Debt Management Plans

[NewUsername]

First time in this forum so hi guys

I’ve just come back from a rather sobering chat with my brother in law. The short version of the story is that he’s fked his life up on the quiet and got himself into about £20k of debt even though he lives pretty hand to mouth. He has a decent job but has just managed somehow to get in this situation. He was quite pragmatic and has organised a debt management plan which is yet to commence.

I was going to offer to help him but he’s adamant the plan is fine and he will comfortably work through it with little downsides.

I don’t know much about them but assume he will be pretty shafted for the duration and some time afterwards even for simple stuff like leasing a car? Am I right?, I’d really like to help him but I don’t want to cause any family angst of what he’s up to isn’t that bad?

[anonymous-user]

Depends, some of the debt mangement companies are scams. 20k can be a lot or nothing, depends what you earn and outgoings. The agreement is voluntary and has an effect on credit history but no where near defaulting completely.

The best bet with a job, is consolidation loan.low interest as most people in debt are just servicing the bulk. But it depends on what the debts are, as a few changes can make massive difference.

CCs for example can easily negotiate minimal interest only and any payment take off balance.

Edited by Thesprucegoose on Saturday 23 November 01:48

[technodup]

Chances are if he's at the management plan stage he's been missing payments so will probably have fked his credit score already. How much depends on what he's been paying (or not paying).

[NewUsername]

He says he hasn’t missed any payments yet and is ready to push the button to make sure he doesn’t, the debt is mostly credit cards and two loans he tell me, he has looked at consolidating loans but his credit is poor as he’s been making min payments for a long time and is maxed out on his debt ratio.

Where could he go for a loan like that? I’m wary of helping him get a secured loan but I’d consider it if it would really help him

[sparks_190e]

£20k isn't exactly "fked his life up" territory. Fair play to him for trying to sort it out.

[anonymous-user]

CCs are easy to work with.

Work out how much can pay and ring them all up and work out an interest freeze, pay balance plan.

it comes down to interest, loans usually are low so leave them, work on CCs. 20k aim to pay 7k a year will all be paid off in 3 years. 650 a month should be manageable.

But i would guess his expenditure needs looking at, as he is probably wasting a lot of money on st.

Being all unsecured debt, the creditors would have difficultly recovering if it went tits up, so they will work with you/bro to sort it. It can all be done for free, but he will need support.

[HTP99]

There are debt management companies who do it for free, Stepchange being one, they will ask for a breakdown of monthly expenditure on essentials and then creditors and work out a suitable and affordable plan to pay the creditor back they will then contact the creditor on your behalf with their solution, most will agree, interest and charges will be frozen, and you will then pay a monthly amount to the debt management company who will distribute each creditors share on your behalf.

Some debt management companies charge for this service, I believe they can take up to 45% of the amount that the debtor pays in fees, however there are a few out there who don't charge.

[DonkeyApple]

NewUsername said:

First time in this forum so hi guys

I’ve just come back from a rather sobering chat with my brother in law. The short version of the story is that he’s fked his life up on the quiet and got himself into about £20k of debt even though he lives pretty hand to mouth. He has a decent job but has just managed somehow to get in this situation. He was quite pragmatic and has organised a debt management plan which is yet to commence.

I was going to offer to help him but he’s adamant the plan is fine and he will comfortably work through it with little downsides.

I don’t know much about them but assume he will be pretty shafted for the duration and some time afterwards even for simple stuff like leasing a car? Am I right?, I’d really like to help him but I don’t want to cause any family angst of what he’s up to isn’t that bad?

I would think that making sure your sister isn’t negatively affected by his shopping habits is the most important thing. If she is not also a shopper then I imagine it would sober him up much more quickly to have his wife put in charge of his pocket money for a while?

[Teddy Lop]

I got in to a similar amount of debt due to reasons about 15 years ago - spoke to a debt management companies but they really alarmed me - in the end i went for I think its called a "voluntary agreement" where you write to the company informing them you cannot afford to service your debts, I think (but check/research, there are specific forums with standardlised letters etc) with a breakdown of monthly incoming/outgoing, which has to paint a pretty bleak picture. You ask them to freeze the interest and accept a much smaller monthly payment, they are legally obligated to consider your request and most do, sometimes counter offering for a larger payment or capping how long they'll freeze but it all still puts you on the road.

[dmahon]

I also wouldn’t call this “fked your life up”. It’s only money at the end of the day and if it’s unsecured they ultimately can’t touch him. It’s also not that much compared to a lot of people.

Some people commit suicide over debt and it always seems even more of a tragedy. So first of all I would be supporting him rather than making him feel even worse and talking like that.

Edited by dmahon on Saturday 23 November 11:56

[supercommuter]

£20k, with a decent job just get a loan over a few years at 4-7% it will be very manageable.

F*cking his life up is a bit strong...

[NewUsername]

He’s struggling to get any sort of loan, credit rating is poor.

[James P]

NewUsername said:

He’s struggling to get any sort of loan, credit rating is poor.

First issue is does he own a (share of) a property? If he does he should speak to an Insolvency Practitioner or Citizens Advice bureau before agreeing to do anything.

He needs to find out how long the plan will last. He has to pay the £20k back in full although he might get the creditors to stop adding interest. The plans are sold on the basis on only making a small payment every month but that makes them last much longer.

He’s at the lower end of it being worthwhile considering bankruptcy but an IVA with someone like CCCS would at least give him a defined end date. Under no circumstances should he pay someone for introducing him to an Insolvency practitioner or a plan provider who has upfront charges.

As others have said £20k is modest in the scheme of things (it won’t feel like that but other people get into much bigger problems) and he would ideally avoid either a plan, an IVA or bankruptcy. Most lenders will accept pretty low payments if the situation is explained.

[p4cks]

Having worked in debt management for almost ten years earlier in my career, and having looked at numerous income and expenditure spreadsheets from customers the vast majority of those who claimed to be in need of a reduced payment arrangement were overspending massively in unnecessary areas but were unable or unwilling to recognise/address it.

It might be tough with him being your brother but that's where I'd start if I were him.

[Shnozz]

No disrespect (quite the opposite in fact for being a good mate and seeking to help him), but reading "even simple things like leasing a car" did make me chuckle when it comes to talking about someone who has overstretched themselves already.