Author Topic: How to get some breathing space  (Read 2188 times)


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How to get some breathing space
« on: Sep 17, 2008, 01:30:49 PM »
Hope this helps some of you out there.

I have a debt of around £35k although I have some equity in my house and my car. I have a good income but even though, I am struggling to cover my out goings. "The more you earn the more you spend!"

My partner has been out of work for around 12 months and this has compounded the debt. It got to a critical point last month where I had to take my head out of the sand and actually do something.

The first and most important piece of advice I can give to onebody concerned about their debt / outgoings is contact CCCS (Consumer credit counselling Service). They are a charity and therefore provide impartial advice on a free phone number. Reach them on or 0800 138 1111. Trust me, they are excellent.

As it happens, once I Had spoken with a Debt Counsellor, due to my partner now starting work we were in a border line situation where we could actually afford to live a budgeted life and pay our debts. Therefore cccs could not negotiate any reduced settlements with my creditors. Unlucky!

There are thousands in our position, where you are only just surviving but don't qualify for the help you may need. But how do you pay for Christmas, decorating, car repairs, things you want (in moderation) i.e. A LIFE!

Here's my tips and what helped me.....

1. Call cccs, every case is different, they may be able to help you. If not, they do a full and comprehensive budget so you at least know where you are each month.

2. Do a budget yourself, use excel. List everything with amounts and dates. Tally this up and compare it to your income, what do you have left. Use this as the template to your life. So many of use do it in our heads or just hope for the best. Banks have changed, they don't allow you over your overdraft anymore so blind hope just doesn't work anymore.

3. Make sure your mortgage, secured loans, utilities, council tax, etc are all covered - these are priority 1!

4. Have a break.

a. Your mortgage may have payment holiday options. Or, should you happen to miss a payment, mortgage companies are very good at working out a repayment plan that you can afford. Lets face it, given the number of re-possions at the moment, your lender will be more than keen to keep you paying than take your house.

b. The above may apply to your secured loans although as these co's are second in line after your mortgage lender, they are often a little more challenging over their payments.

c. Unsecured lenders - these are the ones that make all the noise. Harsh letters written in red, constant phone calls and text messages. Their collection teams usually work on commission or a bonus structure, they are like double glazing sales people! But, they don't actually have much power in any short term. At worst they charge you admin or late payment fines, make late payment notes on your credit file or place a default notice on your account and credit file. Ok, not good but, you still have your house, utilities, food and travel covered. What you can do is have a break, write to them explaining that you do not have the funds to cover this month/s payments as you need to catch up or cover secured lendings and that you are prepared to make a nominal payment of £1 for ? months. That you wish to return to your regular payments on such a date and would appreciate, in order to help you, that interest and charges are frozen and any arrears are moved to the back of the agreement. In most instances, this will be acceptable if its done in writting, isn't abusing any good will and that you then stick to your proposal.

d. Credit cards. I can afford to make my minimum payment but it doesn't reduce the borrowings. One way to get a settlement on your credit card is for the account to be passed to a debt collecting agency. To achieve this you simply don't pay your card fees and ignore all letters until the nominated collecting agency writes. Once the dept is moved across (or sold on), the total amount will be, in effect, frozen. Lets say you owe £5000, min payment of around £150. Normally that would cover the interest and maybe a little bit of actual debt and would take forever to clear. Once this moves across, although there will be fines etc put on the current amount, lets say a £1000, its then a fixed amount with no further interest. £150 / m would pay off £6k in 40 months!! Versus paying the card company for 10,15,20 years. The downside, you will get a default notice on your credit file although if you make your regular agreed payment to the collection agency this will show as a regular up to date payments so over time, will be a positive on the file. Once settled, this will also show on the credit file, again a positive. If this is something for you, insist that your credit card provider communicates only in writting - you have the right to request this. Next, don't panic, the letters will be harsh. Once the default notice comes through and you are contacted by the collection agency, call them immediately and make a suitable arrangement. As long as you agree a reasonable monthly / weekly payment these agencies are fine to deal with. Finally, stick to the payments - ccj's etc can follow if you do not stick to your agreement.

5. Bank Accounts. Most people have a loan or credit card with their current account provider. The problem with this is the bank can do what it wants with your money in order to pay themselves. A usual trick is to take you into an unauthorised overdraft (not something they do for external companies), then when your wages come in, you have no choice but to pay this first. If this is you, or you are heavily into an overdraft that you are paying interest to, get a new bank account. The Natwest to a Step account. Apply on line and do everything via on line and post. Its automated so pretty likely they'll give you an account. If you do this in branch you are likely to asked if you have another current account and if so, they mornally will not provide one. Next, write to your bank and explain you want to close the account. That you have a dept of £xxx and can repay this at £x / month and to hold all interest and charges until the matter is resolved. They will most likely ask you to demonstrate income and expenditure - hence your budget that you have recorded. I've offered to pay mine over 3 years but waiting for them to confirm.

That's all I can think of for now.

So, call CCCS, budget, cover your secured lendings, utilities etc, have a break from unsecured lenders if you need, pass your credit card on to reach a settlement and change your bank account.

Hope this helps