Negotiating reduced settlement on loans/credit cards

Current debts

MBNA - €8000
Halifax - €3850
PTSB CC - €2085
PTSB O/D - €1371
PTSB Loan - €4360
BOI O/D - €1000
Management fees arrears - €3000

Monthly payments of €600 split between these – negotiated and paid through MABS

Parental loan which needs to be paid by the end of the year €3000 – currently saving €250pm in the credit union towards this

Mortgage €318,000 – reduced repayments of €750pm agreed for the next 12 months
€3000 in arrears

Net monthly income = €2150
TRS - €140 (saving towards 2012 management fees)

Current savings of €1000 in credit union

Hope someone can give me some advice. I renegotiated my personal debt repayments last year through MABS and recently have negotiated another 12 months reduced repayments on my mortgage. I have already had 2 years reduced mortgage repayments and would ideally like to get back to full payments by 2013.

The problem is my personal debt is not really reducing and it looks like I am going to be paying it off for years and when my mortgages goes back to full repayments (circa €1300 pm) I am not going to be able to manage.

I am wondering would I be better off stopping payments for say 6 months – saving the €600 per month (in addition to the €250 I am currently saving in the credit union) and then offering the banks a reduced settlement figure on each of the loans / credit cards – is this feasible? Will the fact that I have a job mean they will be less likely to negotiate with me?

In 6 months time I would have over €6000 saved - possibly twice more if I manage to earn some decent commission in work which I could save towards it.

Just feel like I am getting nowhere fast at the moment so would be grateful for any advice

Hi tml,

How are you living on €550 a month for everything else - esb, petrol, road tax insurance, phone, food etc?
€750 mortgage
€250 parents loan
€600 Other creditors
=€1600 a month? Is the wage your basic ex commission?

Do you know if MABS have been successful in freezing any interest charges? Stopping payments could mean any interest already stopped can be retrospectively applied back on to your debts. If interest has not stopped, you will continue treading water. Also are you still paying payment protection insurance? I'm also surprised that MABS told you to restructure your mortgage in order to pay off your unsecured debt, although if it was exorbitant, I can understand the necessity. However 12 months on interest-only will not give you enough time to get rid of your other debt. How much is the monthly mortgage payment?

Do you have another income coming into the house eg partner's salary or SW benefits? By the looks of it, this is very mixed up. You are also prioritising your parents over your creditors (although I can understand why!) Would your parent s be happy to get some money from you every month at a lower rate - give them the €1000 in savings and pay them off over a longer time?

www.frost.ie

Sorry to hear of your problems TML. Is there any way you could make additional monthly income? For example could you rent out a room in your home? Could you do some promotional work or delivery work for a fast food restaurant etc?

Thanks for the replies just to answer some of the queries

Frostie - I had to get rid of my car as I could no longer afford to run it, I get the train to and from work and have an annual train ticket through the tax saver scheme. My phone is paid for by work, got rid of the internet at home. Airtricity bill averages around €70 a month.

MABS have not managed to get the interest reduced on any of the borrowings - I managed to negotiate with MBNA myself so this has been reduced to about 3%.

I do not get any SW payments and am single. The €2150 is my net Basic salary. I do earn commission on top of this but this varies greatly, for example last month I earned €1500, this month its €200, others nothing at all. But the commission generally covers any ancillary spending (birthday / xmas presents, clothes, make - up etc) and I try to save anything that's left to cover me for the months where I do not earn anything extra.

My mortgage payment will be about €1300 when I go back to full repayments.

Getting another job is not an option - I already work circa 50-60 hours a week. I did have the spare room rented out for €300 a month but my lodger moved back home a couple of months ago. I have it up on daft but no luck so far, however a friend of mine is coming home from travelling next month and they are hoping to move in which would be great.

The parental loan has to be repaid as my parents financial situation has changed drastically since they gave me the loan, believe me they wouldn't ask me for it otherwise!

I can plod away for the next year making all the repayments as they are now but with interest etc, realistically I am not going to get anything paid off these loans so when my mortgage goes back up in 12 months time I am going to be in serious trouble which is why I am wondering if it is worthwhile starting to try and negotiate reduced settlements?

Based on the information you have shared, the best advice I can give you is as follows:
1) You are overstretching by paying €600 per month to your unsecured creditors. Based on your level of debt, you should look at reducing this to a more affordable amount. Base it over five years, and keep your commission separate as it's not guaranteed. Don't mention it eevn to your creditors as you cannot guarantee even a minimum amount This should be around €400 per month instead of €600. Ask to get interest and charges frozen. If your plan is affordable over 5 years to clear, MBNA for example will freeze charges and interest. You should get a similar result from some of the other creditors.
2) Go back to the full repayment on your mortgage. If you can get your friend to pay €300 per month, then this leaves you €1150 less the amount to your unsecured creditors. Your mortgage is your priority, and you should make more of an effort to pay this than the likes of your credit cards or overdrafts. Do this as soon as possible.
3) Pay your parents the €1000 in the credit union, and anything else you afford to pay from what you earn in commission over the coming months to get this paid off.
4) Once this is paid off, save what you can from your commission, and deal with one debt at a time, paying off the most expensive ones first.
5) Negotiate with the management company that you will pay this year's fees, and other fees for the coming years as normal, but you will contribute a monthly payment to them to clear the arrears.
6) You will need to complete a financial statement to show your position to your creditors, and send each of them a copy. Thsi will show that you have 2150 coming in(plus 300 from your lodger if necessary), and what you spend your money on. Keep it within reason, and do not include your repayments in this. This should show that you have around €400 per month left to live on, and your mortgage being repaid at €1300.

You are basing your repayment capacity over 5 years, but this is because your commission is left out of your income. As you accumulate savings, and pay off these debts with a lump sum (you may get a settlement offer as well for less, although this would be marked on your credit file). You should be able to clear your debts before 5 years are up, and this is based on teh assumption that most of your creditors will freeze charges.

www.frost.ie