Almost £14,000 in debt and unsure what to do

Rob5342

I think everyone just wants to make sure that you are aware of everything involved, but it can be overwhelming when it all comes at once.

A DMP simply means that you work out a monthly amount you can pay towards your debts and pay that. You can do that yourself or get Stepchamge or PayPlan to do it for you and just pay them that amount each month.

As you will be paying less than the minimum amounts you will get negative markers on your credit report. You can minimise the impact of those by stopping paying until the accounts default, and then making the payments you can afford.

gwynlas

I would urge you to take the advice given here rather than anywhere else as it is often based on lived experience,

From what you have written I get the impression that you were considering taking out a loan to consolidate debts and reduce monthly outgoings. Whilst this would appear to be an obvious route it only works for those who at the same time cut up their credit cards and don't apply for any new ones.

For the sake of your physical and mental health you cannot keep on working such long hours so set up a realistic budget to allow yourself a decent quality of life and pay off your debts interest free.

Altior

In the perfect world (which it's not!), consolidation only works if the interest on the consolidated debt is significantly lower than the original debt. I'm not as opposed to consolidation as some might be on here (I do appreciate why they are), but if the refinanced debt is attracting a double digit interest rate, then it's making the situation worse. In my view the OP has an interest rate problem, rather than a debt problem per se, since there are no low rate options available to them, a DMP is the compelling option.

Of course, they do need to address ongoing realistic budgets etc so that they don't return to borrowing again at some point in the future. Keeping to good practices like an emergency fund and planning for big spends. But that can be tackled further into the process. In the immediate term it should be necessary spending only, and compiling that emergency fund in my view.

ManyWays

I think I misunderstood "she does earn more", sorry.

We only see what people say here. And many people don't give the full story, usually not deliberately but because they just said what they thought mattered.

So please forgive questions from people here that may sound irrelevant, intrusive or suggesting you do not have a good relationship with your wife. They were well meant and aimed at seeing if there was something very important that may be missing.

QrizB

OP I don't want to cause you more stress this morning but are you sure you're being paid correctly?

For someone in their late 20s, National Minimum Wage is £12.71 an hour. If you're working 60 hours a week you should be taking home ~£2600 a month, even allowing for a Plan 2 student loan and auto-enrollment pension contributions.

If you're really only being paid £2068, have you checked that your employer isn't short-changing you?

(This assumes you're employed; you might be self-employed, or a gig-economy worker, or a share fisherman or similar, where NMW doesn't apply.)

Grumpelstiltskin

OP If you are still looking at your thread can I suggest you read this section.

Income & Budgeting Guides | MoneySavingExpert

I don't think you fully understand debt but there should be some help in that section.

RAS

What we suggest is that you turn the way you manage your money completely on it's head. Because your debt has already increased for 6k to £14k and will get worse if you don't change your plan.

It'll affect your credit record for a bit over 6 years but you'll be able to pay for everything other than your debts. And you'll be able to afford to live a better life. And to put aside money for things like the MOT and serious repairs.

You'll then pay what you have left over towards what you owe.

It's important to stop paying now so that the debts default as soon as possible, and your credit record recovers as soon as possible.

You need a new basic bank account, if you owe money to the one into which your salary is currently paid or any bank in the same group. That prevents the bank using you salary to pay your salary to debts when you need to pay rent.

Nalf03

The more I think about it the more a DMP makes sense but I'm scared. If I stop paying Can't that lead to serious legal action? Could that affect our ability to keep renting? That sounds like ot could seriously impact my life.

Also, I dont think I can move all of my details except my debt to a different bank account. The account that the money is coming out of has an overdraft that I cant get rid of (I tried and they said i couldn't afford to reduce or remove it) so the payments will still come out until I reach the overdraft limit.

Nalf03

https://forums.moneysavingexpert.com/discussion/comment/82165105#Comment_82165105

I'm a teacher. I'm working long hours, that doesn't mean I'm getting paid for them all.

That's my salary, I'm doing some extra tutoring here and there but that's not been consistent.

Grumpelstiltskin

https://forums.moneysavingexpert.com/discussion/comment/82166926#Comment_82166926

OK The overdraft just becomes an other unsecured debt, you move everything from that account all incomings and all vital outgoings but you cancel all the unsecured debt payments.

You must understand there are thousands of people in that position every month and nothing terrible happens to them. The bank is not interested in you as a person you are just a number on a computer which is programmed to do certain things if you don't pay. What things? texts, E Mails phone calls all of which can be blocked and ignored and a few things that have to be sent by snail mail all of which you should look at.

You will find debt collection moves slowly and forget court action, only a very small percentage of debts end up in court and then only after a long period of time.

The main thing you have to remember is you are in charge not your creditors, don't contact them at the moment and get yourself in a position where you have the back up of an emergency fund and a liveable budget.