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It looks like 2012 is going to be the year of debt. Those who haven't already borrowed could do so in the next few months, according to research by the Post Office, which says 12 million people will be running up debts on their credit cards to fund day-to-day living costs.

It's rather simple. If you cannot afford it, then do not buy it. Getting into debt for anything other than the purchase of a large asset like a house is idiotic and foolish.

I live in Romania where I am owed very large sums of money by two constructors. See www.raduandresanjucu.com and a Tsunami of Deception for one story. As a consequence of Radu's deceit I sold my home and eventually my UK bank accounts were closed down and credit card debts passed on to debt collection agencies. I have lived in extreme poverty and have very limited income. Both matters were reported to the criminal authorities 15 months ago and I have a lawyer on the job who suggested a criminal approach rather than a civil one. There are other victims. However the police etc have done very little which is apparently normal for Romania. In this country those who owe others money etc hide their assets by either putting them in the names of others or moving money etc out of the country.

I would like to recover what I am owed and pay those that I owe. I am a prisoner in this country and want to move my life on. Needless to say this has had consequences for others including my children. Suggestions welcome!

If it seems to good to be true, it probably is.

@charlie. I suspect you know the horse has already bolted on a lot of this. Indeed, you have written the answer. You take it through Romanian legal process. Ultimately, presumably, you walk away.

Buying property (and apparently gold) from a bloke you come across on the internet is inherently high risk. sophonisba has a point. There are gains to be had across the world in property but it is important to do the due diligence you would at home (that sales agreement on your forum is nothing like robust enough to ensure things are straightforward for a buyer) and also to recognise that "cheap" (to British eyes) does not always equal bargain or good value.

I work as a debt adviser.

but a good warning sign to go seek debt advice is if you use your credit card for day to day expenses, then you are probably in financial difficulties and should seek help.

Secondly be brave, and if you need help, ask for it, the later you leave things the harder it is to help.

There are plenty of Free debt advice agencies out there:
CCCS
PayPlan
Citizens Advice

Sorry, but that kind of Daily Mail holier than thou attitude to debt really winds me up. If you read carefully, you would see that it isnt just about getting a nice car or clothes on tick rather than just going without or saving up, this is real people trying to survive, and getting into debt just to pay the mortgage and put food on the table. If you cannot afford food day to day to feed your kids, what would you do? Not buy it????

I'd like to hear the panel's views on the emotional and behavioural aspects of debt.

It only takes basic maths to demonstrate what people "ought" to do about any debt issue, but what feels right is a different thing entirely.

I'm about 12K in the hole with credit cards, run up to keep me in food, pay bills etc from when i was trying unsuccessfully to run a business. No ferret skin gucci slippers here before any Mail types start.

I'm basically out of work and unwell with no immediately promising source of income and I'm paying off the debt companies of at a nominal rate as suggested by the CCCS.

Should I declare myself bankrupt? if so would I loose what meagre possessions I have?

Thanks :-)

It's rather simple. If you cannot afford it, then do not buy it. Getting into debt for anything other than the purchase of a large asset like a house is idiotic and foolish.

This is the same old holier-than-thou attitude which is often trotted out by at least one person on these kind of blogs. I also work in debt advice, and the fact of the matter is that the overwhelming majority of those struggling with debt are in that position due to a change in financial circumstances, i.e. lost or reduced income (redundancy/unemployment, seperation, divorce, bereavment, etc.) making it difficult to maintain financial commitments which they had managed fine with previously.
This sort of dismissive attitude merely serves to stigmatise the problem, making it more difficult for those in distress about their debt to seek help.

Hello,

My husband's mother died suddenly last July and as we went through her house we discovered she had been running up debt (under a few different names) for years. We realised that she'd died owing around £30,000. And that this debt had been passed on to collection agencies etc etc. She had undiagnosed mental health issues and the only asset existing in the estate is her house which she owned outright.

We don't own a property and have a baby on the way and ideally (once probate is done and the house is in our name) we'd like to move into her house. (It's in a terrible state and it will take at least £50,000 to do it up and make it livable, but has been valued at £350,000.)

How does paying off the £30,000 she still owes work? Do we get saddled with the debt and will we be forced to sell the house rather than move in to pay it off? Or, if we want to move in, do we have to take out a loan to cover the costs of doing it up AND paying off her debt?

Any advice much appreciated!

It is rather simple. But then it would be simple not to have a relationship - much easier to stay single. It would be more simple not to eat any food other than what we need to survive. It would be simple to wear exactly the same types of clothes every day, but that's not what human beings do. We love complexity and our whole civilisation is based on overreaching ourselves - ambition, envy, desire. Without debt we'd be bankrupt (you could argue, convincingly, that we already are).

Why is getting into debt for a house sensible and wise? Is every purchase of property an intelligent decision? Is buying a car over a 3 year period crass foolishness? Is paying for a kitchen over 12 months pure insanity?

In the modern world we have financial tools available to use. Sure, if I purchased a motorcycle with savings I'd obtain a discount, but if I can afford the £144 a month over 3 years then taking inflation into account it's just as canny to buy it on 0% finance.

What most people simply don't do - and this is idiotic and foolish - is to fail to plan for eventualities. It's the belief, propogated by the media and marketed to us from every direction, that we, somehow, that material acquisitions will fulfil our lives. In of themselves they won't. I can sleep more comfortably in my bed if it has a good mattress, but it will not make me a more fulfilled and contended person any more than a Mercedes or a holiday in the Maldives. Getting oneself into unsustainable debt to chase the dream will not work. We should all read more Dickens...

Please don't jump all over me for asking this but, if you are on a DMP, or recently have been, would there be any chance of you getting a mortgage?

I ask because we're on a DMP but if the government proposed extension of the right-to-buy goes ahead we would be entitled to buy our housing association house and the mortgage would be about the same as our rent. It would be our one and only chance to get on the housing ladder.

Also, it looks like I could finally be getting a job, after being made redundant, so our financial circumstances could be about to massively improve.

Would it be best, in this scenario to come out of the DMP if the extension to RTB does go ahead?

Thanks.

DMP's have absolutely no impact on your credit reference. What will have already affected your credit scoring is the fact that you have had to default upon your contractual obligations to your creditors. The DMP is the solution to your debt problem, not the catalyst.

Whether your credit score will affect your application for a mortgage will largely depend upon the application/vetoeing process of the lender themselves.

I was made redundant in April.

Because I worked in local gov't in a policy capacity, and my age, it's unlikely that I will ever work again even though my 'official retirement' is many years off.

I have ploughed all my redundancy money into my interest-only mortgage offset account reducing what I owe to about £10,000 (although this sum increases from time to time as I need to access cash). I have arranged for an overpayment of about £200 to reduce the capital owed.

In a couple of years, my endowment policy comes to maturity, although it is likely to pay out only £48k of the £70k originally promised. This would pay off the mortgage on my flat.

I now live in a house in France which I bought for sod-all 20 years ago and I rent out my flat in London. I receive about £1,000 a month in rent.

I was planning to NOT pay off my mortgage but plough the endowment policy money into the offset account which, in two years time is likely to be pretty depleted. Thus I will be repeating the process I started with my redundancy money. I hope this will keep me going long enough for me to reach 60 and start receiving my pension.

Is this a sensible way of managing my limited savings? Would I be wiser to sell my flat, pay off the mortgage and bank the balance (about £180k)?

I am 53.

Hmm check with a lawyer but from experience, her debts will be paid off by any assets she owns first before you will get anything....

Hi everyone,

I'm looking forward to answering all your debt related questions.

Pavan

Hi Silverface
It sounds as though you may be eligible for a Debt Relief Order (DRO) which is cheaper and easier than applying for your Bankruptcy.

A DRO is similar to Bankruptcy but not everyone is eligible to apply. Your total debts must be below £15,000 and you can’t have available income of over £50 per month after basic expenditure. You will also be excluded if you have gross assets worth over £300 (£1000 for a car).
An application has to be made through a DRO Intermediary and these individuals can be found at your local Citizens Advice Bureau and possibly through CCCS (and other advice agencies).
If you are eligible, and your application is approved, your debts will be placed in a moratorium period for 12 months. If your circumstances do not improve during that period then the debts will be written off and your liability to them will cease.

This will affect your credit history but it will also enable you to have a fresh start.
The other alternative is to pay the debts back, at an affordable rate, as suggested by the CCCS. Please do bear in mind that it may take many years to repay the debts and the creditors may not freeze interest and charges so the debts may continue to increase.

If you aren’t eligible for a DRO and / or you decide to keep on paying token payments, once your circumstances do improve then you could consider applying for an Individual Voluntary Arrangement (IVA) which is also a legal route where an agreement is drawn up between you and your creditors who agree for you to repay around 30-50% of your total debts over set monthly payments for 5-6 years. The remainder of the debts are then written off at the end of that period.

Lauren CAB

Hi McCallum

I don’t know how much of your £1000 monthly rental income you are currently paying out on your mortgage payment or what rate of interest you are being charged on your mortgage.

If you were to go down the route of selling your flat and banking £180,000 that would certainly give you plenty to live on for the next 7 years and beyond. Just to give you some idea, if you put your £180k in a fixed rate deposit paying 4.50% you would earn interest of £540 per month net of basic rate tax.

The decision to sell your flat also depends on your long term plans - whether you want to remain in France or whether you plan to return to the UK when you retire.

I think it would be wise to take advice from an independent financial advisor, but you’d need to provide them full details of all your income and expenditure and monies you have owing in order that they can help you make an informed decision. I would recommend looking up an independent adviser on www.Unbiased.co.uk

Hi RachelHolmes

Liabilities for debts do not transfer to another person after their death unless they were joint accounts or you acted as a guarantor.

I would suggest that you write to all of the Companies that you are aware of that your Mother In Law owed money to advising them of her death, enclosing a copy of her death certificate. You could also enquire whether any of these accounts had payment protection cover, albeit unlikely.

Those creditors will probably be able to claim against the deceased’s estate and the property may have to be sold to cover this. Any balance leftover from the sale of the property once the debts have been repaid should be paid to her next of kin (or whoever it was left to in her will if she had one).

It sounds as if you already have a probate Solicitor so you need to make them aware of these debts and they can then advise you further on this matter.

Lauren CAB

Hi charlie462,

As your debts were accrued in Romania, you would need to seek debt advice there as UK debt laws are different.

Thanks,
Pavan

Hi rinkydinkpanther

A mortgage is a credit scored product and each financial institution will have their own bench mark which is required for their products. In my experience, the better the mortgage deal is, the higher the required credit score is.

Whilst entering into a debt management plan shows that you are doing the best that you can do in your current situation, you may find it more difficult to get a mortgage because you have defaulted on your contractual repayments to your other debts.

There are probably mortgage lenders out there who would lend to you but you will more than likely have to pay a higher interest rate / fees along with that. I would suggest that if you do wish to apply for a mortgage that you seek independent financial advice first. You can find an independent financial advisor at http://www.unbiased.co.uk/.

Lauren CAB

I also work in debt advice, and the fact of the matter is that the overwhelming majority of those struggling with debt are in that position due to a change in financial circumstances, i.e. lost or reduced income (redundancy/unemployment, seperation, divorce, bereavment, etc.) making it difficult to maintain financial commitments which they had managed fine with previously.

All of these events you describe are finite risks which can, in principle, be insured against or mitigated to some extent through a more prudent approach to spending.

Hi Silverface,

From what you've said you've already been to us for some debt advice.

It's difficult to say whether you should declare yourself bankrupt without knowing more about your situation. However, if you've already given your information to us, we can talk you through whether bankruptcy is an option for you. We have a specialist team that can help and support you throughout the whole process.

Kind regards,
Pavan

Depends on what your 'meagre possessions' are! If you're a home owner it depends on the equity in your property; if not you may be eligible for a DRO (debt relief order) but you'd need to go through an intermediary- speak to an adviser at the CAB or CCCS.
They should also be able to check whether you're claiming the benefits you should be- like DLA if you're not well as you mention.

Hello

My wife has got into a bit of a pickle with maxing out high-interest credit cards (for living expenses, not Gucci loafers, I hasten to add) and now she doesn't really know which way to turn. I'm in a similar amount of debt but I earn enough that I should be able to clear it within a couple of years, but her wages don't allow her to pay any more than the minimum payment each month. Her credit isn't great (not terrible, but not great) so she isn't able to transfer the balances on to low/interest free cards, and at the moment there seems to be no end in sight - just a future of paying £1000s of pounds of interest at 40% APR and never making a dent in the actual amount owed.

She's considered bankruptcy and debt relief orders, but we'd like to buy a house within the next couple of years and I'd like her to be able to come in on it too, rather than buying some piddly little place on my income alone, so we don't want to damage her credit any more than it already has been. Are there any options available which will allow her to pay this money back at a reasonable rate (ie reasonable for both parties) while avoid crippling interest charges, and which won't write her credit off for years?

Thanks in advance for any replies.

How difficult is it at the moment to get loans for debt consolidation? and is this a sensible option? It seems like a no-brainer to me to get a loan and pay off the credit cards over a fixed term, but some people tell me that lenders aren't keen because people who have cards tend to spend on them again after they have taken out a loan. What do you think?

Hi MickGJ

The 10 year credit binge in the 90's and 2000's on the back of the seemingly never ending house price boom caused a lot of the financial damage that people are still trying to escape from today.

Every day we are bombarded with TV ads, buy a sofa and don't pay anything for years, take a payday loan to help with Christmas expenses etc etc and the trouble for some people is that they still try to keep up with the Jones's rather than lose face and admit they can't afford something.

We have become very material nation - it's quite common for children as young as 10 to have smartphones or £500 iPads - great if you can afford it, but it just puts extra pressure on families who can't.

There are people who continue to use credit to buy things they could really manage without, but there are a growing number relying on credit just to pay the gas bill or put food on the table.

McCallum

Your question really needs to be directed to an independent financial advisor as they can advise you where your money will be best placed as they are able to see all the products available across the whole market. You can find an independent financial advisor here :http://www.unbiased.co.uk/.
Generally speaking, your money would only be better off in your offset mortgage account if there isn’t the opportunity for your money to earn the equivalent rate of interest or more elsewhere in savings or another investment plan.

Lauren CAB

Hi RachelHolmes,

You're not liable to pay any of the debts unless you or your husband is named on them.

I'd recommend that you write to each of her creditors, making them aware of the situation and enclose a copy of her death certificate as proof.

Her creditors are entitled to claim against her estate and any remaining equity will be passed to her next of kin. You'd need to seek legal advice for more specialist guidance.

Kind regards,
Pavan

Hi notatoryboy

You can still get loans for debt consolidation, but to qualify for loans at the finest rates you'll need a very good credit history (no recent missed or late payments).

Interest rates on loans of £7500 and above are at the lowest for almost 5 years (6% APR from M&S Money) so it certainly makes sense to clear card debts if they are being charged at 15% to 25% or more.

If you do go down the route of consolidating your debts, I would recommend cutting up yoor cards and closing the accounts - it stops you being tempted to start using them again in the future and building up even more debt.

Hello,

I have been trying to help my son sort out his debt problems which have escalated over a number of years. The more he has been unable to tackle the debt, the more despondent he has become.

He had been advised by the CCCS to make small monthly contributions to the debtors but as he does not have the facility of a cheque book, we have been supplying cheques for him to send. Now the CCCS are advising bankruptcy and have sent the relevant forms to him but my son needs assistance in completing the forms because he is dyslexic. As all these charities give over-the-phone advice, is there anywhere in London that he can go for free advice and get help with these forms in person?

He is deeply worried and depressed and just seems to be burying his head in the sand. This is affecting the whole family. Your guidance please. Thank you.

MajorMisunderstanding

The only way to ensure a credit history is kept intact is by keeping up contractual repayments to her debts. If your Wife took any form of debt relief then her credit history will be affected. However the severity of how badly it is affected will depend on what happens with regards to the debts.

I would suggest that you sit down together to work out a realistic household budget to see if there is any opportunity for you to be able to pay more to the debts to try and clear them quicker.

If you are serious about getting a mortgage together then it will be best to do this with the least debts between you as possible, not only for the purposes of obtaining a mortgage but also to give yourselves the best chance of keeping up with those mortgage payments.

If there is no room for her to be able to increase her minimum repayments then it may be best for her to wipe the slate clean and consider a debt relief option most suitable for her; any advice agency can give her detailed advice which one is best for her.

Please remember that whilst a credit history will be affected by any form of insolvency, this won’t be forever and it is possible for your credit rating to be built back up again.

Lauren CAB

Hi rinkydinkpanther

Like others have mentioned, the likelihood of you being accepted for a mortgage really depends on your credit score. You can read more about credit ratings on our blog (http://moneyaware.co.uk/2012/01/make-2012-the-year-you-get-to-know-your-credit-report/). However, whilst you're offering reduced payments it will be difficult to improve your credit rating which in turn will limit the mortgages available to you.

The first thing to do is to draw up an income and expenditure based on your new income - you may find that you'll be in a position to return to offering your creditors minimum payments.

You could also speak to your debt management plan provider about it to discuss your situation in more detail too. You may decide to come out of your DMP to start making improvements to your credit score but you would also need to save for a deposit and this would need to be factored into your budget.

It's important that you seek independent advice from a 'whole of the market' broker.

Kind regards,
Pavan

I earn £22500 pa and have done so for the last 2 years. Due to rising living costs I now have around £8k credit card debt. I have a mortgage and 3 children and am obviously living beyond my means - some of this is unavoidable - my travel to work costs are around £60/week.
I am constructively looking to reduce my outgoings but cannot get a low interest loan to pay off credit - what are my options?
thanks.

Hi Majormisunderstanding

You're in a tricky siuation as in the current climate, lenders are not very interested in debt consolidation unless you have an excellent credit history.

I wondered if you have more income and a better credit history whether you have considered taking out new (lower cost) credit in your name to help repay your wifes card balances - she could pay you and if you can get rates well below 40% it would clear the debt more quickly and help with your longer term plans to buy a home.

Elledawg

Any advice agency in your area of London should be able to assist. Whilst they may not write out the forms for him (due to funding restrictions) they can certainly advise him on the process of Bankruptcy, what he needs to put in the forms and advice on what he should expect once he has entered his petition.

It can be a daunting process but there are people out there who can offer him that support so he doesn’t have to go through it alone. The quicker he applies for his Bankruptcy, the quicker he will be discharged and able to move on from it.

You can search online for your local CAB or Law Centre in your area or ask at your local Council Offices.

Lauren CAB

hi
my brother asked me about this the other day, he owes about 500 quid in National insurance contributiions. His business (self emplyed sole trader) has gone bust and he lives off his wife right now. He hasn't got the £500. How serious is that? Do we have to do a family whip-round or can he stave it off?

Thanks Pavan and Princey

As for my meagre possessions. A modest collection of instruments (no vintage Les Paul's) computer Hi-FI, 12 year old TV books CDs etc. I don't own a car or a house.

I got kicked off DLA because I was deemed to be alive, so I'm on Jobseekers and housing benefit.

Thanks.

superburger

9 January 2012 01:05PM
Response to Ayejay, 9 January 2012 11:38AM

I also work in debt advice, and the fact of the matter is that the overwhelming majority of those struggling with debt are in that position due to a change in financial circumstances, i.e. lost or reduced income (redundancy/unemployment, seperation, divorce, bereavment, etc.) making it difficult to maintain financial commitments which they had managed fine with previously.

All of these events you describe are finite risks which can, in principle, be insured against or mitigated to some extent through a more prudent approach to spending.

...meanwhile, back on planet Earth...

A debt relief order could be an option if his debts are less than £16k- this would be carried out through an intermediary so there would be no need for him to complete forms & it's also much cheaper.

How lovely for you that you have the financial resources never to resort to the desperate use of credit. I can assure you that having been unemployed for four months last year I had absolutely no choice but to use my credit card to survive. Once my savings ran out, Jobseekers allowance certainly did not provide enough to live on in London (especially when I was actively trying to find work) and housing benefit did not go anywhere near covering my rent in this city (even though mine is way below the average for my borough). Before you make some reactionary comment about 'getting any job going', I did. But, this was at a rate of pay akin to my first job in London some 15 years ago (no wonder youth unemployment is so high, middle aged managers are taking their jobs). I have a first class honours degree, 15-years management experience and excellent references, but in this economy that doesn't seem to go far.
Whilst resorting to credit may seem 'idiotic' to you, I challenge you to walk a mile in my shoes and see how long it takes you to reach for the credit card so you can eat. You really have very little idea about the state of the economy in this country, again, how nice for you.

Hi Charlie462

If this money is owed to you under Romania law then you would need to seek advice there as the law differs country to country. If however the money is owed to you under UK law then you can take civil action through the County Court to enforce debts. See leaflet EX301 available from Her Majesty Court Service website: http://www.smallclaims.me.uk/smallclaims_forms/ex301_0406.pdf

Lauren CAB

After a brief spell of unemployment and a needed house move, my husband and I have £5,600 (ish) spread across three credit cards. We want to clear these debts and can afford repayments of £400 a month (we have adopted a frugal lifestyle!).

I know, it's going to be a long haul but we're determined.

Would you suggest that we (a) pay the minimums on two of the cards and focus the rest of the money on the card with the highest interest or (b) divide the £400 equally between the three?

Thank you for your help.

Claire

Check out the information from LaurenCAB at 1:01PM for more information on DROs, seems like it would be a much better (& more affordable) option for you.

uperburger

9 January 2012 01:05PM
Response to Ayejay, 9 January 2012 11:38AM

I also work in debt advice, and the fact of the matter is that the overwhelming majority of those struggling with debt are in that position due to a change in financial circumstances, i.e. lost or reduced income (redundancy/unemployment, seperation, divorce, bereavment, etc.) making it difficult to maintain financial commitments which they had managed fine with previously.

All of these events you describe are finite risks which can, in principle, be insured against or mitigated to some extent through a more prudent approach to spending.

...meanwhile, back on planet Earth...

On planet Earth people in wage labour jobs consider the possibility of them losing that job (through no direct fault of their own) and plan accordingly.

On planet Earth mortal humans consider the possibility of severe illness that will prevent them working and plan accordingly

On planet Earth sufferers of the human condition consider that their relationship might end and cause financial disruption and plan accordingly.

Meanwhile, on planet CiF everything is someone elses fault (Thatcher's a good place to start)

Hi MajorMisundrstanding

This is a tricky situation if she wants to maintain a good credit rating. I's best that you sit down and work out what's most important for you - maintaining a good credit rating or reducing the debts. Have you sat down and looked at your budget to see if there are any ways of making cutbacks or increasing your income to help clear the debts quicker?

Although maintaining minimum payments on high interest rates seems unreasonable, this could be the only way of not affecting her credit score. This way, once you have cleared your own debts, that surplus money could go towards clearing her debts.

However, if this isn't an option or if maintaining minimum payments is not sustainable for her, she would need to look at a debt solution (which would of course affect her credit score).

If she'd like us to look at her circumstances in more detail to recommend an option she can use our online advice service, CCCS Debt Remedy.

Kind regards,
Pavan

Hi CPhil

The best plan of attack is to pay the minimum payment on the two cheaper cards and use the rest of the £400 to repay the most expensive card first. Then when that's cleared focus on the next most expensive - this will cut your interest costs and help clear your card debts more quickly. Good luck and hope all goes to plan.

Would you suggest that we (a) pay the minimums on two of the cards and focus the rest of the money on the card with the highest interest or (b) divide the £400 equally between the three?

Thank you for your help.

if you can't shift the balances to a lower interest rate card (new or existing card). The ability to pay 400/month suggests you're not up total **** creek yet, so consider any of the 0% cards out there.

If shifting to a lower rate is not an option then pay your 400/month on the highest rate card, and just the minimum on the lower rates. Otherwise you're just prolonging your higher interest payments.

5600 at 400/month is 14 months, maybe 18 with the interest payments. You're really not in that bad shape if you can keep that up for a year.

good luck.

Hi notatoryboy,

We don't normally recommend taking out any further lending as this usually makes the situation worse further down the line.

If you are struggling with your repayments, taking out a consolidation loan can protect your credit rating but often it does not remedy the basic problem of being over committed. And in most circumstances a consolidation loan would see you repaying more than the original sum.

As you suggest we do find many clients who have used consolidation loans will start spending again on the cleared cards if they fail to budget correctly, this often exacerbates the situation.

You may find this blogpost useful as it explores the reasons why it's not always the best solution, but what you should consider before looking in to a consolidation loan: http://moneyaware.co.uk/2011/04/to-debt-consolidate-or-not-to-debt-consolidate/

If you are struggling you could try our online debt counselling service CCCS Debt Remedy.

Kind regards,
Pavan