The debt-busting card you've never heard of

Charles 125 - thanks, that makes me feel a lot better - I earn over £25k and have no credit card debt just a mortgage (first thing I paid off after university). They need to repeat the articles from a while ago about not living on credit to make yourself wealthier.

The average credit debt (excluding mortgage) is £15,000 for those earning £15,000 per year, and £40,000 for those earning £25,000 per year. Many people will come to a point where they simply can't afford minimum payments each month. Alternatively, without notice to you card companies will and do remove balance transfer facilities once you get to a set (and unannounced) amount of total credit with all banks and card companies depending on your income. They do NOT automatically restore balance transfers once you reduce your credit once having been determined 'at risk' to the companies. This can happen at credit of just 3/10 ths of your income. It is of course deliberate to 'tie' you into maximum interest charges. . . . What to do next depends on whether there is a mortgage and or a partner earning. If neither apply, then free charities such as CCCS will negotiate one single monthly payment which they will distribute amongst card companies. This can be as little as £1 a month per company depending on how severe financial difficulties are. They will also ensure there is no further interest or charges applied as long as financial difficulties stay. You cannot include moneys for future car or vehicle replacement, home improvements not started yet or saving for foreign holidays on budget sheets and some card companies will also want to see proof of income/ benefits and possibly recent bank statements. There are serious added complications if there are card debts with either your current bank or a company you have a mortgage with and it is essential that these balances are transferred elsewhere before you miss any monthly payment. Otherwise your bank could take your whole income each month until the card debt is repaid, or the debt could be added to a mortgage, making repossession more of a risk. However, once you start paying less than the contractual minimum each month you must not borrow any further credit elsewhere as this would constitute fraud. But the savings each month should be enough to pay eg petrol/fuel in cash or by debit card. You are allowed to use another reserve card you ARE keeping up payments on to pay PROVIDED you clear the ENTIRE new credit by the statement date. This may be necessary eg in an emergency. Cancel direct debits with all card companies you are in difficulty with and return cards cut in half. If you have a mortgage or a partner earning a substantial salary, you have to follow a different route. You must again use a free charity like CCCS and submit budget and income sheets to the card companies individually and offer proof of financial difficulties. Cancel direct debits, and send a cheque for the next monthly payment for the amount you CAN afford, with budget and income sheets to each card company (You will need to distribute the monthly amount available after paying all essentials pro rata amongst the card companies). By cashing this cheque, the companies have then agreed to a voluntary payment plan. Then set up a standing order through your bank for each card company for this lower monthly amount. You may need to get the sort code/account number to pay in to by phoning customer services. You need your card account number attached to the standing order as a reference, so double check your bank(or you online) get this right. It is VITAL that money is available for this standing order to go through each month or you are in breach of the voluntary plan whence interest/charges may be applied again. CHECK statements each month to ENSURE there is no interest or charges, and contact card companies immediately if they do so accidentally as they may only minimally back date any mistakes by them. You may have to jump through several hurdles to get a voluntary plan agreed. This might include sending CCCS budget/income sheets to the card's debt collection agency. capital One will ask if you require a short term (6 month) plan or longer term plan (5 years) - if in any way unsure, go for the longer term plan. You may have to pursue the companies vigorously by phone and in writing to get them to agree to drop interest or charges. Barclays may try to 'blackmail' you to pay more than the amount YOU can afford, by saying that only then will they reduce - and not stop interest. Put in a formal complaint to them and if necessary then refer on to the Financial Ombudsman. (State that you will do this in the formal complaint). You should (as in almost certainly will) eventually get interest stopped and charges dropped, whatever card company, though it might take several months and some hard negotiation, unless your affordable payment is quite high eg £25 monthly per card company. You will need to re-submit budget and income figures every 6 months to each card company, once you (or eg CCCS) have established a payment plan or some companies will start charging interests and charges again without reference to you. Re-login to online debt charities once you have entered details, at least every 60 days or you will need to re-enter all (anonymous) finance details again. CCCS online states how long it will take to clear the debt at your affordable payment rate, without interest and charges. Eg if will take 27 years, include this sheet with your budget and income details and use this to negotiate dropping interest and charges! CCCS walks you through filling all of the necessary details in their debt remedy link. DO NOT include a sheet saying sell your house as an option if this is given, when sending in to card companies and do NOT give/ include the reference number by phone or in writing - one card company had the cheek to ask me for this over the phone and were promptly told CCCS specifically says NOT to give out this reference number! Err very much on the cautious side for expenses. if you later find after 6 months that you can actually afford more, you can THEN adjust payments up. If on the other hand you under-estimate expenses - remembering that gas/electricity costs as one example can catch you unawares, as well as rising sharply, you could find it difficult to meet agreed 'affordable' monthly payments. In any case, review your income and Budget sheets every 6 months and if necessary, ask the card companies to accept a lower affordable monthly amount. they might say it will take longer to clear the debt, but provided your income/ benefit and budget sheets justify a lower amount, the card companies are very unlikely to refuse a lower payment offer. It can APPEAR scary. From 2 months on of paying less than the contractual minimum, you will probably be served a default notice. You may get heavy handed legal letters saying court action might follow. These might be from the card companies own debt collectors or solicitors owned by the card company. Card statements will continue to show all missed amounts re 'minimum' payments. You may also get 'hostile' phone calls and reminder letters asking for the total amount of 'minimum' payments missed. While legally card companies can ASK for more each month - do note that they CANNOT [B]insist[/B] on more than you can afford to pay. After 6 months of not meeting minimum payments it is possible though highly unlikely (while you are on a voluntary payment plan) that further action could be taken. This might include selling the debt on to another lender (with whom you would then need to negotiate a payment plan) or using outside collection agencies and solicitors, who would need to be sent budget and income details. In dealings of any sort with either in-house or external debt collection agencies, you must write to them and revoke their right under common law to enter your property/ grounds. At this stage you must not leave windows open or doors unlocked, as if bailiffs gain unforced entry, they have the right to re-enter your property/accommodation. You can also write to the card companies and any debt collectors to insist in ONLY dealing with them in writing. Record the times and dates/details of any harassing phone calls in case matters eventually end up in court, in your defence. Unfortunately cars might be confiscated ultimately. If this is a risk, either always use a garage or park away from your property/address or register the vehicle in someone else's name BEFORE you default on any minimum payments. While you are on a voluntary or negotiated plan, it is MOST unlikely court action will result, simply because Judges will only make payment orders that you can afford, and if you are 'skint' costs probably won't be awarded against you. Even if they were, payment might be £2 a month within what you can afford! Even after a court action, bailiffs have no right of forced entry without a warrant. Equity in a house is best NOT declared to card companies, though a charge might be put buy a court on eventual resale; but unless the debts are huge in comparison to house ownership value, repossession to meet card debts is very unlikely. In the longer term, if there is no house equity or substantial partner earnings, after a good few years, an IVA might be possible to write off 70% of the debt, but requires professional advice and assistance to pay the not inconsiderable costs (£1000+) involved in applying for an IVA, not all of which are granted. Partners or spouses are NOT liable for their partner's or spouse's debts, except as part of an estate if the partner/spouse dies. For this latter reason, and especially if there is a family involved, take out LIFE COVER from a good company. This costs eg less than £20 a month for £30,000 cover for a 60 year old, and substantially less for younger persons. You can of course add this amount to your budget and further reduce card payments accordingly. Cancel all PPI and if ESSENTIAL (eg job 'likely' at risk) take this out much cheaper with a third party company. If any of this is unclear to you, you can consult Citizen's Advice locally for free though there might be a month waiting list or more for an appointment. Act AS SOON as it is clear that you will be in financial difficulty. DO NOT hide your head in the ground and do nothing - and miss payments. If you miss several payments without getting a payment plan agreed for you or by you, card companies will act swiftly and severely. Contacting card companies early can avoid huge later difficulties. It isn't a light step to go for a payment plan as your credit rating will be affected for 6 years AFTER you get out of difficulties or repay the debt. BUT it is essential where interest and charges exceed what you pay each moth and debts are spiralling out of control. While on a payment plan, re-submit budget and income details every 6 months, or sooner if financial difficulties ease. If monies become available later on eg from family, pension lump sums etc, you can negotiate a settlement to write off the loan at typically about 2/5 of the loan amount, (though credit references are still affected for 6 years if the loan hasn't been fully cleared). I hope having to negotiate a payment plan won't be needed, but with rising costs and massive interest rates, more and more people will find this necessary just to survive each month from one payday or benefit payment to the next!