This post is a little story of how I got into and then out of debt. It seemed like something useful to dump here on the blog.
This is a reasonably long post but I hope you find it interesting and comforting if you are also in debt too!
The beginning of my Debt Problems
My journey towards a life of debt began a couple of months after my eighteenth birthday, the point at which I could legally get credit. During a lunch break I popped into my local HSBC Branch to pay in a Cheque. Little did I know that I would walk out of that same bank with a £3000 personal loan, a £500 overdraft and a £1500 credit card. This all happened way back in 2001 where in my opinion, credit was easy to get and the banks were literally throwing money at me. Of course looking back, I don’t quite know why I did this but it happened, and things only got worse!
When I returned to my place of work, I told my colleagues about what had happened in the Bank. It was at that point I perhaps could have gone on a different course, and perhaps wouldn’t be sat here now writing this post.
One of my colleagues, a stocky man in his late twenties offered me some advice. He told me “Credit is not a good thing to have at your age, you should go back to the Bank and reverse what has happened”. At the time I said I would be fine and knew what I was doing, the truth however was that I had no idea that this was the first step down a slippery slope. I should have took his advice, after all he had more life experience than I did.
With this new found wealth, courtesy of HSBC, I planned to learn to drive (sensible) and buy my first car. Instead I wasted the loan on frivolous purchases and I also did the same with the Credit Card, I dipped in and out of the overdraft. Before I knew it I was £5000 in debt with nothing to show for it, I was only earning around £10,000 per year at the time.
Hooked on Credit and Amassing more Debt
In all in took me about two months to blow through the loan, the overdraft and the credit card. I was hooked on this idea of obtaining credit so easily and so I applied for an Egg credit card (do you remember them?), I was approved with a limit of around £1200. At the same time I applied for the Egg Card I also applied for a credit card with Natwest Bank. The application was approved with a credit limit of £1000. Why I was doing this I really do not understand but one thing I did know was that it was very easy to rack up a lot of debt in a short space of time.
It took about a month to blow through the two new credit cards. At this point I was managing the repayments and it wasn’t a problem really, the money went out by Direct Debit so it wasn’t missed. It was only a matter of time before this changed.
My next target was a company called Intelligent Finance (do you remember them?), I applied for a Personal Loan, Current Account and a Credit Card. I was approved for a loan of £1500, a credit card with a limit of £2000 and an overdraft on the current account of £500. If you can see a pattern forming then you are correct, I blew through this in no time adding to my debt which at this point stood at £11,400. I now owed more money than I earned in a year.
Continuing into the Abyss of Debt
Not content with the amount of debt I was in, I decided to buy a laptop on Hire Purchase courtesy of HFC Bank. About two months after I took out this finance they contacted me inviting me to apply for a loan to repay this finance, naturally I agreed. Soon after this I added an additional £2000 onto the debt. Would this be the end?
There was a couple of mobile phone contracts in the mix too, plus a refinancing deal from HSBC when I began to fall behind on payments. In the end my debt stood at £20,000 and in February 2002 I experienced humiliation at the same branch of HSBC bank where this debt journey began. The journey had lasted 10 months.
February 2002 should have been a turning point but it wasn’t. I went into HSBC to ask for help sorting out the mess I now found myself in. I was still living at home at the time and none of my family were really aware of what had been happening.
The lady at HSBC was a bit like a head mistress telling off a naughty school boy. What happened was she rolled all my accounts with HSBC into a new loan, which carried a much higher rate of interest. She demanded my Switch Debit Card back, and cut it up in front of me. I was told I would be issued with a Solo Debit Card and that I wouldn’t have a cheque guarantee limit or overdraft. Her parting advice was to get myself sorted out and start acting responsibly. I did not listen.
The Brick Wall
Despite the restructuring of my debt with HSBC, I still had all the other debts to pay. In March 2002 I lost my job. This left me unable to repay the debt I was in. This was the start of my exposure to the darker side of debt, being chased by debt collection agencies.
At age 19 I was more interested in going out and having a good time than worrying about my debt. However this cockiness would begin to subside as things became more serious, although it would take a further two years before I started taking it really seriously.
The pressure begins
In 2002 I owed money to quite a few organisations and whilst to some the figure of £20,000, or £1000 for every year I had been alive would be something of concern, to me it was just money, money that had come and gone.
It initially began with many calls to my mobile every day. Sometimes up to 20 from all the different organisations. This was easy to deal with, I just ignored the calls from numbers I didn’t recognise. Next came the letters, lots of them in fact. So many that you could probably have decorated your house with them if you were that way inclined.
Each letter formed part of a series of letters, with most of them becoming more threatening each time they were sent out. Still I pretended like it wasn’t happening.
Starting to take things seriously
The letters and calls persisted for about a year and in 2003 I decided to think about doing something about it. I contacted a dodgy Debt Management Company who were very welcoming. They talked me through what I could do and said that a Debt Management Plan would be suitable for my situation.
We went through an Income and Expenditure and worked out I could afford to pay £250 per month towards my debts. They made it sound so easy and that they were effectively taking the problem away and rolling all of my payments into one easy to manage sum.
The fees were quite high for the privilege of this service. The first months payment was taken for the Debt Management Company and then they took a percentage each and every month. I made the first payment and the letters and calls began to subside.
After my first payment was debited I did feel a small sense of relief. This feeling was to be short lived however as not long after this payment was made the Debt Management Company had ceased trading, taking my money with them.
This experience left a very sour taste in my mouth and I was in no mood to be handing any money over to anyone. A few months later the letters and calls started again and the cycle started over.
One of the companies who I owed money to was called HFC Bank. They had ran out of patience with me and in July 2003 they applied for a County Court Judgment against me. I remember seeing the letter and opening it. Whilst I found it a bit scary, I didn’t think that my other creditors would take this sort of action.
I returned the court forms with my offer of repayment of £50 per month. The debt was quite high by this point, around £4000 plus the Solicitor and Court Fees too.
The Judgment was granted and I didn’t make a payment. This was foolish as HFC Bank applied for an Attachment of Earnings Order. This essentially means the Court instructs your employer to deduct payment directly from your wages. I defended this request stating it would risk jeopardising my full time employment.
After that I always paid this account on time each and every month without fail. For the time being though, my other debts were ignored.
2004 turning point
In 2004 I had two jobs, one full time and one part time. I was still living at home so things weren’t too pressed financially although still relatively young at 21, my night time habits used up a lot of money. My part time job was with ASDA and when I started working with them they provided a booklet with lots of useful information.
It was from this booklet that I found out about a company called Payplan. They provided a free Debt Management Plan although I must admit, I was very sceptical about them given my previous experience with the fee charging debt management company going insolvent.
I decided to give Payplan a call anyway as by calling them I wouldn’t have anything to lose. The person who I spoke to on the phone was very understanding and we talked through my entire situation. They agreed that a Debt Management Plan would be the way forward for me, and confirmed that there wasn’t any charge for them to provide this to me.
The County Court Judgment would remain my responsibility but all my other debts would be taken care of by Payplan.
A pack was sent out in the post and I completed the requested information and returned it to Payplan. About a month later they took the first payment and for the first time since this all began, my debt was be paid.
2005 The Start of Progress
I was now 22 and felt I should really start taking responsibility for my actions. I also met my current partner during this time too!
I decided to self manage my Debt Management Plan and began making offers to all the companies I owed money to. I paid quite a lot of money out each month in order to reduce how much I owed.
It was at this time I started looking at how much I had been charged for late payments and being over my credit limit for example and decided to start writing to the original lenders to ask for these to be removed from the debt.
I was quite surprised when all the companies I wrote too did in fact refund the charges, although it did take quite a long time to sort all of this out, it did reduce the balance and was well worth the time invested.
2005 More Court Action
One thing that did happen in 2005 was where two debt collection agencies were claiming they owned a particular debt I owed. The problem was that I couldn’t confirm who actually owned this debt so didn’t pay either company until they provided the correct proof.
Despite me writing to both companies to ask what was going on, they both replied that I should pay them. The original creditor wasn’t any help.
One of the debt collectors decided to take the matter to court and get a County Court Judgment. I thought at the time the best thing to do was to ignore it, surely they would realise their mistake. This was not the right thing to do, and when I failed to make payment, I was served a Warrant of Execution meaning the Bailiffs were going to turn up!
It was at this point I called the debt collection company who had requested this Court action and demanded to speak to their compliance department. Eventually I got through and I explained very carefully what had been happening with this debt and how absurd it was that they had taken this action, despite my proof that another company claimed they owned the debt.
Thankfully the Court Judgment was set aside and the bailiffs didn’t visit. It was very distressing though. As a result of this, the account was written off and so one more debt was gone for good.
2006 to 2008 – Repairing my Credit Rating
I continued throwing as much money as I could towards my debts. In 2006 I also became interested in my Credit Report and so began investigating the information it contained.
To my surprise some of the information contained within it was wrong, so I wrote to the companies concerned who either corrected the information or in some cases removed it altogether.
There was also instances where duplicate defaults had been registered for the same account and in one case, I had to involve the Information Commissioner’s Office in order to get the information removed. The debt that this related to was with a company called Intelligent Finance who wrote off the remainder of my debt as compensation for failing to record accurate information.
In 2008 I paid off most of my debts so what started out at £20,000 was down to around £2000 by December 2008. I was pleased about this achievement and vowed never to make the same mistakes again. However you can read about what happened in a later instalment of this series!
2009 The end and the beginning
In 2009 the only debt left for me to repay was my County Court Judgment. In April 2009 I paid it off in full and although it took a very long time to repay this debt, eventually it was paid off.