I think I'm busted

Help, I think I'm broke!

Personal Story (you'll probably want to skip over this as the background sob story is probably unnecessary and boring)

This situation has slowly been brewing for more than ten years. I got hooked on gambling and have been losing more than is healthy for a longtime. But I've usually kept it reasonably under control and never left myself in a financial situation where I couldn't make basic ends meet. Until recently.

Then last year I was finally admitted to hospital with peritonitis after twice being misdiagnosed and sent home. My insides were a real mess due to the time delay and I had to stay in hospital for about 10 days with tubes inserted as they tried to cleanup the mess. I was told by my doctor I could have died during surgery that lasted 4-6 hours longer than the average time. I lay around in a hospital bed unable to move, poisoned gunge dripping out of me into bags, and in wards with patients my age who were fighting terminal illnesses. It definitely messed with my head in ways I never understood until recently. I thought at the time the experiences would have a positive impact on my life, make me appreciate the precious gift of life. But in truth they have not. The experiences sent me on a deeper depression about the fragility of it all, how the clock was already running against me, and how much time I had wasted so far.

I'm not trying to use this as the excuse for my many mistakes. But hospitalisation is definitely the trigger point where everything has escalated out of all control. Savings totally wiped out. Credit card debt piled up everywhere. Moving balances around to secure 0% debts, applying for more credit, personal loan to consolidate some credit card debt, and then months later maxing out that debt on credit card again. I've also thought I could manage these payments fine, I earn enough money, and that I wasn't taking on unaffordable debt, but I wasn't thinking clearly enough I suppose. I've piled on the weight and can struggle to walk up the six flights to my flat without gagging for breath. And I'm self-employed so not taxed at source. You can see where this is going with savings wiped out. I'm definitely in a position where I'm going to have to talk to the inland revenue about paying amounts to become due soon.

I've finally taken the step to admit myself to counselling and treatment for my gambling addition. I almost can't believe I'm doing this when I walk to the sessions but I'm pleased that I have taken the courage to take the steps. I'm a very weak person (as my gambling shows) and it's unlike me to do anything difficult. I usually just run away and hide from the world. It feels like I've left it far too late now, that I'm ruined, but I have to try to fight back somehow. I've committed to 16 weekly sessions after an initial assessment recommended I undergo the full 4 month program. I've taken temptation out of the equation by getting permanent exclusions set on all my betting accounts. I only bet online and I've never placed a bet at a betting shop in my life. So the access has been switched off. I haven't placed a single bet since setting up those exclusions.

I've even admitted to my parents there is a very serious problem here, that I am in counselling, and I never thought I would tell them because I'm deeply embarrassed. They know the scale of my debts now too, again I never thought I'd share the figures with anyone who knew me. It's obviously upset them a bit, but both of them have privately told me they are happy I was honest with them - after hiding my illness from them last year for as long as possible. They are comforted at least by the knowledge I'm trying to do something positive about this mess now.

My Debt Situation

My debts stand at:
Personal loans = £20k
Credit cards = £38.7k
Overdtafts = £1.2k

Income tax I have a payment due end of July just shy of £6,000. And then another tax bill will become due January 2014. I estimate this could be as much as £18,000 with advanced payments due. I usually overestimate before my accountant crunches the numbers and amounts due. But it will definitely be a five figure payment - probably £15,000-£16,000 the minimum range I reckon.

As of now, I haven't missed a payment on any debt. All credit card payments, loan payments, etc. have been paid on time. But since a lot of this credit card debt is on 0% deals at present, it's easier than it will be. Once the full interest rates start kicking in and the minium payments escalate, everything changes.

I don't see a way I'm going to be able to get the money together to pay the full £6k in July due on taxes in cash. The thought of dealing with the tax office terrifies me especially when I have tell them the reason I am unable to make these payments. It's appalling and I'm expecting a very negative reaction to this (and yes I know I deserve it). And this is just the smaller balancing payment - it's far, far worse looking ahead to Jan 2014.

But anyway StepChange have advised I should talk to Inland Revenue immediately inform them of the situation and try to work out a plan with them for the payment due in July. Obvious concern though if I'm on a repayment plan to cover the £6k due in July as quickly as possible, I'm getting further behind on saving for January 2014 with a much larger amount due. It feels like this is all going to meet an inevitable and miserable end.

Having taken the debt remedy tool on stepchange and inputting £6k tax repayment plan annually they already suggest an IVA. So I guess I am effectively bankrupt.

But I wonder why IVA is being recommended to me over 5 years when it's treated almost as harshly as bankruptcy in terms of black marks? Yes I get to keep some of the stuff in my home, but a lot of this stuff is essential to my work anyway, and I have very few valuables. If the bailiffs take the tools of my trade away, I won't be able to make any payments back to credits during my bankruptcy because I won't have a decent paying job.

That said about IVA, I think bankruptcy is treated far more harshly on those who have indulged in risky behaviour like I have done gambling. And that there's a very good chance my discharge will be at least doubled from the normal 3 years to 6 as a result.

(This is not to deny I deserve the additional hammering I'm going to get, because I'm sure I do. But it's pretty heartbreaking knowing I'm looking at losing another 6+ years of my life to this, in addition to the 10 years I've already burned up in depression and gambling addiction. But if I choose to continue living I realise I have to pay the penalty for my sins.)

Stepchange doesn't know how much of the debt was accumulated though, so that won't be why they came to the suggestion of an IVA. But I guess it might be a better path than all out bankruptcy for those reasons?

The other thing i need to do urgently is get myself a cashminder account. Because all my current accounts are linked to other accounts with debts. So I need to get this setup before I go too much further setting the wheels in motion with stepchange.

I suppose the main questions in my mind right now:
- How to approach the Inland Revenue?

- Does an IVA really make the most sense given my lack of assets and situation?

- I hope Co-Op won't reject me for a cashminder account because it's the only option I have to separate my current account from debtors? I'm sure I read a year ago they stopped offering this accounts to the financially challenged, did they reverse course later on?

Bottom line I know there's no easy way out of this and there shouldn't be. I just want to make the best decisions as possible now so I can start putting the pieces back together and a chance of coming out of this alive. I have so many issues to solve (mental, physical, financial) and I'm trying to take little positive steps to improve each of them all at the same time.

I'm sincerely sorry for the long rambling post. My mind is all over the place atm. If anyone can offer any constructive advice if they think I'm heading down a wrong road I'd be so very grateful.