Stopped paying off credit cards - what next?

[spg1983]

Hi,

A member of my family has lived an amazingly extravagant lifestyle over the last 10 years or so, however it's just emerging that it was all paid for with credit cards, loans secured against house etc. Now the money has run out and the mortgage and loan companies have been threatening repossession due to some missed payments. However, in order to catch up with the arrears, she has stopped paying her credit card repayments for the last few months. She's had a few letters about it but is convinced that the credit card companies will simply write off the debt (tens of thousands over 4-5 cards) if she ignores them as they'll realise there's no way of getting the money.

Before you ask, we've tried to help and she totally refuses to believe that this situation is a problem. Think there are mental health issues involved here as well :( she must be so stressed but has too much pride to seek or accept help.

Is she correct? Will the credit card companies just give up on chasing her? She never answers her phone or front door unless she knows someone's coming round so I don't see how they can make contact apart from letters which she puts in the bin!!

she'll have CCJs and an impossible credit rating (just as well) but as she's probably going to lose her home that is the least of her worries. Ignoring the letters means judgement will be entered against her by default, then the bills continue to build with interest.

I don't think the credit card companies send the bailiffs - that will be the council tax and repossession people.

not entirely clear how she will be able to buy food, either? Is she able to realise this?

if she refuses help and cannot be sectioned, I can't see what else you can do. As you realise, any finance you add will just be pissed against walls like all the rest.

very sad situation and my sympathies.

Apparently her credit rating was checked recently and out of 1000, it was less than 20. I think she's been surviving recently by withdrawing her salary in cash as soon as it arrives into her account and then living off cash for the rest of the month.

The reason I mention MH issues is because of the refusal to recognise the seriousness of the situation and the continued lavish spending despite this. The stress of it all is really taking its toll on her but she just won't admit it.

Sounds like she was partially right then - they won't chase her if she doesn't respond...

Some of my DH's relatives have done this. They have always lived beyond their means, having everything they wanted. They ran up huge credit card bills, went on holidays, went to the pub every day (they are retired). It seems they had no intention of paying anything off. They seemed to think the credit card companies would just let them off because they couldn't pay. My DH is their next of kin, and we weren't sure if we would inherit their debts if they died. The husband is convinced that he will win the lottery any day now, because he spends (or used to spend) about £20 a week on lottery tickets.

They sold their house a few years ago to pay off the credit cards, and moved into a rented house (at a discounted rate from relatives). Since then they have managed to run up more huge debts, and have had to be declared bankrupt.

They cannot get credit any more. They have their pension every month, which is enough to pay their rent, run the car, and buy food and have a little extra left over. They still go to the pub every day (we pass and the car is there) and the husband found a credit card that he thought he might be able to apply for, until DH told him he had to stay away from credit cards.

OP I really don't think the credit card companies will write off the debt, unless she declares herself bankrupt. Would she do that? Does she have enough income or pension to live on, even if she has to move?

Yes she had more than enough income to live on on a daily basis. Very comfortably in fact, she's just pushed it way further than it can stretch! There is absolutely no way she would declare herself bankrupt and I really don't think she'd sell the house.

Can she be forced into bankruptcy by the companies she owes money to? I can't see this situation ending unless any of them take action.

primrose it sounds like your DH's relatives took a bit of responsibility by selling the house but she won't do that!! Her DP sat her down to discuss finances as she was summoned to court recently for the mortgage arrears and she refused to discuss it and ended their 10 year relationship! Apparently she cannot trust him any more, in other words he is no longer willing to go along with the lifestyle and cover up the evidence of the debts so he is no longer needed...

Yes she can be forced into bankruptcy. The card companies can also secure a charge on her property (a fairly recent change) so she could be forced to sell to repay the debts. She needs to contact one of the free debt advice charities such as these who will help her.

They would never have sold their house without his input. He found out what it was worth, and asked about the house they now rent. He presented this to them as an option, and convinced them to do it. They would never ever have taken a decision like that on their own. (Another problem with DH's male relative, he is very indecisive and cannot make a choice - even in a restaurant he gets someone else to choose his meal. I think he may well have mild MH problems too.)

She needs advice soon - see www.stepchange.org. Ignoring the credit cards is not going to end well. At the very least she should be making the minimum payments. She needs to get a debt plan in place.

If she's been summonsed to court for the mortgage arrears, it's all about to go to pot anyway. If she fails to agree some sort of sensible payment schedule (and stick to it!), they will foreclose, and she'll lose her home. She won't be able to rent as she clearly won't pass any credit checks, so she'll be homeless...

The credit card companies won't just forget about her. If she continues to ignore them, eventually they will take her to court, and they can obtain a levy on her wages, for example. They can also force bankruptcy.

Also recommend Stepchange here too. If her salary is being paid into a bank account of a bank which she also has debts to, the bank can simply take the money from her account.

I have been through the process of ignoring debts and it's hard to deal with. I was surprised actually at how slow the credit card companies were to act though; I suppose as they are unsecured debts that the company doesn't have much power to act except from sending threatening letters. I was expecting to file for bankruptcy anyway, and had no assets like a car or house, so there was simply nothing they could do. It costs money for them to force someone into bankruptcy, or to apply for a CCJ, so unless they feel there's a good chance that they'll get some of the money back, they often don't take action except for writing letters and constant phone calls.

There is a rule I've heard where debts can't be enforced after about six years if they aren't acknowledged, but I think it's tricky to rely on that, it normally applies to situations where the debtor has moved away and the company hasn't been able to trace them to a new address. She has probably heard something about this and has misinterpreted it.

If she will not consider bankruptcy then she could enter an IVA or other debt management plan, which would allow her to keep her house. I found that bankruptcy is a lot quicker and easier tbh (it falls off your credit rating within six years - an IVA plan can take longer and is only marginally less worse for your credit rating, and I didn't have to make any payments to creditors as they decided I didn't have any disposable income, whereas the payments I would have made on an IVA would have added up to quite a bit over the years). But it would enable her to keep her property if that's something that is important for her.

Her creditors will take all steps necessary to recover the debt. Bailiffs, summonses, bankruptcy, whatever it takes. If you suspect she is mentally ill there's actually nothing to stop you calling her GP and asking them to go round and make a mental health assessment.

Thanks for all your replies. She literally will not accept that her debt is out of control and is refusing all options including IVAs and even just going to see someone for advice.

She is very very good at getting people to believe her - we told her dad who was in tears when he heard how bad it was, we all decided together that the worst thing to do would be to give her money (she'd just spend it and get into more debt), and we needed to get her to access some help/advice. After an evening with her, he's bailed her out financially so she doesn't have to go to court this time and believed her when she told him she had it under control...this is not the case but she managed to get him to believe it anyway!

Then her father is just enabling her behaviour. Unless this person is directly affecting your life I would leave her to it from now on and not get enmeshed in her private little hell.

Yes that's what the rest of the family have done apart from her dad and I think I need to stay away too. Only problem is that apart from her dad, I'm her next of kin so I'll get the spare room ready :(

Thanks for all the advice