# Paycut and dealing with debt



## Muppet (21 Jun 2012)

I'm not sure where to start.

As of next week I'm about to take a significant cut in pay and I'm not sure how I'm going to afford the payments on my cc and other outgoings.

Brief history
I have an mbna cc which has a balance of approx 6800
Boi cc balance of 4100
Overdraft boi 1850

My mbna cc was over 8000 a little over a year ago. I haven't had a valid card since 2009 and am just paying interest.
In the past 24 mths I've cleared a 7000 credit union loan and 4000 car loan.

I have a house which I bought in 01 with my ex that I haven't lived in since 05 or 06. My ex and I have 2 kids which I pay maintenance for but she pays the mortgage on the house as its her home and it was agreed she'd keep it if she paid the mortgage. It's worth about what's left on the mortgage but I know she has arrears on it.

I've been in debt since our split. Cc balances going nowhere while I got rid of my other debts. 6 years is a long time to remain in debt and it's about to get worse.
The majority of my income is for rent and maintenance keeping me firmly going nowhere. I have no social life as i could never afford it and rarely buy clothes or waste money. I've paid thousands in interest to mbna and boi over the years.
I'm wondering what's the best way to approach the cc debt now that my wage is being reduced?
Be pre emptive and call them or go into arrears and wait for them to call me?

Tia


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## elcato (21 Jun 2012)

Ordinarily I would advise that you go into arrears to force the CC companies to freeze the interest. One problem I see here though is the house. Was the mortgage taken out in both your names ? Is there a legal document that states that you have discharged all ownership. If not, then the CC companies could get a charge on the house for the money outstanding which would be paid back on the sale of it. This may not be a bad thing though if it gave you breathing space and stopped the interest from now. but your ex would need to be informed possibly.


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## Muppet (21 Jun 2012)

elcato said:


> Ordinarily I would advise that you go into arrears to force the CC companies to freeze the interest. One problem I see here though is the house. Was the mortgage taken out in both your names ? Is there a legal document that states that you have discharged all ownership. If not, then the CC companies could get a charge on the house for the money outstanding which would be paid back on the sale of it. This may not be a bad thing though if it gave you breathing space and stopped the interest from now. but your ex would need to be informed possibly.



I don't see the house as the biggest issue just now. The house is my exes principle private residence which is home to her and our two kids. If it could be sold the money from sale would barely if even cover the mortgage owed to the bank. The agreement to waive my interest in the house is informal at present as the other party is unable to get a solo mortgage. 
But I digress. The cc's are my concern at present


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## frostie (22 Jun 2012)

I think the point elcato was making is that inaction on this could  result in legal action from the credit card companies, the point being,  how will your ex-wife feel about a judgement being secured against a  property that she is paying for, because that could well be the outcome. Upon the sale of the house at whatever time in the future, she will effectively be paying your debt!

Another point is that even if you have waived your rights to ownership,  it is most unlikely that the lender will have waived your liability, as  it was originally loaned in joint names.

The new insolvency legislation coming forward will not help you, as it's  unlikely that you could get a debt relief certificate, even though your debts are below €20000 as you are able  to repay the interest only amounts on your cards -- this would only be  possible if your disposable income after rent food heat etc is below €60  per month. 

You will also not be able to avail of the debt settlement arrangement, as your name is linked to the mortgage, which you are not required to pay, and a personal insolvency arrangement is also out, as your debts are below €20000.

Unfortunately you are one of the types of individual who falls between  the cracks of the new insolvency legisaltion, but there are solutions  available. You need to get a repayment plan in place which might  be able to stop interest accruing and result in anything you do pay,  reducing the capital amount you owe. The quickest way of doing this is to complete a financial statement and propose a debt management plan to your creditors.

www.frost.ie


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## Muppet (22 Jun 2012)

Thanks for the replies. I had accepted the house as a noose around my neck for the next few years for the sake of the kids having a home. I want to clear my debt with the cc's and was looking for the most appropriate way to do this based on my circumstances. 
I don't expect anybody else to be liable for my debt. 
I didn't think unsecured credit card debt could force the sale of someone's principle private residence. Yes my name is still on the mortgage and yes I'm stilliable for this but I proposed the sale previously and was shot down. 
Don't really know what to do now. Maybe draft some letters to boi and mbna outlining my circumstances and see where that takes me?
Whats an acceptable living amount after deduction of rent maintenance and other necessary bills?


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## ontour (22 Jun 2012)

Can you go back to the credit union and consolidate the debts so that you are potentially paying a much lower interest rate?  This may also give you the opportunity to offer the CC company a settlement amount that is less than the current balance.


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## Muppet (22 Jun 2012)

ontour said:


> Can you go back to the credit union and consolidate the debts so that you are potentially paying a much lower interest rate?  This may also give you the opportunity to offer the CC company a settlement amount that is less than the current balance.



No I tried that three times while I was on a higher wage and got refused each time. I had a weekly deduction directly into the cu account and cleared the loan there and still no joy. When the loan was repaid I used the remaining savings to reduce other debt. It's next to impossible to get a loan to repay other debt these days unfortunately.


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## frostie (22 Jun 2012)

It's not that they will force the sale of the house, it's that if a judgement is granted, when the house is sold, the mortgage balance (if any) will be paid, then the judgement satsified, then the balance paid to your ex. 

CUs or other lenders will generally not consolidate another lenders debt - if all the debt is with the lender they may, but certainly not in your case.

Go through your income and expenditure. There's no such thing as an acceptable amount amount after living expenses - this is your disposable income. There are however acceptable amounts in terms of the living expenses themselves eg full sky package - not essential, single person spending €700 a month of food - not acceptable to most creditors either. Be realistic with your expenses - without knowing your income, impossible to answer.

Your debts add up to €12750. Using a five-year plan as an example, can you afford €212.50 a month? Assuming interest can be frozen with the consent of your creditors, your debts will be repaid in full over this term.

www.frost.ie


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## elcato (22 Jun 2012)

Well it looks like the only option you have is to stop paying the CC till they agree to stop any more interest acrueing. I suggest you ring them and tell them you cannot pay and you want to come to an agreement once they freeze the interest.


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## Muppet (22 Jun 2012)

frostie said:


> It's not that they will force the sale of the house, it's that if a judgement is granted, when the house is sold, the mortgage balance (if any) will be paid, then the judgement satsified, then the balance paid to your ex.
> 
> Go through your income and expenditure. There's no such thing as an acceptable amount amount after living expenses - this is your disposable income. There are however acceptable amounts in terms of the living expenses themselves eg full sky package - not essential, single person spending €700 a month of food - not acceptable to most creditors either. Be realistic with your expenses - without knowing your income, impossible to answer.
> 
> Your debts add up to €12750. Using a five-year plan as an example, can you afford €212.50 a month? Assuming interest can be frozen with the consent of your creditors, your debts will be repaid in full over this term.



Thanks frostie. When I work out cost of bills and rent and maintenance etc I could probably manage 212 at a push. I don't live extravagantly in any way whatsoever. Paying a figure similar to the one u quote and all necessary bills ( I have no extras like 70 sky etc) and my food budget I keep very small then after all that Ill have very little left. That's what I meant by acceptable.

On the judgement thing if the house isn't sold ever how would that work?


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## Muppet (22 Jun 2012)

elcato said:


> Well it looks like the only option you have is to stop paying the CC till they agree to stop any more interest acrueing. I suggest you ring them and tell them you cannot pay and you want to come to an agreement once they freeze the interest.



But do I have to wait? The interest is so big it would go over 7grand in 2 mths. I'd been whittling it away from 8 grand to under 7 and Id hate to see it go up again. Will they not listen if I approach them first?


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## frostie (22 Jun 2012)

If you can show that as your disposable income, you should be able to get this arrangement in place - roughly works out MBNA about €112, €70 to CC, €30 to O/D per month. That's your debt sorted over 5 years. Obviously the various creditors may seek to review this at different intervals, normally 6-monthly, in terms of your income to see if there has been any improvement. If no improvement, plan will generally continue as is.

If you get a judgement you're also liable to court interest of 8% per annum on top of the debt. The debt will grow, and you may also end up with an instalment order against you - deal with it now, do not wait, as the lender has no obligation to suspend interest, particularly where the debtor is not co-operating.


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## elcato (22 Jun 2012)

Have you read this thread on dealing with MBNA ? I haven't but it may be useful.


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## Muppet (22 Jun 2012)

frostie said:


> If you can show that as your disposable income, you should be able to get this arrangement in place - roughly works out MBNA about €112, €70 to CC, €30 to O/D per month. That's your debt sorted over 5 years. Obviously the various creditors may seek to review this at different intervals, normally 6-monthly, in terms of your income to see if there has been any improvement. If no improvement, plan will generally continue as is.
> 
> If you get a judgement you're also liable to court interest of 8% per annum on top of the debt. The debt will grow, and you may also end up with an instalment order against you - deal with it now, do not wait, as the lender has no obligation to suspend interest, particularly where the debtor is not co-operating.



Thanks again frostie. I'm fully prepared to work on this to get it fixed. All my other debt was managed but credit cards are a foolish form of finance that keep you paying thousands for years. Mbna have been paid thousands in interest over the past few years and is continue as is but my circumstances have changed too much to continue.
I don't want to go down the road of courts and judgements. 
My income is pretty straight forward to see. I pay my rent and maintenance by bank transfer and bills by dd so it's all laid out in my bank statements. Do I need to provide these or will a letter suffice outlining my budget?


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## Muppet (22 Jun 2012)

elcato said:


> Have you read this thread t=153211&highlight=MBNA+arrears"]dealing with MBNA I haven't but it may be useful.



Yeah I read it. It was where I was brought after a google search thanks. My circumstances seemed like it warranted it's own thread


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## frostie (22 Jun 2012)

Muppet said:


> Thanks again frostie. I'm fully prepared to work on this to get it fixed. All my other debt was managed but credit cards are a foolish form of finance that keep you paying thousands for years. Mbna have been paid thousands in interest over the past few years and is continue as is but my circumstances have changed too much to continue.
> I don't want to go down the road of courts and judgements.
> My income is pretty straight forward to see. I pay my rent and maintenance by bank transfer and bills by dd so it's all laid out in my bank statements. Do I need to provide these or will a letter suffice outlining my budget?



A letter will generally suffice -you put all your income on to a spreadsheet to go along with it, send the cover letter showing all of your creditors and how much you owe each- send this to each of your creditors -asking them to accept the amount you have offered, that you believe it is fair based on your circumstances, and that you request that they freeze interest and charges to allow you to deal with the debt. The only thing you _may_ need to provide is a proof of income.

www.frost.ie


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## Muppet (22 Jun 2012)

frostie said:


> A letter will generally suffice -you put all your income on to a spreadsheet to go along with it, send the cover letter showing all of your creditors and how much you owe each- send this to each of your creditors -asking them to accept the amount you have offered, that you believe it is fair based on your circumstances, and that you request that they freeze interest and charges to allow you to deal with the debt. The only thing you _may_ need to provide is a proof of
> 
> 
> This is what I needed to read. Thanks very much for this. Will keep this updated with progress


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## frostie (22 Jun 2012)

frostie said:


> you put all your income on to a spreadsheet]
> 
> *and expenditure!! sorry! Good luck with it, hope it works out!


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