Help with debts when on Maternity Leave

marymint_2

Hi

I have been lurking on these boards for a while but have now decided enough is enough and I need to sort out my debts. My husband and I are in debt to the tune of around £12,000.

To give you a bit of background info my husband suffers from anxiety problems and panic attacks. Around 18 months ago he was off work sick for a long period of time and we decided he should leave work as his job was very stressful and adding to his mental health problems.
He then decided he would like to go back to college to retrain and in the meantime he has been working part time as a taxi driver to suppliment his income. Since doing this his health has improved immensely and I have no doubt this was the right thing to do however he earns very little (approx £6k p.a.).

However, not long afterwards I found out I was pregnant with our second child. We were shocked but delighted about this, but we already had some debt from him being off sick, and the remainder of a loan we took out to pay for our wedding, which with my salary we could afford but since I have been on maternity leave the debts have grown and we are unable to meet minimum payments.

At the moment I am only earning Statutory Maternity Pay, but in April I will be going back to work and in May hubby will finish college and will be able to get a full time job so we will be in a much better financial position in order to clear our debts. At the moment our joint income is approx £900 per month but this will increase to around £2100 per month.

I was wondering what would be the best thing to do in our position? I have been burying my head in the sand hoping the problem would go away until April when I could resolve it, but I am receiving constant phone calls and threatening letters and am really stressed, and don't want hubby to be getting stressed out.

Do you think creditors would accept reduced amounts until April or would I be wasting my time?

Sorry this is so long!

Thanks for reading
Toni

GeorgeUK

Do you rent or have a mortgage?
Could you take a payment holiday on the loan or mortgage?

I think the first thing to do is to get all the information down on paper so you can see exactly where you are financially and how much you have each month to offer creditors. The SOA calculator is very handy for this. Post it up here and we'll see if there are any savings you may be able to make.

http://www.makesenseofcards.com/soacalc.html

goodeys

In my personal opinion and experience nothing makes debt grow like anxiety and maternity leave. I too have had a similar problem. We had debt before I was pregnant but we always paid it back on time and were able to pay more than the minimum as we were both working. After the birth of my son I suffered from severe anxiety and pnd, so bad that i ended up needed inpatient treatment at a psychiatric unit for a couple of months. During this time we used all of savings to keep on top of the mortgage as my husband had to give up work to look after our baby son and take care of me. When the savings ran out we started to accrue mortgage arrears and have been unable to meet the minimum on anything since. After calling these companies and explaining the situation they were quite unsympathetic and although they did agree to lower the minimum payment it was still so much higher than we could afford. So in the end we did just what you shouldn't do and just ignored everything. Stopped opening the mail or answering the phone. I called the national debt helpline the other day and they were fantastic. Give them a call they really know their stuff and will explain to you that you need to focus on your priority debts and if after these there is next to no money left they suggest sending a token payment 9 (OF £1 PER MONTH) letter to these companies to be revised in 6 months or in your case to be revised when you return to work.

I really do sympathise with you and the idea of a mortagage payment holdiday from GeorgeUK is a great idea (Nationaldebtline will suggest this too) that you need to consider (obviously if this option is available to you)

x

P.S One more thing, do not agree to payments with these companies that you cannot meet. Ie you are supposed to pay £100 but they will accept £50 pm so you agree and then you can't afford it anyway. Another mistake that I have made! Whoops (sorry its so long!)

marymint_2

Thanks for replying. It makes me feel better to know there are other people out there in the same situation, I felt like I was the only person in the world who was struggling.

I will fill in the SOA and contact national debtline too.

We do have a mortgage, I'm not sure about the payment holiday I will call the mortgage comany and ask

Thanks

marymint_2

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 440
Partners monthly income after tax....... 600
Benefits................................ 440
Other income............................ 0
Total monthly income.................... 1480

Monthly Expense Details
Mortgage................................ 540
Secured loan repayments................. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 90
Electricity............................. 25
Gas..................................... 28
Oil..................................... 0
Water rates............................. 24
Telephone (land line)................... 18
Mobile phone............................ 70
TV Licence.............................. 10 ADDED
Satellite/Cable TV...................... 38
Internet Services....................... 17
Groceries etc. ......................... 200
Clothing................................ 20
Petrol/diesel........................... 30
Road tax................................ 15 ADDED
Car Insurance........................... 80
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 60
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 0
Buildings insurance..................... 27
Contents insurance...................... 0

Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 0
Entertainment........................... 30
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1327

Assets
Cash.................................... 0
House value (Gross)..................... 85000
Shares and bonds........................ 0
Car(s).................................. 600
Other assets............................ 0
Total Assets............................ 85600

Secured Debts
Description....................Debt......Monthly...APR
Mortgage...................... 62500....(540)......0
Total secured debts........... 62500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
HSBC Overdraft.................1500......0.........0
HSBC Credit Card...............1750......50........24.9
HSBC Loan......................1000......179.......0
Loan from family memb..........6000......0.........0
Household Bank.................600.......0.........0
Capital one - Husband..........300.......0.........0
Great Universal................808.......90........0
Capital One C Card.............600.......30........17
Total unsecured debts..........12558.....349.......-

Monthly Budget Summary
Total monthly income.................... 1,480
Expenses (including secured debts)...... 1,327
Available for debt repayments........... 153
Monthly UNsecured debt repayments....... 349
Amount short for making debt repayments. -196

Personal Balance Sheet Summary
Total assets (things you own)........... 85,600
Total Secured debt...................... -62,500
Total Unsecured debt.................... -12,558
Net Assets.............................. 10,542

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

This has shocked me. It looks much worse on paper that in it did in my head. Can't believe how much we spend on some stuff like mobile phones and Cable TV. They will have to go.
Can anybody else see other things we could cut out?

goodeys

If I were you I would try to get a TV, Telephone and Broadband package all together, you should be able to save there. If you can live without cable then just get rid of it and and go for a tel and broadband package. Look on quidco to see if the supplier that you want to swap to is on there as you should be able to get some cash back.
You don't have a TV licence...or Road tax?
Cut out the clothes allowance for a bit and do you need nursery fees at the moment if you are off of work?
Are you entitled to any extra tax credits as you are on a low income at the moment? You should also get your prescriptions free if you are pregnant so if the cost is for your husband and if he is likely to be on the meds for a while see if his doctor will supply them in say 3 month quantities rather than monthly, this will then count as one prescription for each med. Alternatively they do the pre paid card where you pay an amount for your yearly meds and if you are on regular medication then it normally works out quite a bit cheaper.
As you said already, get rid of the mobiles if you are able to and are not tied into a contract
Your car insurance seems quite high too, have a shop around and see if you can get a better deal, again look at quidco as you will probably be able to get some cash back.

In the meantime start ebaying all of the stuff you have laying around that you don't want. Kid clothes go well on ebay.

All the ideas i've got at the mo i'm afraid

marymint_2

All the suggestions are great, thank you.

I've added the TV Licence and Road Tax, missed them off the original list sorry.

I will look into the prescriptions, that's a good idea.
The nursey fees are for a little playgroup my toddler goes to, I don't really want to stop sending her as I have noticed a massive improvement in her social skills since she has been attending, but maybe I could cut down her sessions (she goes for 3 two hour sessions a week), or maybe I will ask my mum to help with costs.

My sister in law has given us a big load of stuff to sell after having a clearout (my hubby occasionaly does boot sales) but at the minute the weather isn't great for them. After christmas we have tons of clothes and toys we no longer need too so maybe ebay is a quicker option.

I spoke to someone from payplan today who advised me to contact my creditors with a token payment which I will do, and I am going to speak to someone from my local HSBC branch tomorrow as that is where a big chunk of the debt lies. I'm nervous but I'm sure I will feel tons better afterwards.

Floxxie

Hi Toni,

Just in case you weren't aware, if you are receiving SMP you can work in a self-employed capacity without losing your SMP so for example you can do mystery shopping. Thought I would mention it so you don't feel you can't earn whilst on maternity leave.

Floxxie.

CLAPTON

you have several debts with HSBC and you current a/c

you should open a new current a/c with a bank with which you have no debts and ensure your income is paid into otherwise HSBC may use you full income to pay 'its' debts...right to offset debts etc

GeorgeUK

Mortgage................................ 540
Payment holiday? Is it interest only or repayment?

Council tax............................. 90
If paying over 10 months, can you ask to pay it over 12?

Mobile phone............................ 70
Can you change to PAYG?

Telephone (land line)................... 18
Satellite/Cable TV...................... 38
Internet Services....................... 17
A package may be cheaper.

Groceries etc. ......................... 200
You might be able to cut down a little. Have a look at the old style board. Can you do meal plans so you can buy ingredients in bulk and freeze meals so you know what there is and aren't tempted by impulse shopping? Have you moved down a brand?

Would it be possible for you to get a 0% creditcard? If you can get a Virgin card, it is 0% for 16 months and from the 2nd month onward minimum payment is only £25. As you are only £196 short each month you may be able to save this on the card payments or if you are able to clear the loan early - Virgin allow money transfers at 0% too, but you would need to check if there was an early settlement penalty.

If you have any bank or credit card charges, i would reclaim these too.

goodeys

Yeah definitely do as GeorgeUK says and get another bank out set up and make sure that your money goes into the account. As soon as I spoke to Natwest re my problems they demanded my cards back, but at that time I was already in arrears so they were well within their rights. Definitely speak with the DWP and see if you can perhaps get income support if you are on the government maternity allowance they this is not classed as a taxable income, if it is your employer paying it though then I believe that this is classed as taxable. As soon as you are in receipt of a benefit like incme support then you can receive council tax reduction (that's if you haven't already!)