# Dealing with unsecured debt



## anon4this (1 Jun 2012)

My husband and I both have quite a bit of unsecured debt. A lot of it was incurred after my husband lost his business due to ill-health and he is now on an invalidity pension. 

I am earning a wage but all the unsecured debt repayments are eating into out disposable income every month and finding it hard to get them paid down. All our outgoings mean its a struggle to come up with any money for out of the ordinary expenses like repair work or car servicing.

Our unsecured debts are:
Credit Union  : 600 (under 3 years to go - bal 16800)
Visa (aib)     : 250 (bal 8000 - int 10.5)
UB (cc)        : 100 (bal 3000 - int 16% approx)
MBNA (me)    : 250 (bal 10000 - int 11.9)
MBNA (him)    : 150 (bal 6000 - int 11.9)
total              : 1350

We have asked the CC companies to reduce the interest payments but they won't and seem to suggest while we are paying the minimun balances each month they won't/can't do anything for us.

We missed 2 payments on my husbands MBNA cards and they sent out a form to fill in requesting loads of info on my income as well as his et... we didn't fill this out as yet.

 I see some people on here have seccured write-off of some of their debts
 with the credit card companies or have had their interest frozen. Any tips on making our situation better?


----------



## demoivre (1 Jun 2012)

How much savings, if any, have you in the Credit Union?


----------



## anon4this (1 Jun 2012)

Have 2000 in savings but cannto touch this as it is security for the loan.


----------



## frostie (1 Jun 2012)

To be honest, you need a debt management plan, looking at those figures. You could reduce those figures considerably, and potentially get the interest frozen, never mind reduced.

This would effectively restructure your unsecured debts over a longer time. The credit card companies are more likely to freeze the interest, the CU is unlikely to do so, but nonetheless it can still be restructured.

You will only really get a write-off on debt if you have a lump sum to offer, and I'm assuming that you don't. You can go to MABS or get advice from a debt management company, but you need to get this sorted, soon, because if you are just making the minimum repayment on those cards, your debt is going nowhere.


www.frost.ie


----------



## anon4this (1 Jun 2012)

You say if you have a lump sum to offer they may negotiate with us. I am due a once-off payment from a previous job which would amount to roughly €4000 after tax and was wondering if we should add to this amount monthly (100 here or there) so would have some money to offer the credit card companies?


----------



## frostie (1 Jun 2012)

My advice would be to say nothing about the 4k you are waiting on, and get a plan set up quickly - you could reasonably expect to reduce what you are paying down to maybe €450-500 a month and get the interest stopped on the CC's, obviously I don't know what your monthly expenditure is, but it is reasonable to assume that if you are struggling to meet the repayments at present, that this would actually be affordable for you. 

Once that is done, I would advise you to pay as much of the 4k as you can then, towards your credit union balance, as this will continue to accrue interest. By reducing the capital amount, you would then pay less interest ongoing, and would have consent to a restructured loan.


www.frost.ie


----------



## fobs (2 Jun 2012)

They have never missed Payments on the other cards so why would these institutions deal with them?


----------



## frostie (2 Jun 2012)

The other lenders will have to deal with them. The income and expenditure would show that the debts are not sustainable in their current format, and to pay a creditor preferentially, will mean that the other creditors who have not been paid will not accept the repayment offer.

The financial statement would show what is left after ordinary bills, mortgage or rent, and normal living expenses are taken care of. This money should then be divided up between the other creditors on a pro-rata basis.

If for example, the 4k was offered as a settlement to the one creditor who had missed payments, the credit card company, say MBNA in this case, would always do a credit check, and very quickly discover that they are taking a hit on a large amount of money, while other creditors' debts are being serviced. They will not accept this.

Also, while the payments are being made to the other cards, they are probably only the minimum payment, so the debt isn't actually reducing. That's why they need help to get the interest suspended, otherwise the debts would continue indefinitely.

www.frost.ie


----------



## anon4this (2 Jun 2012)

Thanks frostie. Should we use the mbna form or our own. Am I liable for my husbands debt or should he provide mbna with the details of only his income? The other debts are in either my name or joint names.


----------



## frostie (5 Jun 2012)

You aren't liable for your husband's debts, unless they were joint debts. I would advise you to try and deal with all of the debts at once, otherwise, you are only going to end up having to the same at a later date.

The fact that one income contributes mainly to running of the home means that all of the debt is a combined burden. You should show your own income as well as his, and all of the combined outgoings from the household.

Also, here's a tip when dealing with MBNA - if you calculate your debts over 60 months, and show the available amount left over to achieve this repayment plan on your income and expenditure, in MBNAs case they will generally freeze interest and charges.

eg you owe MBNA €16000, divide by 60 months = €266/month
You are currently repaying them €400. You should do the same with your other creditors as well, to come the overall figure you would be able to repay each month. This would mean paying around €450 to your credit card debts, and continue as normal with the credit union, as they will normally refuse to freeze the interest. This will give you breathing space of €300 a month.
Hope this helps

www.frost.ie


----------



## demoivre (5 Jun 2012)

anon4this said:


> Have 2000 in savings but cannto touch this as it is security for the loan.



You can. Section 32 (5)  of the Credit Union Act, 1997 as detailed below allows you to offset savings against the loan: 

*32.*(5) Where a member of a credit union is indebted to the credit  union  and consents in writing to the credit union acting under this   subsection, the credit union may, by way of set-off against the   indebtedness, withdraw any of the member's shares or deposits; and such a   withdrawal may be made notwithstanding anything in _subsections (2)_ and _(3)_.         

You can substantially improve your cash flow by getting the CU to offset your shares against the loan and Restructure the remainder over 5 years which should be around €300 per month. Stop paying all cc debt and wait for agreements to be ended, which they will advise you about. This might take several months but when the agreements are ended interest will cease to accrue. Now you can negotiate. You have 4k coming and you should be able to save money over the months that you are not paying the cc debts and waiting for agreements to be ended. MBNA, according to a recent thread on here, will probably settle for around 30% of what is owed, in full and final settlement - you could use the 4k plus savings to pay this. I would be surprised if AIB don't settle for €150 per month and Ulster €60, which will roughly clearly both debts over 5 years. The down side of all this is that you need to be prepared to leave your phone off the hook from 9am to 9 pm and leave your mobile on silent !! The cc companies don't want to end your agreements so they will try and get some money from you ! Your credit records will be ruined too but that might be the least of your worries.


----------



## frostie (5 Jun 2012)

There's no reason to be as 'radical' as this. If you speak to all of the lenders and show a representation of the situation you're currently in, they will deal with you. If the other credit cards are up to date, having forsaken one or two other debts, then it's generally 6-9 months, before the debt will be sent to recoveries.

This means 6-9 months of interest accruing, where it is not necessary. 

If you do this plan with the consent/co-operation of the lenders, it will be much easier, and much less stressful!


----------



## anon4this (5 Jun 2012)

Not worried about my credit rating at the moment as my husband has poor health so having enough money to pay his consultants and get his health costs paid for are taking priority over cc debt. We had costs of over 400 for same last month.  I bank with aib since I was 18 so hate to not pay that card or overdraft as worry with my wages being paid into that bank they could freeze my account?


----------



## frostie (6 Jun 2012)

You're right, and one of the things we advise our clients to do is immediately open a new account with a bank that you don't owe money to. You can switch all of your direct debits/standing orders and payments inward to that new account, which means that the bank cannot 'seize' funds being paid in.

While those in debt should communicate with their lenders at all times, you have to understand that while you show loyalty to the bank, there is no loyalty returned by the banks, so I wouldn't feel too bad about taking action that is in your own best interests.

And you are also right in that your husbands health care costs should quite rightly take precedence over your credit card debts.

www.frost.ie


----------



## anon4this (6 Jun 2012)

Will take the first step and set up a new current account to get my wages paid into and all my direct debits set up.


----------

