Date: Thu, 03 May 2007 11:23:21 +0100
From: Alan 
Newsgroups: uk.finance
Subject: Re: My Big Debt Dilemma - What Would You Do?

johnwho2000@gmail.com wrote:
> I currently have unsecured debts of approx £24,000. I received default
> notices on these loan/credit card debts 18 months ago and a year ago
> they were assigned to debt recovery agents. Apparently the debts have
> not been sold on, the agencies are working on behalf of the original
> creditors.
> 
> I have been paying £2.00 per month token payments on each debt for the
> last year or so. I have had some serious ongoing health issues and
> currently my only source of income is incapacity benefit.
> 
> We also have a large mortgage and that has been changed to an interest
> only mortgage with a new mortgage company to reduce the monthly
> payments. It means that we are effectively just renting the house now
> but at least we get to stay in our own home and as the value of the
> property increases so does our equity stake in it, should we ever
> sell. The mortgage is paid from my wife's income.
> 
> My mother has offered to help us out financially. On that basis I have
> made full and final settlement offers to my creditors of just over 30
> per cent of the outstanding debts owed on a pro-rata basis. One
> creditor (that accounts for over two thirds of my debts) has said they
> would accept a 50 per cent settlement figure.
> 
> Now here is my dilemma. Should I use the lump sum to pay off these
> unsecured debts, bearing in mind no interest is being added. I have
> had nothing in writing to that effect, but I was told verbally that
> interest stopped when I went into default and certainly the stated
> balance has been reducing slightly with my very modest £2.00 per month
> payments - OR - should I use any cash to reduce my mortgage balance as
> we are obviously still being charged interest on that?
> 
> My fear is that if my circumstances change and I am back at work then
> this creditor will expect to get all the money I owe them and I will
> lose the opportunity to settle at 50 per cent.
> 
> All advice would be very gratefully received. Thanks.
> 

We could do with the broader picture i.e. more information

Its not clear whether these debts are in your sole name or joint with 
your wife. Likewise is your home jointly owned or in a sole name?

Have legal proceedings been instituted for recovery of these debts and 
have any County Court Judgements been obtained ?

Might be worth getting copies of your credit record from here 
http://www.experian.co.uk/consumer/orderPaperReport.html - the £2 
version to see what is actually registered against you (and or wife)

My first thought was that if there is any equity in your property I am 
surprised that your creditors have not explored obtaining a money 
judgement against you followed up by a charging order against your 
property to secure their debt(essentially an additional charge behind 
the mortgagor).

Theoretically I guess they could then force a sale (subject to court 
sanction) but in reality especially if the equity is small/children in 
residence etc. they often write off the debt in their books and wait and 
wait  ......

This comes as a nasty shock to the householder many years down the line 
when they eventually sell their property and find that they owe a large 
amount of money.

As another poster has stated make sure all agreements are in writing 
signed by the creditor and include the term "In full and final 
settlement" specifying the full debt amount and amount accepted.

Regards

A