Super scared about my debt options

Blueelle

Hello,

First time posting, have been reading these forums late into the night to try and work out what I’m going to do.

I have about 38,000 worth of debt which has been accumulating for about 10 years. I’ve never missed a payment on my 1 loan and 4 credit cards but because I can’t access any more credit, I am paying large APRs on all of my credit cards. £23,000 worth of credit card debt at an average of 24.9% so as you can imagine the min payment basically just covers the interest and not much else.

I can’t carry on spending all my wages on debt and then adding to the debt each month on the one credit card I have that isn’t currently maxed out.

I really want to use StepChange to try and help me buy can see the advice everywhere is to default first. I’m just so scared about doing this as I’m worried they will refuse my part payments after the default and go for court action. I’ve done a budget and I could afford to pay my creditors about £80 each as I could afford about £400 to creditors a month on my budget.

I don’t want to damage my credit rating for longer than the inevitable 6 years but I’m so scared.

I don’t know if anyone has any experience with the following creditors, I have,

M&S loan, Virgin CC, NatWest CC, MBNA CC, Tesco CC.

The other thing is I have paid all there interest on my loan already and am just paying the money borrowed now - should I just continue this payment and go self managed by defaulting on the credit cards? That would mean I could only pay them £50 each a month. Would they accept that, I should be able to make increases after the first couple of years.

Will the creditors listen to me if I ask them to set a default asap and then I can start paying the payment plan? Can they band together to take action?

I’m so scared about court action, has anyone experienced anything similar. I just don’t know what to do my anxiety is through the roof and I can’t sleep at night.

Any help would be greatly appreciated.

sourcrates

Hi and welcome.

Your anxiety is getting the better of you, you appear to be way overthinking what will happen here.

You pay creditors whatever your budget allows in debt management, there is no acceptance of payments, they get what you pay them, as everyone has a different story, this is why a DMP is so flexible, it bends and twists to fit individual circumstances.

If your paying what your budget says you can afford, why would a creditor take legal action, they won`t get anymore out of you will they, courts/lenders all use the same budget you provide, so there would be no benefit to them doing that.

You really need to read some of the sticky posts on debt management just to find out how it all works, how easy it is to set up, and how your lenders will take whatever you propose, according to your circumstances.

Once its all set up, it runs very smoothly just as per normal, and life goes on, the only difference is that now your payments are affordable, and you won`t be struggling for money every month.

Your lenders are all mainstream ones, so no massive issues there, you will find they tend to use debt collectors, and may sell your debt on to a 3rd party, legal action is last resort and only becomes a real prospect much, much later in the debt cycle.

There is a process of non payment that preludes defaulting an account, it takes as long as it takes basically, but I will let others advise you on the best way forward.

Gonk1967

If I were you, I would look into an Individual Voluntary Arrangement…

Options for dealing with your debts: Individual Voluntary Arrangements - GOV.UK

sourcrates

https://forums.moneysavingexpert.com/discussion/comment/81957364#Comment_81957364

Not a good candidate for an IVA, not enough debt, and we don`t know if the OP is a homeowner or not.

IVA not advisable for debts under 50k, who are non homeowners.

fatbelly

If you've been reading here you will have seen that these creditors hardly ever take court action. In fact you'll struggle to find a single thread where that has happened. So forget that train of thought.

If making the contractual payments on these nonpriority debts is causing hardship then you stop paying. It is that simple. They run through their standard letters etc and you get a default. No asking them anything or telling them anything.

Then you are freed from the interest that you want to be rid of. £400 per month repays 38k in 95 months. That's a long time and you may want to look at other options that would take less time.

Give us a soa and we'll help you work through it

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

Rob5342

There really is nothing to worry about. Most of the time if an original lender doesn't like what you are paying they will just sell the debt on. Debts gets sold on for a small fraction of their value so the companies involved can make a nice little profit just by letting payments that seem small to you roll in, they have no need to chase every single debt down for its full value. They could take legal action if they wished but repayments would only be set at a level you can afford, if you are already paying what you can afford then legal action would be a waste of time for them so most of the time they don't bother, and if they did then you'd just end up paying what you are anyway so other than having a ccj registered against you it makes no practical difference. Claims are usually dealt with my post or online rather than attending court.

Legal action gets thrown around a lot to try and scare people into paying, but if you are paying what you can afford then it's nothing to be concerned about.

I've been on a DMP for the last 5 years, I've just been paying what I can afford with no complications anywhere.

Blueelle

Thank you so so much to everyone that’s taken the time to comment you’ve already made me feel a lot better.
I am a homeowner so that is why I am so worried about court.

I know to default first is the most sensible option but having to deal with the scary letters is inevitably going to make my anxiety worse, which is why I am tempted to use StepChange so all creditors know what I am doing. Does anyone know the chances of them defaulting the accounts within the first 6 months, or will they just use AP markers that mess up my credit for longer? Can StepChange make them mark as default?

Once my daughter is at school in about 18 months time, I can work more and increase my monthly payments to hopefully around double so should speed it up.

I think my fear at the moment is the no payment/defaulting first option. I’m worried about this, and will also end up having all the extra interest until they default. Where as I’ve heard if I enter a payment plan straight away they will stop all interest?

Altior

I wrote about this on another thread, but the interest is being added anyway. The difference if you stop paying is that you will have that money that would have gone to lenders, instead of the lenders. So the added cost in reality is the default fees and some compounded interest, which is minimal in the bigger picture. Once you have achieved defaults, the debts are effectively interest free.

RAS

Let's see the SOA and maybe consider options.

One important thing to note is that interest will rack up before the default, but stops thereafter. And there's a good chance the debt will be sold on at a major discount.

Once your daughter is in school, save some money each month into a fighting fund and you should be able to settle the debts for a fraction of the original amounts after a few years.

Grumpelstiltskin

I think the problem some newbies have is they think if they stop payment someone will be waving the threat of a CCJ within 4 or 5 weeks.

They don't realize a) what happens in which order and when and b) how slow debt collection is.

OK You will get threats sent by text, E Mails etc. but they are just empty threats sent with the hope they will frighten you into paying, you just ignore them.

Rob5342

https://forums.moneysavingexpert.com/discussion/comment/81957644#Comment_81957644

That's what I used to think, after years of pulling any trick I could think of to meet the minimum payment I mistakenly thought that I'd get someone knocking on my door within a week or two of missing a payment wanting payment immediately.

The reality of course is quite different, I stopped paying my Virgin card to try and get a default but they didn't give me one for 18 months, and I told other creditors that I'd be reducing my payments and they wanted to check that the reduced payments would be affordable. You really do hold much more power than you think you do, and creditors know they don't have a lot of power and have to resort to scare tactics as a result.