defaulting/closing credit cards and store cards

thebigbiffo

long story short, the OH has credit card bills and stores cards that cannot be paid. there's been no redundancy in the house but a large drop in income.

MABS advised over the phone that OH send out letters explaining this and asking them to 'shut the account'. the fact that there's multiples is almost a silver lining as they'll want their 'slice of the pie' and do a better deal. we're talking 4 credit card companies and 4 store cards...yeah, i know:mad:

this is essentialy defaulting isn't it? the MABS lady reckoned ICB defo informed even if we reach an agreement, but technically, what options do the credit card companies etc have but to try get as much money us as possible, inform ICB and a couple of years down the line hands washed of it...is this really the case? we've no other option but to hands up say 'dont have money to pay you'...what happens then?

3DataModem

They may attempt to go through the courts to persue the amounts owed. I would say this is very likely.

LashingLady

Basically your OH will be "making an arrangement" with her creditors. This WILL result in a black mark against her credit rating which will remain in place for 5 years after the last payment is made.

What she needs to do is send a letter to each credit card issuer advising them that she is encountering financial difficulty and that she needs some time to assess her situation, and asking them to stop charging interest and penalties while she comes up with an offer of what she is capable of paying.

Then she needs to do a "Financial Statement" (There are templates for this and the letters on the MABS website). In this statement she lists her monthly/weekly income and expenses by priority. Priority of expenses is: Rent/Mortgage (or any debts secured on house) first followed by a reasonable amount for food and subsistence, utilities like gas, electricity etc, then other important expenses like insurance. Anything left after this is available to pay her debts. If this figure is say €300 then she should carve it up in the proportion of each credit card to total debt and offer to pay that amount. A letter of offer should then be sent to each cc company with a copy of the financial statement and showing how much is going to each company.

Another option she has is if she has a significant asset (eg a car) that could be sold and an offer made to any of the credit card companies to take a final payment on the debt. I know that they will definitely take a final payment of 75% of the total debt and that this can be negotiated down to 50%. However, this will still result in a black mark against her credit rating which will last for 5 years.

HTH

thebigbiffo

Thanks very much for the detailed reply. We've spoken to mabs and this is the course of action we have to take. It is interesting that they may take a significant amount off the overall amount owed should there be an asset to sell...would they still negotiate down like that if we came across a lump sun in cash, lets say a loan from a family member?

anyway, thanks again.

G

LashingLady

Selling a car is just an example of where you might get your hands on some cash. If you have a family member willing to lend you a certain amount it would be the same kind of deal. The CC companies wouldn't really need to know where it was coming from just the fact that you have it.

thebigbiffo

yeah, guessed that. was just wondering whether they'd actually look at your assets in an event like this. suppose that'd be very hard for them to do though.

thanks again