Topic: best plan of action

[trinty68]

My wife has left me and now I am struggling with exsessive debt. I have a 5000 overdraft, 8000 loan and 3000 credit card all with the same bank. I am worried that they will grab all my wages when I can't pay my debts so my direct debits will not get paid. I have not defaulted yet and plan to talk to my bank on Thursday. My payments are about 300 a month in total and I can only afford about 30, should I trust my bank as I worry about the offset rule or should I move to another account? I have just opened one while my credit rating is still good so I could move.
I plan on a dmp and I am seeing a debt specialist at the CAB but not until 2 July.
Any advice is most welcome.

[James Falla]

Hi there Trinity68
If you are struggling to pay the debts you owe to your bank then the first thing to do is always open up a new account with a different bank asap. Start using the new account from now on. This will ensure you remain in control of any funds you have. The setoff rule cannot be applied cross banks.
If you can only afford to pay about £30 towards your debts your options are limited. The DMP option is not ideal as it will take you many years to repay the debt. Given your total debts are more than £15,000 I would think that bankruptcy ultimately might be your best option.
Please let us know how you get on with the CAB. I would be really interested in hearing their view.
 

[trinty68]

Hi,
Thanks for the reply, I spoke with my bank yesterday and they were really helpful. They agreed that I could not not afford to continue with my debt problem and that debt management was probably my best option. They have frozen my credit card and loan for 30 days and are allowing me to continue using my overdraft until I have been to CAB. They have given me time and even advised me to open a bak account else where and move alll my direct debits and pay.
So I see Cab on 2nd July, I think bankruptcy too but I have a car loan which I need to get to work as I work shifts so what could I do there?

[James Falla]

Hi trinty68, no problem at all.
Great news that your bank has been so understanding. This is really positive from them. Have you opened up a new account yet? If not I recommend a simple card cash account with either Co-Op or Barclays. If you do then decide to go bankrupt down the line you will be able to keep your account open with them and not have to change it again.....
In terms of the car loan is this an HP? If so and you are considering bankruptcy you first need to ask them if it would cause them an issue given you kept up the payments. If not then often you will be able to do that and keep the car even if you go bankrupt as long as the payments are reasonable in the context of your other expenditures.

[trinty68]

Wow, I think I could justify paying the loan as I had worked it into my budget sheet as a Priory debt and I opened a private account with NAT WEST wich comes with a debit card.
My other concern is my joint mortgage, if it was just me and my wife I would demand it goes on the market but it's my kids family home, I can't go bankcrupt and still have a share in the property even if my wife is paying the mortgage. I am prepared to sign it over if she can get the bank to agree, my share of the equity is around 25000 which would allow me to pay off my debts, maybe I could do a dmp short term then if my wife goes into arrears it will force the sale or I go bankcrupt then.
It all sounds very complicated but I am sure it's quite common.

[James Falla]

Unfortunately trinty68, if your share of the property equity is £25k this will pretty much prevent you from going bankrupt. The problem is that the house would very possibly be at risk in bankruptcy as the official receiver would be obliged to release your equity - by forced sale if necessary......
 
As such the best thing might be to sit tight and start a DMP at this time. When your car is paid off you will be able to increase the payments enough to consider the alternative option of an IVA. Doing this would mean that your house is not at risk and would reduce the payments you have to make for 5-6 years. However you need to be able to pay around £150 a month to make this work. Would this be possible once the car is paid off?

[trinty68]

Yes my car loan is 158 a month.

[James Falla]

When does it finish? And at this time do you own the car?

[trinty68]

Another 4 years 6 months and Yes I would own it. I suppose I could hand it back after half the payments if I could save any money towards another car.

[James Falla]

Hmmmm, yes 4 and a half years may be simply too long to struggle on.... Handing back the car after half the payments is one option if as you say you have been able to somehow get another car. Alternatively if your plan ultimately turns out to work towards an IVA you could try to source a new car as quickly as possible. Then as soon as you are ready you simply hand the old car on finance back to the finance company. In affect you allow it to be repossessed. Yes there will be a shortfall but that debt can also be added to the IVA and it means you can get out of the car agreement as soon as you are ready rather than waiting. If you are then able to make payments of £150 a month (which you should be able to do) then the IVA becomes a very real and sensible option for you.

[trinty68]

Sounding good,
Where I work I don't get paid for the overtime I have done until next May, very frustrating but it could work to my advantage as it would be a way of saving up for a car.

[James Falla]

Absolutely. Sounds like an option for you at that time....

[trinty68]

Just thought I would give you an update on my situation.
I have been to citizens advice who are contacting my creditors. I will only be offering token payments as I don't have enough left over to pay them.
 I will continue with my car loan.
My plan is to pay off my debt when my ex wife agrees to sell our house, that could take up to 5 years however she is showing signs of wanting to sell sooner rather than later.
With that in mind citizens advice agree it is best to just pay token payments for now as I need all the spare cash I can find to get through my divorce.
Of course anything could happen with the house and my plans could change but for now I am in control of my situation.
I must say that so far I have had no hassle from my creditors and total support from CAB which has made a massive difference to my well being.

[James Falla]

That sounds like a good holding position for now trinty68 and I am pleased that the CAB have helped you get in control of your finances. At the end of the day however a token payment plan only really puts a debt problem on hold for the future.
 
Obviously the key to your plan is that your ex will sell the house thus allowing you to repay your debt with the proceeds. However that of course depends on her actually selling within a reasonable time period and then the sale price that is agreed. Ultimately if this does not happen you can still consider your car and as a fall back position you could still hand this back at any time freeing up the £158/mth which could then put you in a position to start more sensible DMP payments or an IVA.
 
Please do come back to us if you have further questions or want additional help in the future.

[Michael1]

I am really glad to hear that you have an understanding bank. Unfortunately, from personal experience and much of what you can read here, not all banks are going to be very helpful in helping you out. Sometimes it is good to see that the ‘small guys’ do get a win.