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Struggling with debt? Ask a stepchange debt adviser a question

edited 29 September at 3:38PM in Debt-Free Wannabe
255 replies 37.3K views
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  • Hi, I'm currently helping a friend sort out her finances. We've done her income/expenditure and she's massively overspending. I am going to work with her on cutting down, meal planning, swapping phone providers etc. Basic 'belt tightening'.

    She has around £9000 on credit cards and is now frequently going over her arranged overdraft limit so is getting hit with fees.

    I have suggested she diverts the money she is currently putting into a savings account towards paying down the credit cards. I showed her the repayment calculator which showed her that if she did so, she could reduce the repayment time from 19 years and £20000 interest to around 3 years a a couple of grand in interest. The cards are those 'rebuild your credit score' cards. However, her credit score has fallen again because she is maxed out financially.

    I don't know the technical term, but she has been paying in for years to one of those saving schemes where you get your money plus some kind of dividend on maturity. If she misses a single payment she gets no dividend, and if she cashes in early she gets no dividend. She might also be penalised, but I don't know that for sure.

    If there's enough in that saving scheme to wipe out her cards and overdraft, would it be worth her cashing it in now? Of course, only if the final dividend would be less than the interest she will pay on her card debt and overdraft fees. She could then hopefully rebuild her credit rating sensibly so that she could apply for a cheaper credit card or loan if needed for emergencies in a couple of years' time. I think she would be able to cut down and be more sensible because she's had a real shock after seeing the actual figures. Also, she is going to give her credit cards to me so she can't impulse buy!

    Should I suggest this to her or is it a bad idea? She trusts me because I have never been in debt (I have a muscly 'delayed-gratification-think-it through gland!! ) in spite of being on a low income due to good budgeting skills. But I'm not a debt counsellor so I don't want to advise the wrong thing!

    Thank you for reading.
  • edited 21 August 2019 at 6:57AM
    HelsbelsgemHelsbelsgem Forumite
    2 posts
    edited 21 August 2019 at 6:57AM
    Hi

    Grateful to see this thread. I’m helping my brother sort out his debts. He’s been chronically ill the last 3 years, and lost his job as a GP. He told us in January that he hadn’t contacted or paid HMRC for 6 years. Since then I’ve been working with a tax accountant to fill in the missing tax returns, reduce his penalties etc. I have lasting power of attorney to deal with HMRC on his behalf. Just heard today that HMRC has reduced his bill from £52k to £22k, which is good news, but interest will accrue until it is paid. Wondering about the next step
    - My brother is too ill to work and most likely will not work again so there is no way of paying back via a regular amount
    - My brother’s wife works and supports him and their son but everything goes on the mortgage etc
    - They have a house, but I would hate for them to sell to settle up the debt as the illness has been hard on my sister in law and nephew
    - My Dad has some savings but not a lot, and I have no savings but work and haven a regular income

    My next thought is to get advice and approach a debt advice charity, hence this message. I also thought I’d approach HMRC direct. Any advice gratefully received, I don’t know who is liable for the debt and whether we should try and pay it as a family. Many thanks
  • Hi

    Thanks for your post, sorry we’ve not bee able to respond sooner.

    If someone can’t afford their debt repayments, then cancelling payments into a sharesave scheme is usually a good idea. It should be possible to withdraw the money deposited into the scheme and use this to clear/reduce the debts starting with priorities such as rent, mortgage and utility arrears if applicable.

    There are some situations where we’d suggest continuing with the sharesave scheme if for example it’s due to end within 12 months.

    If cashing in the savings would clear the debt now, this may be a better option for your friend. She’d be debt free and not have to worry about dealing with creditors and juggling credit card payments.

    For more specific advice on the best way forward I’d recommend your friend use our online Debt Remedy tool before deciding. Here’s the link.

    I hope this helps,

    Linsi
    Smileyt wrote: »
    Hi, I'm currently helping a friend sort out her finances. We've done her income/expenditure and she's massively overspending. I am going to work with her on cutting down, meal planning, swapping phone providers etc. Basic 'belt tightening'.

    She has around £9000 on credit cards and is now frequently going over her arranged overdraft limit so is getting hit with fees.

    I have suggested she diverts the money she is currently putting into a savings account towards paying down the credit cards. I showed her the repayment calculator which showed her that if she did so, she could reduce the repayment time from 19 years and £20000 interest to around 3 years a a couple of grand in interest. The cards are those 'rebuild your credit score' cards. However, her credit score has fallen again because she is maxed out financially.

    I don't know the technical term, but she has been paying in for years to one of those saving schemes where you get your money plus some kind of dividend on maturity. If she misses a single payment she gets no dividend, and if she cashes in early she gets no dividend. She might also be penalised, but I don't know that for sure.

    If there's enough in that saving scheme to wipe out her cards and overdraft, would it be worth her cashing it in now? Of course, only if the final dividend would be less than the interest she will pay on her card debt and overdraft fees. She could then hopefully rebuild her credit rating sensibly so that she could apply for a cheaper credit card or loan if needed for emergencies in a couple of years' time. I think she would be able to cut down and be more sensible because she's had a real shock after seeing the actual figures. Also, she is going to give her credit cards to me so she can't impulse buy!

    Should I suggest this to her or is it a bad idea? She trusts me because I have never been in debt (I have a muscly 'delayed-gratification-think-it through gland!! ) in spite of being on a low income due to good budgeting skills. But I'm not a debt counsellor so I don't want to advise the wrong thing!

    Thank you for reading.
  • Hi

    Welcome to the forum.

    I’m sorry to hear your brother is unwell and unable to work. From what you’ve explained I do think getting in touch with a debt advice charity such as ours would be a good idea.

    You can find our number and opening times here.

    We’ll start by creating a budget for your brother taking the household income and living costs into account. This will then help us tailor our advice and recommend the best solution to help with this debt and any others your brother may have.

    If you speak to HMRC before us, it’s worth letting them know your brother is in financially difficulty but seeking advice from StepChange. It sounds like your brother is solely liable for this debt, but you can check with HMRC if you’re unsure.

    We hope to hear from you soon.

    Linsi
    Hi

    Grateful to see this thread. I’m helping my brother sort out his debts. He’s been chronically ill the last 3 years, and lost his job as a GP. He told us in January that he hadn’t contacted or paid HMRC for 6 years. Since then I’ve been working with a tax accountant to fill in the missing tax returns, reduce his penalties etc. I have lasting power of attorney to deal with HMRC on his behalf. Just heard today that HMRC has reduced his bill from £52k to £22k, which is good news, but interest will accrue until it is paid. Wondering about the next step
    - My brother is too ill to work and most likely will not work again so there is no way of paying back via a regular amount
    - My brother’s wife works and supports him and their son but everything goes on the mortgage etc
    - They have a house, but I would hate for them to sell to settle up the debt as the illness has been hard on my sister in law and nephew
    - My Dad has some savings but not a lot, and I have no savings but work and haven a regular income

    My next thought is to get advice and approach a debt advice charity, hence this message. I also thought I’d approach HMRC direct. Any advice gratefully received, I don’t know who is liable for the debt and whether we should try and pay it as a family. Many thanks
  • Is a debt from the UAE enforceable in Scotland by a dca from england who do not own thd debt and are meerly acting on their behalf?
  • Important update! We have recently reviewed and updated our Forum Rules and FAQs. Please take the time to familiarise yourself with the latest version.
  • bestfootiebestfootie Forumite
    88 posts
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    Hi

    Urgent reply much appreciated here.

    I have a friend who has spoken in confidence to a debt relief charity. He has a strategy and clear structure of what he will do.

    My friend tells me he has circa £3k in overdraft (at the limit of his overdraft). Before writing to his creditors as the first step, should he make a money transfer to clear the overdraft or a money transfer to clear the overdraft + a sum of money to put the bank account in credit?

    The reason he asks is that once he is in discussions with credit card companies re paying back debts to them, he assumes they'll freeze the credit cards and he will not be able to spend on them any further. At least if he makes the money transfer he can just spend on essentials from his bank account?

    Thoughts please so I can advise!

    Thanks

    K
  • bestfootiebestfootie Forumite
    88 posts
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    why on earth don't any of these credit card companies have an email address to send documents to?! It's like they're trying to make life as difficult as possible for people in debt!
  • bestfootiebestfootie Forumite
    88 posts
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    Hi...

    Could someone please come back to me?

    Thanks!
  • Hi

    I’m sorry we’ve not been able to reply sooner but welcome to the forum.

    A creditor from abroad can contact you about a debt and accept payments, either directly or using UK-based debt collection agency (DCA). If you’re living in Scotland a DCA based in the England can chase you for payments.

    To enforce the debt through the courts the creditor would need to obtain a court judgement (the equivalent of a CCJ or decree) in the country the debt originated from first.

    They’d then have to start a second claim in the appropriate UK jurisdiction where you live and get a UK judgement before they could enforce the debt.

    I hope this helps,

    Linsi
    Shug76 wrote: »
    Is a debt from the UAE enforceable in Scotland by a dca from england who do not own thd debt and are meerly acting on their behalf?
  • Hi there

    I’m sorry we’ve not been able to reply sooner, we’re very busy at the moment. If you ever need urgent help, please call us on the number shown on our website.

    We wouldn’t normally recommend paying one debt in full if your friend can’t do this with all their debts. This could be viewed a preferential treatment and other creditors may be less likely to freeze interest and charges and be less likely to accept a reduced payment if they’re not treated fairly.

    The bank account advice we give when a client has debts with their bank does differ depending on the recommended solution, but your friend can find general information about changing banks on our website.

    By opening a new account your friends’ income will be safe, they’ll be able to cover their essential living costs and make fair and affordable payments to all their debts.

    If you don’t have the email addresses for the credit card providers, I'd recommend looking at their websites. Most have a ‘contact us’ page which usually has an email address or an online form you can fill in and submit to them.

    I hope this helps,

    Linsi
    bestfootie wrote: »
    Hi

    Urgent reply much appreciated here.

    I have a friend who has spoken in confidence to a debt relief charity. He has a strategy and clear structure of what he will do.

    My friend tells me he has circa £3k in overdraft (at the limit of his overdraft). Before writing to his creditors as the first step, should he make a money transfer to clear the overdraft or a money transfer to clear the overdraft + a sum of money to put the bank account in credit?

    The reason he asks is that once he is in discussions with credit card companies re paying back debts to them, he assumes they'll freeze the credit cards and he will not be able to spend on them any further. At least if he makes the money transfer he can just spend on essentials from his bank account?

    Thoughts please so I can advise!

    Thanks

    K
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