Starting monthly payments

Kittymumof4

Hi, we stopped paying cc in June. We have a significant amount of debt, 75k, spread over 10 cc and an overdraft on a joint account. 8 cc in my husbands name and 2 in mine.

We've had one of mine transfer to Wescot, two of my husbands Transfered to Wescot, overdraft transferred to Wescot. One of my husbands has transferred to PRA Group.

The others have mostly defaulted now apart from one, but we've not had debt recovery letters from these yet.

I haven't contacted them yet but want to start to pay these off now.

We have a relatively small amount available to pay these off each month and have built a small emergency fund but not as much as we'd hoped due to essential repairs and maintainance on the house and car.

Do I treat each account as an individual debt or ask Wescot to consolidate the ones they've taken over, knowing that they might also take over some of those that we're waiting for the debt collectors letter about?

Do I now account for splitting the monthly payment equally across all debts? So if we have approx £300 available to pay each month, do I offer to pay £30 p/m off each account?

Will they accept this? I've not done a fully updated SOA as yet so I will do this tomorrow which will tell me exactly how much we can afford to pay but I suspect it will be between £200 - £300 p/m. It will increase by £100 in July.

I've looked into IVA but it's likely that we will have some inheritance, i can't say whether it will be within the next 7 years or not. I'm not keen on the IVA route but I'm unsure whether the companies will accept such a low amount.

There is potential that I will be able to work from next year which would increase the amount we can pay each month, and my husband can take money out of his pension in a few years which would allow us to make offers to settle at least some of the debt.

Brie

Each debt is handled individually. This is so that it can be sold on, passed back to the original creditor, whatever. These things get passed about somewhat regularly in my experience.

The normal thing to do is to list all the different debts and then figure out what portion of your available money will be paid to that on a pro rata basis. So if you had £30 available and one debt of £100 and another of £200 you'd pay £10 to the first and £20 to the second. And you would do this by standing order, never by direct debit.

And you tell them what you can afford, don't ask what they want. They may ask to see your SOA to check that you are being fair in making your payments but they don't need to see bank statements or anything else like that.

Some companies will accept the bare minimum, even £1 a month even if that means the debts will never be paid off. You can't pay them money you don't have and you don't need to starve to give them more just because they want it.

You are right to be cautious about an IVA, especially if any of your income is benefits, it's not the right solution. I can't remember seeing previous posts from you so don't recall your circumstances but have you asked for copies of your credit agreements or done affordability checks? You should do those before starting to make payments as there may be some debts that are unenforceable.

Please don't take pension money out early to pay debts. Think hard about what you have now and will have when you retire. What will have you to live on then if you dip in to the pension too early. Maybe if there's an inheritance you can try for full and final settlement.

Good luck with getting a job when it's possible. Meanwhile keep stoking that emergency fund so you have some wiggle room and don't need to get more debt.

Kittymumof4

Thank you @Brie, that's really helpful.

I haven't done any affordability checks or asked for credit agreements. What do I need to do to do this? What am I looking for in the credit agreements? If I do this though it's going to mean more time without paying anything. We're getting lots of letters and pretty much daily phonecalls from Wescot and some from PRA Group. Should I still contact them or wait until the affordability checks have been done?

My husband has a decent income but I only have carers allowance. I'm guessing the IVA would be in my husband's name though as the majority of the debt is in his name. I'm really not keen on an IVA though. So if I can only offer a small amount such as £20 - £30 off each debt p/m, can they say it's not enough? Which would force us into an IVA?

Also, when I do the new SOA, should I keep some money aside each month to keep adding to the emergency fund? Or should everything we have 'spare' be paying off the debts?

RAS

I'd emphasise that if you feel that your emergency fund is too low because you had to spend on emergency repairs, you need to build that fund before paying creditors.

If you get a letter before action come back immediately for help.

Meantime, more information on your financial back ground might help provide advice.

What led to the debt, what has changed between when you took on the debt and today, for example?

fatbelly

I agree with the above.

You haven't said explicitly but I assume you are homeowners. Let us know if not.

£300 per month on £75k of debt is heading towards a 20-year plan. On the one hand, that's a bit long. But on the other hand, the creditors should listen to settlement offers when you get that lump sum ( don't use pension money)

Kittymumof4

Thank you @RAS, what will happen though if we wait so we can build the emergency fund and keep ignoring the letters from Wescot and PRA Group?

The debt built up because I've been unable to work for the past few years. I have health issues and I'm also a carer to my disabled child. We're also supporting our young adult child through university as they're not entitled to full maintainance loan due to my husband's income. They also have a disability so are unable to do any regular work part time, though they do a few hours in a casual job when they can. Our other 2 children are independent adults and have moved out.

Our mortgage recently went up by £200 p/m when we came out of a fixed rate and it's quite a high mortgage, which we could have managed if I'd been working.

We were borrowing money to live on, then we became unable to meet payments so borrowed more and more to pay the monthly credit card bills.

Without the cc bills we can now afford to live. When I did the SOA last year, it was apparent why the debt had built up. We were paying 1k p/m in cc bills and only actually had around £500 p/m disposable income (less now with bills and mortgage having gone up) and so each month we were borrowing £500 to pay cc bills.

Kittymumof4

Thanks @fatbelly. Yes we are home owners and have quite a high mortgage.

Are settlement offers usually much less than the full amount of the debt? I have no idea what companies will usually accept.

RAS

Wait until creditor contact you and save into the emergency fund.

Settlement offers come way down the line, 3 years plus, so keep your payments within budget and don't contact the creditors.

Wait for them to approach you. Then offer a low percentage in response, if you even have the funds to pay it?

Rob5342

https://forums.moneysavingexpert.com/discussion/comment/81860901#Comment_81860901

It all depends on how old the debt is and how difficult the debt purchaser wants to be. Settling for 50% isn't uncommon, some people have managed to negotiate less and others end up paying more. PRA are notoriously difficult to deal with and often don't drop below 90% or 95%

Kittymumof4

Thanks both. So PRA and Wescot have both contacted us by letter, letting us know they've taken over the debt and asking us to contact them urgently, then further letters from Wescot 'confirmation of Address'. Should I continue to ignore these? I'm worried they will turn up at the house or take legal action?

Rob5342

Have they defaulted?