Defaulting a CC

[mum2all]

My friend has just phoned me in a real state as she is about to default on her cc, apparently she owes nearly 20 grand on it (God knows how!) and has been struggling to make payments on it for the last 6 months or so but has been making reduced payments and the cc company have frozen interest/charges. This is the final month before they hand off to a third party to collect? She's tried everything - 0% cards, bank loan or extra on the mortgage but no luck. The company had said they would accept a smaller lump sum, 8 grand I think, but as things are obviously so tight for her she can't magic that out of thin air. Any advice? I have no idea what a default actually means or what will happen next so can't offer her any ideas myself. We are in Scotland if that makes a difference

Basically a default sits on your credit file for 6 years and affects obtaining any future credit. The debt also had to be paid back.

Have a look at www.cccs.co.uk/ or national debtline. They are free charities that can help her.

Also money saving expert website....its a fab site

Rules are slightly different in Scotland.

She really shouldn't be sacared of it being handed to a 3rd party as debt collecing agencies are not allowed to charge interest/charges. The cccs will help her work out a debt management plan and deal with the cc company for her. They are a charity so make no charge for their services.

LJ29-that's not always the case. Some debt collecting companies are basically baliffs.

The credit card company will sell the debt to them at a discount on a non-recourse basis and they then try to get more than they have bought it for. They can be pretty aggressive- I know because I lived in a flat where the tenants before us defaulted on Barclaycard. They would knock on the door with a court order to seize goods to the value of X.

Your friend needs to find out who these debts are being handed over to and what the process will be.

Alternatively, she could declare herself bankrupt. If she has no way of paying this back, it might be the best way forward. It will trash her credit rating but frankly, it's probably already trashed, and bankruptcy means that your creditors cannot pursue you.

Sorry- just to add, third party agencies can also add their own charges and they are steep!!

e.g. when we moved abroad I stupidly forgot to pay our final elec bill.

It got handed over to an agency and a £75 bill became a £600 bill. How annoyed was I?