My Big Debt Dilemma - What Would You Do?


J

johnwho2000

I currently have unsecured debts of approx £24,000. I received default
notices on these loan/credit card debts 18 months ago and a year ago
they were assigned to debt recovery agents. Apparently the debts have
not been sold on, the agencies are working on behalf of the original
creditors.

I have been paying £2.00 per month token payments on each debt for the
last year or so. I have had some serious ongoing health issues and
currently my only source of income is incapacity benefit.

We also have a large mortgage and that has been changed to an interest
only mortgage with a new mortgage company to reduce the monthly
payments. It means that we are effectively just renting the house now
but at least we get to stay in our own home and as the value of the
property increases so does our equity stake in it, should we ever
sell. The mortgage is paid from my wife's income.

My mother has offered to help us out financially. On that basis I have
made full and final settlement offers to my creditors of just over 30
per cent of the outstanding debts owed on a pro-rata basis. One
creditor (that accounts for over two thirds of my debts) has said they
would accept a 50 per cent settlement figure.

Now here is my dilemma. Should I use the lump sum to pay off these
unsecured debts, bearing in mind no interest is being added. I have
had nothing in writing to that effect, but I was told verbally that
interest stopped when I went into default and certainly the stated
balance has been reducing slightly with my very modest £2.00 per month
payments - OR - should I use any cash to reduce my mortgage balance as
we are obviously still being charged interest on that?

My fear is that if my circumstances change and I am back at work then
this creditor will expect to get all the money I owe them and I will
lose the opportunity to settle at 50 per cent.

All advice would be very gratefully received. Thanks.
 
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M

Mark Goodge

I currently have unsecured debts of approx £24,000. I received default
notices on these loan/credit card debts 18 months ago and a year ago
they were assigned to debt recovery agents. Apparently the debts have
not been sold on, the agencies are working on behalf of the original
creditors.

I have been paying £2.00 per month token payments on each debt for the
last year or so. I have had some serious ongoing health issues and
currently my only source of income is incapacity benefit.

We also have a large mortgage and that has been changed to an interest
only mortgage with a new mortgage company to reduce the monthly
payments. It means that we are effectively just renting the house now
but at least we get to stay in our own home and as the value of the
property increases so does our equity stake in it, should we ever
sell. The mortgage is paid from my wife's income.

My mother has offered to help us out financially. On that basis I have
made full and final settlement offers to my creditors of just over 30
per cent of the outstanding debts owed on a pro-rata basis. One
creditor (that accounts for over two thirds of my debts) has said they
would accept a 50 per cent settlement figure.
Stick at it; they'll probably accept 30% if you make it clear you
can't go any higher.
Now here is my dilemma. Should I use the lump sum to pay off these
unsecured debts, bearing in mind no interest is being added. I have
had nothing in writing to that effect, but I was told verbally that
interest stopped when I went into default and certainly the stated
balance has been reducing slightly with my very modest £2.00 per month
payments - OR - should I use any cash to reduce my mortgage balance as
we are obviously still being charged interest on that?
Pay off the debts (on whatever reduced lump sum agreement you can
negotiate). As long as you owe them it's affecting your credit record,
while the mortgage is fine as it is from that perspective. And, as you
say, the mortgage is covered by the equity in the house, so if the
worst came to the worst you could pay it off by selling up.
My fear is that if my circumstances change and I am back at work then
this creditor will expect to get all the money I owe them and I will
lose the opportunity to settle at 50 per cent.
May sure you get any offers of lump sum settlments in writing. Don't
*ever* make any payments at all on the basis of a phone conversation.
Once it's been offered in writing, they can't go back on it so long as
you make the lump sum payment within the agreed terms.

Mark
 
A

Adrian Boliston

I currently have unsecured debts of approx £24,000. I received default
notices on these loan/credit card debts 18 months ago and a year ago
they were assigned to debt recovery agents.....

I'd say that a good source of debt related advice can be found on
www.fool.co.uk discussion boards as there seem to be a lot of people there
who have got into debt and are starting to see the light at the end of the
tunnel.

cheers adrian www.boliston.co.uk
 
A

Alan

I currently have unsecured debts of approx £24,000. I received default
notices on these loan/credit card debts 18 months ago and a year ago
they were assigned to debt recovery agents. Apparently the debts have
not been sold on, the agencies are working on behalf of the original
creditors.

I have been paying £2.00 per month token payments on each debt for the
last year or so. I have had some serious ongoing health issues and
currently my only source of income is incapacity benefit.

We also have a large mortgage and that has been changed to an interest
only mortgage with a new mortgage company to reduce the monthly
payments. It means that we are effectively just renting the house now
but at least we get to stay in our own home and as the value of the
property increases so does our equity stake in it, should we ever
sell. The mortgage is paid from my wife's income.

My mother has offered to help us out financially. On that basis I have
made full and final settlement offers to my creditors of just over 30
per cent of the outstanding debts owed on a pro-rata basis. One
creditor (that accounts for over two thirds of my debts) has said they
would accept a 50 per cent settlement figure.

Now here is my dilemma. Should I use the lump sum to pay off these
unsecured debts, bearing in mind no interest is being added. I have
had nothing in writing to that effect, but I was told verbally that
interest stopped when I went into default and certainly the stated
balance has been reducing slightly with my very modest £2.00 per month
payments - OR - should I use any cash to reduce my mortgage balance as
we are obviously still being charged interest on that?

My fear is that if my circumstances change and I am back at work then
this creditor will expect to get all the money I owe them and I will
lose the opportunity to settle at 50 per cent.

All advice would be very gratefully received. Thanks.
We could do with the broader picture i.e. more information

Its not clear whether these debts are in your sole name or joint with
your wife. Likewise is your home jointly owned or in a sole name?

Have legal proceedings been instituted for recovery of these debts and
have any County Court Judgements been obtained ?

Might be worth getting copies of your credit record from here
http://www.experian.co.uk/consumer/orderPaperReport.html - the £2
version to see what is actually registered against you (and or wife)

My first thought was that if there is any equity in your property I am
surprised that your creditors have not explored obtaining a money
judgement against you followed up by a charging order against your
property to secure their debt(essentially an additional charge behind
the mortgagor).

Theoretically I guess they could then force a sale (subject to court
sanction) but in reality especially if the equity is small/children in
residence etc. they often write off the debt in their books and wait and
wait ......

This comes as a nasty shock to the householder many years down the line
when they eventually sell their property and find that they owe a large
amount of money.

As another poster has stated make sure all agreements are in writing
signed by the creditor and include the term "In full and final
settlement" specifying the full debt amount and amount accepted.

Regards

A
 
J

JaffaB

Go to the Citizens Advice. Take all the details of your debts with
you, the letters from your creditors (or their agents), your
agreements with them, your property details, your benefits package
etc.

They will sit down with you, go over the figures and help you decide
your best option. They will even assist you in dealing with your
creditors.

DO NOT phone or contact any of the debt management companies on the
radio or TV, they will only make matters worse, and will charge you a
massive administration fee for telling you things that the CAB will
tell you for free.

The majority of work that the CAB does now is related to personal
debt, so they are used to this. Only when you have all the facts
based on all the detailed figures can anybody help you.

Jaffa
 
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D

Daytona

I currently have unsecured debts of approx £24,000. I received default
notices on these loan/credit card debts 18 months ago and a year ago
they were assigned to debt recovery agents.
As Adrian mentioned, there is an excellent forum for debt issues here
- <URL:http://boards.fool.co.uk/Messages.asp?bid=50079> - TMF dealing
With Debt board. Start here
<URL:http://boards.fool.co.uk/Message.asp?mid=10194975>

Many of the people have been there, done that, & got the T-shirt, so
the advice is from people who have a detailed knowledge of the
subject.

Good luck with it :) !

Daytona
 
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