Debt consolidation companies

[andyjevs]

I have run up some pretty heavy debts through credit cards and loans and we're just about keeping our head above water (heavy meaning �11 k on cards, �23k loans) We (my wife and i) both work and we have a �70k mortgage with no equity. However, i have contacted a company called payplan. This is a free service and will either allow you to pay a set amount to your creditors until the debt is paid or to pay set amount for 5 years and become totally debt free after that time. I have young children so i don't want to lose the house but this is the only way i can see myself getting out of this black hole i'm in. Has anyone used this company or can you offer any help or advice. I appreciate i'll be blacklisted for any further credit but that can only be a good thing. You help would be very much appreciated

[camille79]

Payplan aren's a company as such but an organisation to help people make IVAs with their creditors.  I was a "customer" for 5 years and found them really helpful.  There is no charge made to the debtor - Payplan are paid by the loan and credit companies and i would highly recommend them.  The only thing I would say is that their literature is slightly misleading when it says that you can often come to arrangements with creditors and pay less than the full amount to close the debt.  I inherited some money and decided to try to clear my slate but had to pay the full amount to all creditors.

The info they send out is useful too - helps you budget and get out of the debt cycle.  So go for it!

[Didwot]

Consider Bankruptcy.
Seriously.
It only lasts for one year, and as you have no assets, you have nothing to lose.
Unless you earn a lot more than you need to live on then you will not have to make any monthly payments.
The only danger point is your home. I assume it is in joint names, but you state there is no equity.
It should therefore be possible to do a deal with the Official Receiver to buy back your interest in the home for a nominal sum plus legaal costs.

[Gaynorvj]

Hi

Try out this website:

http://www.debthelpuk.co.uk/

It is dedicated to people in a similar situation to yours. 

It gives you just about every answer to your debt questions and there's even a forum where you can look at other peoples questions and answers and post one of your own.

It is run by professionals and it is a free service.

[Mrs_Pegasus]

Do not take the bankruptcy route whatever you do and you will find that most debt help routes will steer you away from this.

Please give www.cccs.co.uk a ring.  They are a charity organisation that basically get their costs from the big credit companies.  I know many people who they have helped. 

Payplan is good but recently while overseeing a debt board I heard they had got someone into worse debt then they were in in the first place but I am not dissing them.

[twiglet4frog]

My advice, cut out the middleman! your salaries are paying your mortgage so ask the bank to extend the length of the mortgage thus dropping monthly payments and use that extra to pay off the debts directly. cut back on non-essentials and use that to pay off and call the people on the credit cards and ask for an interest free period of grace so that u can plow as much money into paying off the lump sum as possible. failing that, move the debts onto other interest free cards(takes some juggling and reading the fine print) and just keep paying the debt and not the interest. DONT take out a loan to pay a loan as that will make things worse. End of the day see it as this, they have taken their money and given it to u, so they are very very keen to get it back from u, if this means taking a lesser profit or even spreading the installments with no profit for a short time they would consider this over getting nothing back if u go bankrupt. they dont want to lose out so talk to them, explain u are struggling in debt and that unless they offer to spread the debts or reduce repayments/interest then u will be forced the banckrupt route. you arent the first that they will have dealt with and probably have certain procedures  they can follow to help u. dont be afraid of them, be straight with them and also firm that its their best interests as much as yours that u avoid bankrupcy

[andyjevs]

Thanks for all the invaluable help. I'm very wary of the bankruptcy route for fear of losing my home. I have no equity on the house and i only own half of it (it's shared ownership...please see my next question !!!)

[Didwot]

In answer to mdoo98
On bankruptcy all your assets (with limited exceptions) pass to your trustee in bankruptcy.
If you have income surplus to your reasonable needs the trustee can ask for an order that you make monthly payments to him for the benefit of your creditors.
You may not obtain credit (of more than �200) without telling the lender that you are a bankrupt
You can not be a company director.
You can not be an estate agent.
On the positive side the bankruptcy only lasts one year (and possibly less): moreovoer you cease to be liable to pay yoiur debts (with limited exceptions) and it takes a huge weight off your shoulders.

[scorpio61]

If you have a �70k mortgage and no equity I presume your house is worth �70k, the max loan you will get, provided your credit history is still intact, is �87.500. �17500 is of no use, you will not get any gratitude from the creditors that are not paid or a genuine thankyou from those that are, you would also have increased your monthly mortgage payments and consequently reduced the amount of money you have to service those creditors that are left.

If it could be proven that once the remortgage is completed you have no reasonable disposable income due to the increased mortgage payment, then a "one off" IVA could be the solution, something I practise more and more nowadays. The money released would be offered to the creditors as a full & final settlement and the debt would be written off. There is no further action against you unlike the IVA payplan are telling you about. They are recommending a legally binding, five year plan, making a monthly payment with the equity considered in the 4th or 5th year. This could be good or bad, totally depending on how house prices increase (or don't) over the next 4 years. If the IVA fails in that time due to illness, loss of job etc etc there is still the option of the creditors filing for bankrupcy. This option is not recommended even if you could get 125% loan to value on your property.

Another solution would be debt management if you thought your circumstances can change for the better in the future. The arrangements set by most debt management companies are not contracts, they are open, so they can be adjusted as your circumstances improve. At a later stage you can remortgage and pay them off, in the meantime you will have something that resembles a life.

[scorpio61]

You must be careful what you do, if you speak to someone who only sells IVA's or debt management then this is what they will sell you, but it might not be the best solution. Be aware of the down sides of an IVA.

Channel 4 are currently looking for people in your situation, go to http://www.channel4.com/life/microsites/F/family_project /index.html  if you are interested. They are looking to select a few people and to follow them on how they are getting out of there situation and how debt affects families etc. 2 of my clients have willingly stepped forward so I would imagine Channel 4 would find it interesting to see how you fair against your chosen path. There is little financial gain in this, it is a serious documentary so you would be doing it to highlight the problems of todays families.
Good luck whatever you choose to do

[Didwot]

Can anyone point out any disadvantages, on the limited information available, to this particular individual taking the bankruptcy route?
Advantages:
No monthly payments
No increased payments
Good Bye to all the Debts
Disadvantages:
The house? Surely not. There is no equity so it should be possible to buy back thier interest in the property for a nominal sum.

[scorpio61]

sorry Ditwot, not true.

1) Anyone who believes they don't pay anything on a bankrupcy are very much mistaken. The Trustee will complete an asset report and do a "means test". This is a financial statement and defines what money the Bankrupt needs to lead a near normal life and what money is left over (DI - Disposable Income) If the DI is sufficient to justify collection (above�100 per month I think) then it is collected for the period of time of the bankrupcy, fee's for the trustee are deducted and what is left is paid to the creditors. If their salary goes up during the 12 months they are legally obliged to inform the Trustee and increased payments will follow. It is also a misconception that a bankrupcy lasts for 12 months, this is only a general rule.

2) The Trustee in bankrupcy can hold a charge on a property for up to 15 years and call it in when he feels it is to the best advantage of the creditors he represents.

I hope this answers your question

[twiglet4frog]

i agree, banckruptcy length of term is not set at 1 year and is assesed on individual basis, i know someone that was made it for 3 years! It can also depend on the size of the debts not being paid off.

2nd, although this isnt official practice a friend of mine found out that most banks and building societies are extremely cautious of loaning money or mortgages to bankrupts, dissolved or otherwise. Officially your dissolved and allowed to continue with your debts cleared (a new man so to speak) but the fact it remains on file unofficially warns of most banks simply as it is no guarentee to them that they will get any money back lending to u. A case of leopards wont change their spots kind of attitude when it comes to banks profits. You may notice that doors will be shut on u concerning loans and mortgages all the time depending on the scale of the bankruptcy. Or if the debts wiped out werent too high then they may consider loaning but a smaller amount than someone who hasnt had a bad debt record. Again, this isnt something they notify you about officially (may not legaly be allowed to) but a friends unofficial desperation talk with a branch manager as to why a �10,000 loan was rejected yet again even though they were no longer bankrupt for 7 years and no credit problems since then revealled this, and also that to gain enough trust from a bank to loan to u again would require a much larger than average credit score.