Is it hopeless?

Grumpelstiltskin

johnsof75 said:

When I called Step Change they recommended a debt management plan but do you think defaulting is a better option. Sorry for asking so many questions.

Yes Stepchange will encourage you to start a DMP before the debts default. The problem with this is that debts are marked arrangement to pay, not defaulted, they can stay on your credit report 6 years after final payment, longer than defaults.

Start by reading this

Free debt advice: what to do & where to get help - MSE

Read also the sticky threads on here and then as badmemory suggests read some of the diaries.

The more you understand the easier it is.

You have to change your mindset, remember you will be in charge not your creditors.

Grumpelstiltskin

Another board to look at for money saving ideas.

Old style MoneySaving — MoneySavingExpert Forum

sourcrates

johnsof75 said:

Thank you. Would that mean I could never get credit again and would need to live in this flat forever. Appreciate that may be the only option and consequence of the mess I have got myself into. 

johnsof75 said:

Would it mean I would be made bankrupt or can I still repay the money I owe? sorry for asking so many questions. I am worried I might loose my job if I was made bankrupt. 

Bad credit is only recorded for 6 years after it defaults, credit files will heal with time.

I don`t know where you have got the idea of bankruptcy from, as I said before, your debts are all non essential credit debts, no one will make you bankrupt, there are so many things wrong with that statement, I`ll just say it would cost more than you owe to make you bankrupt, so you can put that insane idea out of your head.


Our recommended basic timeline after you stop paying any particular non essential debt:

It takes between 3/6 months on average for an account to default, some can take longer.

Use this time to save an emergency/settlement fund.

You will get collection letters and calls.

After you have received a default notice issued under sec 87(1) CCA, a default can be registered on your credit file.

All interest and charges then stop.

A lender can now take legal action if they wish, its a 2 part process with plenty of time to avoid further action and come to an arrangement, only 2 in 10 debts ever go to court.

Most lenders either engage a debt collector or they sell the debt to a 3rd party, who then engage their own debt collector, whatever happens you will be written too.

You can now start making affordable payments to your debts unhindered by further interest or charges.

Or,

you can go straight to stepchange and start a DMP straight away, accounts will eventually default, and most will stop interest, but you won`t have an emergency fund, nor will your credit file heal so quickly.

Further down the line, after your debts have been sold at least once, settlement offers will become available, this is when an emergency/settlement fund comes in useful, as you can offset the interest added prior to default, by settling debts for a small percentage of their face value.

QrizB

Looking at your SoA, you've not quoted interest rates for your unsecured debts. Howeve you do seem to be paying more than the minimum amount on some of those. If you reduced payments to the minimum, would you then have a surlus that you could use to start clearing the higher-APR debts?

RAS

Might shock you but this isn't nearly as bad as I anticipated given your first posts. Debts around 1 year's salary are usually manageable.

It isn't either Stepchange or DMP or defaults. A DMP is an informal process which can be supervised via a free charity like Stepchange, a charging company or yourself.

These days debts will default, eventually, but if you use Stepchange it takes longer because creditors will record AP markers for longer. Once the default is issued fees and interest cease. Having said that Virgin usually take a year or so.

This is counterbalanced this with the fact that your creditors will generally sell on the debt and after a few year's you are offered discounted settlements on your debts. Since they paid 10-30% for the debt, getting you to pay 30-50% of the balance is a win.

But, Big but, without credit you need to have funds to cover unexpected expenses. With shared ownership and being a leaseholder, you need a bigger emergency fund because you can be liable for expenses at short notice. Full freeholders can delay work a few months or sometimes years to save up, you don't have choices on timing need to deliver quickly.

With respect to other insurances, put away a dedicated fund that covers one white good, and then cancel that insurance, and slowly self-insure. 

I'm not sure what civil service pensions are like now but can you check your death in service payment and see if it covers the mortgage? 

And check your ill-health pension situation? As a singleton, topping that up may be more important than life insurance?

ManyWays

Most of the SoA looks fine. the haircuts and presents are on the high side, but move some of that into entertaiment and an emergency fund and it looks more normal.

But no travel costs at all? Not even the odd mini cab or train fare?

NeverendingDMP

Hi it's definitely not hopeless. I'm not sure whether you are paying interest on the debts now. Am guessing you are. A dmp with stepchange versa doing one that you manage yourself has lots of similarities in that you offer a manageable payment based on your budget-  the crucial difference that people are suggesting to you is don't pay any of the debts, stick that money into an emergency fund whilst your waiting and only when you get the defaults will you offer to pay that manageable payment. With stepchange you would get there  help but start making the manageable payments straight away and have no time to build an emergency fund and the interest might not be stopped at all or as quick. Before the default happens it will be called arrangement to pay which affects your credit rating for way longer. When a default happens they don't charge interest any more and they have to just get what they are given towards the debt. When it comes to remortgaging I had defaults but logged onto my mortgage provider clicked a new deal and five minutes later I was set up -theres no credit check. The mortgage boards can reassure you of this if your mortgage is different to mine due to shared ownership. What I would say is if you decide you don't go to down the default route the budget needs to be as strict as you can manage. If you do default which I think is more realistic for you to do it's worth upping some areas of your budget to include emergencies, entertainment, travel and give yourself some more wiggle room so it doesn't feel like an impossible budget to keep too.  And yeah have a nosey at some other threads and diaries. It's a friendly bunch on here

kimwp

Do you need the life assurance?