I am asking for a friend ,and would like advice on which is the best way to go ,he broke his foot very badly in July last year whilst abroad ,he is now back home and on Universal Credit ( £270 ) he gets monthly his only income as he lives with parents, he can't work as he is still receiving treatment on his foot and might have to have another operation ,the only debt he has is a credit card £3.500 and an overdraft £2.000 ,he managed to get Halifax to freeze interest on overdraft until now and they have said he only has till 7th Feb to pay overdraft back or they will close his account and put him in debt recovery which he does not really want ,he pays minimum payment on credit card to keep it right for now ,but I just wondered if you had any ideas what would be the best solution till he can get back to work without spoiling his credit by going into debt recovery ,if it did go to debt recovery what does this mean will it ruin his credit for 6 years ,would it be a good idea to do this for the overdraft and the credit card till he can get sorted as its starting to worry him ,or is there a better solution Thanks Jenny
Any debt recovery will have an impact on credit files and everything remains on those files for 6 years. The 'formal' solutions, IVA, DRO, BR make the biggest impact. Something like a DMP makes a smaller impact, if any. However, late payments or arrears will make their own, similar impact.
The 'formal' solutions are a bit heavy handed for a debt of £5.5k, but Halifax might force his hand with their own recovery. I would suggest a chat with StepChange who might be able to persuade Halifax to agree to a longer period of reduced payment with a DMP. Unfortunately the credit card will probably have to be included and that line of credit might be stopped too.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
If he only has 2 creditors it's probably best for him to negotiate direct with them and try to get agreement to continue with the minimum payments.
The creditors are unlikely to take recovery action for relatively small debts and depending on his circumstances might not get anything back if they do.
Failing which a DMP might be worth looking at as Foggy suggested.
