Debt Advice

missbohojangles

Sorry if I'm in the wrong place. I'm struggling to navigate the site.

Hi everyone,

I have autism and ADHD and have unfortunately got myself into a bit of a pickle with debt, mainly due to compulsive spending. This is something I will be getting therapy for over the coming months.

At the moment, I have three loans and three credit cards, with a total balance of around £26,000. None of the accounts are in arrears yet, but unfortunately my monthly outgoings are now higher than my income. Over the past couple of months, I have been using my savings to make sure all of my monthly direct debits are covered.

Going forward, I know I will need to speak to StepChange and arrange a Debt Management Plan (DMP) at some point. However, after doing some research, I just want to make sure I am approaching things correctly.

My main questions are:

• If I cancel the direct debits at the end of this month and stop making payments, roughly how long would it take for the six accounts to default?
• Would it make sense to wait for the accounts to default before applying for Breathing Space?
• Could I use this period to give myself some additional time to build up my savings before setting up a DMP with StepChange?
• Is there any reason why this approach would be a bad idea or could cause me problems later on?

The reason I ask is that I would like to save as much money as possible in the meantime to help replenish my savings. I appreciate that this may not be the best approach, which is why I would really appreciate advice from anyone who has been through something similar or who understands how all this works.

My credit score has always been good, but I am prepared for it to take a hit for six years. In fact, not being able to take out any more credit while I go through therapy and work on my spending habits can only be a good thing for me.

I appreciate any advice or experiences anyone can share.

Thank you!

Brie

• If I cancel the direct debits at the end of this month and stop making payments, roughly how long would it take for the six accounts to default?
• Would it make sense to wait for the accounts to default before applying for Breathing Space?
• Could I use this period to give myself some additional time to build up my savings before setting up a DMP with StepChange?
• Is there any reason why this approach would be a bad idea or could cause me problems later on?

Yes cancel the DDs. How long it takes to default depends on the creditor - might be 3 months, might be longer. You have to be patient and wait for the default before you do anything further with that account.

Don't apply for Breathing Space. That only lasts 60 days normally and can't be repeated ad hoc. If you have bailiffs banging on your door (almost infinitely unlikely) then do apply but creditors are only going to be going to those extremes if you completely do not engage with them for a very long time.

Yes - save all that money in your emergency fund while waiting for the defaults and definitely don't set up a DMP before the defaults have happened. And you don't have to use StepChange. You might use them to get stuff organised and then DIY the DMP. Or you might decide another solution is better for you. Have you considered a debt relief order? Have a look at the info on DebtCamel as it is easy reading.

Debt solutions - what is your best option?

Well as you already know your credit history will be a bit of a mess for a while but that will heal in time. Don't worry about the credit score itself - no one sees that except you.

missbohojangles

Thank you for your response.

To be honest, StepChange is the organisation that seems to be mentioned everywhere I look, which is why I specifically mentioned them.

I don't believe I would be eligible for a DRO because, although I am now on long-term disability benefits due to a health condition, I would still have enough disposable income after paying all of my essential bills and health costs to make payments towards a DMP.

At the moment, my debt repayments are around £750 per month, whereas realistically I could afford to pay somewhere between £200 and £250 per month. This would obviously mean that it would take longer to clear my debts, but I would be able to make regular payments and eventually pay them off.

I would only be considering using Breathing Space once everything had gone into default, with the intention of using the two-month period to get a DMP set up. Would Breathing Space not be necessary in my circumstances, then?

Thanks again for your advice.

Brie

Good to know you've considered the alternatives.

I don't think BS should be considered at this point. If you have things under control, things default and you start paying there is no reason to need this. But it's a case of wait and see.

Given your reason for being in debt have you considered challenging the creditors on affordability?? Look at point 10 in the link below. It's possible that the creditor should not have granted you any credit or as high a limit as you received. If they agree they made a mistake there's a chance of interest being credited back or the debt being adjusted in your favour.

DFW Sticky-Provit/Statute Barred Letters, Defaults, Mental Health Help and Guidance, all here. — MoneySavingExpert Forum

Likewise look at point 9 about mental health. As you are in therapy you should be able to get your health professional to complete a Debt and Mental Health Evidence Form. Again these may see debts adjusted in your favour if the creditor is convinced you didn't properly understand the situation you were creating. fyi - there can be no charge for completing the form if you are in England. Wales and Scotland have different rules I believe but your therapist can discuss this with you. Essentially if it's going to help you recover health equilibrium then it's in your therapist interest to assist.

Brie

Oh and yes, StepChange is an excellent organisation. Unfortunately some of their operatives have been reported to be a bit overly eager to get DMPs set up and don't wait for defaults to happen. This can have a negative impact on how your credit history rebounds so it's important to let things take their course, however slowly. Hence the need for you to be patient.

missbohojangles

My debt has been caused by my mental health conditions, although the lenders weren't aware of my mental health at the time. Zopa, in particular, do know that I have autism, as I have both a loan and a credit card with them and informed them that I have communication difficulties over the phone.

The only lender that I feel really pushed additional credit towards me was Aqua. I initially used the credit card for my shopping and would pay the balance off in full at the end of every month. Over time, they increased my credit limit from £900 to £3,200 and then repeatedly emailed me offering the option of taking a money transfer.

The card is still at 0% interest until November, but once that interest-free period ends, the interest will start to be charged, and the rate will be 49.9%. I've only been making the minimum payments so far.

That said, Aqua weren't aware of my mental health conditions either, although they would have been aware that I already had other credit cards and loans at the time.

I'll have a look at the link you provided, thank you, and I'll also speak to my former therapist. Unfortunately, I'm currently having to wait around six months before I can access further therapy with the community mental health team.

Don't worry, I'm happy to be patient. The longer it takes, the more I can save in the meantime, so it makes sense to me really. Thanks again.

fatbelly

Do you know that PIP/DLA is effectively disregarded for a DRO calculation? Would you still have >75 surplus?

missbohojangles

Hi, thank you for your response.

Yes, I would still be over the threshold for a DRO until my transitional protection runs out. Unfortunately, that probably won't be for at least another two years, depending on how much my rent and other bills increase each April.

I've been receiving Carer's Allowance for several years, and I was also receiving the Severe Disability Premium when I was previously on Income Support, which is why I receive transitional protection now.

Someone mentioned that I could go onto a DMP in the meantime and then, once my transitional protection ends and I become eligible, cancel the DMP and apply for a DRO. I have no idea how accurate that is, though.

ManyWays

Do you know how much the "transitional protection" is worth a month?
Can I ask if all your income is from benefits?

missbohojangles

Hi, yes, all of my income is from benefits. I receive Universal Credit, from which my rent and Carer's Allowance are taken into account. My transitional protection is currently £227.49 per month.

Universal Credit pays my rent directly because the council requested this, as they are aware that both my son and I are neurodiverse.

I receive Carer's Allowance weekly, as well as PIP at the enhanced rate for daily living and the standard rate for mobility. The mobility component is mainly used for taxis to appointments, while the daily living component goes towards things like meal deliveries, support when I need to go outside, and a cleaner when I need one.

sourcrates

There is no reason why you cannot start debt management, and then apply for a DRO if or when your circumstances change to fit the criteria.

Stepchange is the main debt charity in the UK, and is creditor funded, which is why it is widely advertised by both debt advice boards and the credit industry itself.

You are better off letting everything default first, there will be letters and calls chasing payment, and it can be scary the first time its experienced, so keep in mind, nothing of a legal nature can happen until the debt defaults, as technically you won`t have broken the agreement until that point, once defaulted lenders all usually follow a similar process of debt collection or sale of the debt, you will be written too regardless of what happens.

It would be rare for any legal action at this point, but it could happen, if so there are ways to avoid it by making immediate repayment arrangements, but try not to focus on what could happen, stick to what does happen, the vast majority of people don`t experience any issues.