on whether this actually happens for unsecured debts or whether it’s more likely just scare tactics?

i worry about the former considering the size of some of these debts. For full disclosure, here is everything I currently owe including fees and interest accrued:

AMERICAN EXPRESS 10,118.94 

BARCLAYCARD 5,626.68 

HSBC BANK PLC 5,234.09 

HSBC BANK PLC 7,412.96

MBNA Limited 11,001.11 

MONZO 20,140.00 

SANTANDER CREDIT CARDS 8,615.11 

VIRGIN MONEY CREDIT CARDS 3,620.03 

VIRGIN MONEY CREDIT CARDS 7,384.00 

ZOPA BANK LOANS 20,010.48

Total: 99,163.40

fatbelly

If you are making payment to this lot they won't go for court action as there would be no point.

Even if you didn't pay them, only one or two would.

None of them use statutory demands. Rare as hen-s teeth, just used in vindictive cases, not consumer credit debts

Even charging orders don't mean orders for sale would be granted as you are living in the property

Grumpelstiltskin

Op We still haven't seen your SOA as fatbelly advised you to put up.

A list of what you owe doesn't give the full picture, you haven't even given the monthly repayments and interest rates. Without the full picture we are working in the dark. 

DankVielen

IndebtedDoofus said:

Hi all, came across this forum as a 31 year old idiot who has landed himself in a whole heap of debt. My situation is complicated and I'm hoping that as this is purportedly a judgement free forum I won't be too criticised too harshly for the situation I've landed myself in.

The long and short of it is that last year I landed myself in some serious debt thanks to crypto currencies. I was doing very well, lost it all, and then started chasing those losses with more and more reckless gambles. I already had a not insignificant chunk of debt that I was paying down and used my access to credit ti bet way more. In the end I spiralled massively and when I found myself coming to terms with everything that had happened I found myself in roughly 100k of debt.

At least a 3rd but maybe closer to half of that was borrowed in the depths of my crypto addiction. I thank the lord that I'm now back on the straight and narrow but ultimately I have to be realistic and I know for a fact that I cannot afford to repay what I owe in full without being a total debt slave for the next two decades.

My question is - should I set up a  DMP for 500 a month for the aforementioned two decades in the hopes of clearing this debt? Or should I take the advice of many posters here and default first then look to settle? I'm currently a homeowner with about 60k in equity - if I take the latter option how likely are they to try and take my house?

No Judgement here, well done for facing up to it, I have family members with gambling issues and my own debt was around 90k.  I started off seeking a 60k discount but it took them too long and so I held out for 100% off, i.e. waited for the debt to be Statute Barred or CCJ'ed.

with respect, can you please do a proper SOA otherwise you will not get the help you deserve and that can be provided by others.  It really is helpful as it splits the debts up and gives us an idea of where your current income is going.

Your debt is clearly totally unaffordable, but before any solutions can be offered you need to get professional help with the gambling addiction, otherwise you will be right back in the same place. Professional help will identify the underlying insecurities, anxiety other "trauma" that triggered the feeling that you needed to gamble.  My family members will always be gamblers, one has not changed and blows every penny they get on gambling, the other has understood it is part of their personality, understood what triggers the need for it and has coping mechanisms to prevent it.

You have learnt the hard way that Crypto has no value, it never did, hopefully others can learn from your experience.  Really it is just like insider dealing on shares back in the day, people would give tips on a share because they wanted to get out, so they tell people "do not miss out", then they cash in their shares when the price has increased.  Next thing you know the company crashes and it becomes a penny share!  Crypto is even worse because it has no value in the first place, so called influencers will make videos about it and make a lot of noise when the price is amazing because of the activity that they have generated. Meanwhile they cash out all or some of their holding and they tell people to hold firm.  On top of that there are all the scam fake crypto apps which make you look rich until you express a desire to cash out.  Ironically, if you have been scammed you may be able to get your bank to reimburse you

You also need to get your partner on board with helping you dig yourself out of this mess, otherwise you risk losing them.

Consumer debt is not secured debt like a mortgage which is secured on your home or car loan secured on the car, UNLESS you gave personal guarantees.

You need to start by updating your email and phone number details in the portal of each account with a new email address from a different online mail provider and  a 99p sim from Tesco which you will only use for debt, helps to have a non-smart phone for the debt sim.  

Next get a lever arch file with separator tabs for filing the letters for each debt, put the default letter in each section and then all new letters for each specific debt in it's own section on top of the last, so most recent on top.

Then you open a bank account with a bank that is not affiliated with ANY of your lenders, maybe Lloyds Bank, also open a savings account with yet another bank which must be untouchable, it is an emergency fund.

Next you move your non consumer debt direct debits to the new account, if any of those debts were for a car then I assume you would want to keep up payments on that, but if you have other debt with that loan company you would need to isolate that debt and deal with it differently.

Do NOT use any of the MSE switching offers for getting a new bank account.

Then all you have to do is cancel all your direct debits, stop making payments to all your unsecured consumer debt, then wait for something to hit the fan.

Personally I found it speeded things up when I wrote to each creditor and said

"Dear Sir/Madam

Re: Account number 987654321

Unfortunately to a change in circumstances I will no longer be able to make payments to the above account, I can't see this changing in the foreseeable future.

Yours faithfully

A Debtor"

You will still get lots of letters from collections, debt collectors etc until they decide to issue a default notice and terminate the agreement.  KEEP THAT LETTER, it is super important down the road.

The default letter will say they have sold the debt and name the Debt Consolidator they sold it to, sometimes they even include a letter from the Debt Consolidator, either way the Debt Consolidator will appoint a Debt Manager Company, they will write to you and they will tell you that they have appointed Debt Collectors and give you their name.

You will then get a series of letters to scare you into making payments, the debt will become unenforceable in 6 years UNLESS they get a CCJ in the six year period. This also presumes that you make no contact with them, you do not acknowledge the debt and you do not make any payments to the debt.

Whatever happens your credit record will be trashed for at least 6 years, longer if they get a CCJ, the decision to get a CCJ comes down to what evidence they can gather that you are spending money.  So lock down your social media, go off radar and do not take out any contracts or credit agreements, even renewing an overdraft can make them feel it is worth getting a CCJ.

This talk of £500 DMP etc is not going to be viable because your debt is so high, so the approach I would take is to not make ANY payments as they just reset the 6 year Statute Bar, instead throw all the spare money you have into that savings account as an emergency fund.  That way if you get a actual offer of an actual amount you will have the money ready. You need to burn the debt candle at both ends, this means you need to cut your spending drastically, it stands to reason you lived beyond your means and you need to "feel" that you are on a diet so to speak.  

This is just a lifestyle change and it is not forever, if you need something do not buy it, try to get it for free from freecycle. Do not eat out or have home delivered food, learn to spend only on what you desperately need rather than what you want.

The accountability of an SOA is therapeutic, plus you will get very good advice on what can be trimmed, also make sure you list the interest rates for each debt.

Your debt is sold for pennies in the pound, typically it is packaged up with thousands of other similar types of debt.  You might find two debts from the same lender are sold to different companies and dealt with totally differently. 

I am no mortgage expert, but from what I have seen on this forum it seems you will not be able to get another mortgage, but you will be able to keep paying your own at your lenders standard variable rate.  I am not sure if this is just certain lenders but others will no doubt chip in to clarify.

sourcrates

If a creditor did go as far as a charging order, on the whole they just sit on the land registry file until either the debt is satisfied or the house gets sold, however long that may take.

An "order for sale" is now so rare that they stopped keeping official figures for them in 2019, something like a dozen or so in the whole of the UK get granted every year, and the court looks at every other alternative first, so that is very unlikely to be an issue for you.

RAS

Well done for getting out now. You're not the first to hit this forum with similar crypto debts and some who owed less had burned through savings first.

We do need to see the Statement of Affairs to understand whether you have any flexibility and which options might work for you. And there are some rule changes due shortly

By the way, a long DMP will usually result in debt being sold multiple times and you'll get offers of discounted settlement down the line. 

Do seek help with the gambling side. An awful lot of us have a tendency to binge and even the most basic computer games are designed to be addictive. Even those can have financial downsides but it's far too easy to cross over into something more damaging financially like crypto. 

ManyWays

A SoA would really help us talk sensibly about your options, including a DMP and an IVA. Which lenders havent you complained about, as you seem to have a lot of debt, it may be best to go after them all?

If I follow the default strategy suggested on this forum how long would it likely take me to be eligible for a mortgage together again?
that isnt something anyone can answer at the moment, as we have no idea what your options are.