Big help required!!!

Hi

My wife and I find ourselves swimming in a river of debt at the moment - we owe £170k on the mortgage of a house that is valued at around 195k. However, we also have 2 secured loans with Firstplus and Welcome totalling about 85k and some credit cards with another 17k of balance owing on them.
We have virtually kept up on payments but failed our mortgage this month (we did tell Halifax in advance of this) and failed Firstplus for the first time in three years too!

We had hoped to get out of this hole - we put our house on the market early this year with the thought of downsizing and my wife increased her hours as our daughter is soon to be starting school. The dream was that increased income coupled with lower mortgage payments would help us reduce the debt. How naive we were!!!
Unfortunately, the increase in her pay has pretty much been eaten up by rising interest rates on all three charges. The house sale never happened either - the mortgage advisor said we could not sell because of the negative equity, the worst case scenario he had seen in his 20 years of working apparently!! Effectively, we have been told that we are trapped in this property as a) we certainly can't get a fresh mortgage and b) we have not got enough to pay all the charges on the house.

As we are leaking money so quickly, We decided the time had come for some expert help and went to the CAB. We have had 3 appointments so far.

The first visit was a premilinary interview which we both attended and we was given a budget plan to fill out which confirmed total loss of about £600 a month (or minus £200 a month disposable if you remove the credit cards).

However, the next two visits confused us somewhat as we were advised differently on each occasion on what is best to do.

The first chat my wife attended (I had work commitments) - the lady she saw seemed to give some hope. She suggested a pro-rata payment scheme could be operated to our creditors(apparently not an IVA). She said that this would also include the secured loan creditors. My wife queried if this was definitely the case and was told that definitely it would be. On asking on the implications however, the lady went to check with her supervisor and told my wife that we would have to cut up our credit cards (which is fine) but we would never ever be able to get credit again!! This again would be fair enough if we do want to be debt-free wannabes but we was a little worried if this included future mortgage applications etc... The word 'forever' surprised us too - we thought even the worst case scenarios were removed after 6 or 10 years. At the end of the interview, an appointment was booked so that I could come at a convenient time - and armed with statements/secure loan agreements etc.

When I went for the second chat (me alone this time), it was unfortunately with someone different so no real continuity on either side. He filled me more with an impending sense of gloom. He went through all the figures again mentioning that an offer could be made to all the creditors. However, he categorically ruled out any of the secured debt being involved and wasn't interested in seeing any of the secure agreements. As our disposable income was worked out as minus £200, he said we could really only offer £1 a month to all our unsecured creditors as a token offering with our budget plan as back-up evidence. He mentioned they 'might accept it but might choose to go through the courts' but didn't go into any real depth. He has given us a bit of paper that we need to sign to start proceedings.

I have a couple of questions on all the above that hopefully this great community can help with:

1) Which of the two CAB advisors painted a more accurate picture/solution?

2) Are credit card/store card companies really going to accept a temporary offer of £1 a month or will they take it further? We are a bit nervous to sign the authority to begin proceedings.

3) My wife's pay is likely to go up again soon as she is going to change from three days a week to full time. This would actually give us a positive 'disposable income' of two or three hundred pounds. When I mentioned this to the man at the CAB, he seemed keen to still send out the £1 letters now and then send new offers as and when the pay increases. I'm worried though the initial £1 offer will look too derisory and would it be better to delay until we have something better to offer as an opening offer?

4) Can credit really be affected 'forever'. Would this include mortgages?

I didn't give a background of how we got in this mess as I think that would have made the post far too long (it's long enough as it is!) but on the whole it is down to bad timings, naivety, silly consolidations, a fair bit of bad luck and unfortunately too much pride maybe to ask for help sooner.

Any help would be greatly appreciated. If anyone could tell me that it wasn't a completely hopeless situation, that would be good too!!

Many thanks