Looming redundancy, and debt. Need advice

[TameRacingDriver]

I have just found out today, that there is a fairly "substantial" threat that I will be made redundant in the next month.

I would stand to receive about £7,500 redundancy if this happens. Problem is, by the time I get this, my debt will likely stand at approx £12,000... so I'd be around £4,500 or so short of being able to settle those.

Being in the north of england, and sadly, having spent the last 12 years in my current job being "de-skilled", there is no guarantee that I would find work any time soon.

Luckily I do not have a mortgage or kids. I "sort of" live at my girlfriends - I spend most of my time there but technically still have my parents.

What I want to know is, if this happened, what should I do about the debt? I could pay off the loan and overdraft I have but that would leave me with 2 credit cards. Or should I bank the money and try bankruptcy, or something else? Its the first time I've ever been in this situation so I have no idea about what should be the best course of action.

I wouldn't care but although I was stupid getting into the debt I've been in, I've been making a huge effort to pay it back, and I would have paid it off within 2 years, but it looks like that option is likely to be taken away.

[Pulse]

Will you not be able to get a job working in a supermarket, in a warehouse, as a labourer, etc? There are usually jobs out there if you're willing to do anything, in my experience.

[anonymous-user]

pay off the debts with the highest rate of interest first

find another job - there are some out there: be flexible and keen and you should land one

[davepoth]

Forewarned is forearmed - cut down the spending now, get as much of that debt out the way while you can. Most people don't get anywhere near as much notice as this.

[wattsm666]

It is probably worth considering keeping some of the funds back to service the debt whilst you find alternative employment, will give you some flexibilty. Bankruptcy is probably not worth considering at this level of debt.

[Scootersp]

no point in using the money to clear the debts straight away, you will not be permanently unemployed so it's all a matter of time and getting through that time. Once you are earning again then you can use the remainder of the redundancy to clear the highest (credit card usually) debts.

It may be worth considering switching to a zero % credit card (careful on the transfer fee)?

Anyway I would work out the minimum monthly amount you'll need to keep the creditors happy then see how long this, combined with living expenses (thrift mode needs to be instigated right now) will last. Even those with no debt and savings when faced with your situation only have a longer period of time before the lack of earnings will bite.

Be disciplined and remember the redundancy money is commited to repaying your debts longterm and is simply to provide cashflow for the time you are unemployed ie don't spend it frivilously.

If you gain employment relatively quickly with around the same salary then there will almost certainly be money left from the redundancy to clear some debt and make your previous 2 year plan to clear your debts even shorter.

[richardxjr]

You'll need the redundancy money to live on until you find another job. Cut down spending obviously first, then I would go one of two ways:

a) good credit? 0% cc as suggested above. But please be disciplined and close the old accounts that you transfer onto 0%.

b) bad credit? Write to creditors once you have been made redundant. Collate an income/expenditure sheet leaving an amount left each month for repayments. You have to treat each creditor fairly, so split this amount pro rata and offer this as an interim payment per month for 12 months. Ask them to freeze interest on the account as a condition of your offer.
Nothing at all left for payments? Then offer each creditor £1/m.
Make it clear in your letters that you have no property interest or sizeable assets.

Forget bankruptcy for such a small amount.

[ATM]

richardxjr said:

Write to creditors once you have been made redundant. Collate an income/expenditure sheet leaving an amount left each month for repayments. You have to treat each creditor fairly, so split this amount pro rata and offer this as an interim payment per month for 12 months. Ask them to freeze interest on the account as a condition of your offer.
Nothing at all left for payments? Then offer each creditor £1/m.
Make it clear in your letters that you have no property interest or sizeable assets.

What does this do to your credit rating?

[Wacky Racer]

richardxjr said:

Forget bankruptcy for such a small amount.

This.

[TameRacingDriver]

Thanks for the replies.

I think I can deduce the best plan of action is, if the worst happens, just look for work, hope I find some relatively quickly and if I do I will be able to pay the loan off and possibly overdraft (these two things account for 500 a month) and then chip away at the two cards (one is at 0% until this time next year and the other on about 6% but for the life of the balance).

In a way if I was made redundant but could find work relatively quickly, I'd be in a much stronger position over the coming 12 months as another poster alluded to. Could be a blessing in disguise!

[Gibson70]

To avoid bankruptcy, you could try Debt Relief Order (DRO) for debts under £15K. This is a new product and may be a better option for you.

Have a good read:-

http://www.debtadvisoryline.co.uk/information/debt...

[RedSpiseeBalls]

JPJPJP said:

pay off the debts with the highest rate of interest first

Phone up the companies you owe the outstading debt to, explain the situation, assure them and then come to an arrangement as far as repayment.

Then and this is the hard part: DON'T be arrogant or think anything is beneath you when looking for another job.

[TameRacingDriver]

RedSpiseeBalls said:

Then and this is the hard part: DON'T be arrogant or think anything is beneath you when looking for another job.

I'm pretty much a trained monkey anyway so I don't think ill have too many problems there!

[jdw1234]

I'm not sure of the figures.

Is there a cap on savings at which point your are no longer eligible for benefits?

If so could you reduce debts until you are below this limit and then use the remaining as cash liquidity to service your debts (whilst claiming job seekers etc.) and then pay down the remainder when (not if) you get another job.

Comments on this idea chaps?

[richardxjr]

ATM said:

richardxjr said:

Write to creditors once you have been made redundant. Collate an income/expenditure sheet leaving an amount left each month for repayments. You have to treat each creditor fairly, so split this amount pro rata and offer this as an interim payment per month for 12 months. Ask them to freeze interest on the account as a condition of your offer.
Nothing at all left for payments? Then offer each creditor £1/m.
Make it clear in your letters that you have no property interest or sizeable assets.

What does this do to your credit rating?

This was my 'bad credit?' option. So your credit rating is already shot.


My point is do not use what cash you have repaying unsecured debt. You need it for food, heating, housing etc. Banks have to be flexible in these situations, Morrisons and Tesco do not.

Good point about benefits threshold above. I think it's 8k?. Personally I'd chose to use my money to live off until I got down to that point, then consider claiming if necessary.

Edited by richardxjr on Thursday 17th November 17:18