£43k Debts. Self-employed. Urgent help needed!

Derek_Trotter_2

Hi all

I hope people aren't offended by the stupidity that has caused my situation, but I'm in need of some practical suggestions and expert advice to try and regain some control.

My wife & I have been together for just over 5 years and for the whole time I have been overspending, borrowing more & more on credit cards with a tragic head in the sand approach to the whole thing and we're now sitting on unsecured debts of £43k.

We have nearly always been on big enough salaries to make me think we could pay our way out with balance transfers, consolidating and other tricks, but each time we did it we (primarily me) always continued to spend more.

Earlier this year we took the drastic step of selling our house to clear some of our debt, buying a small flat instead of our terrace house, but had to pay about £6k to the mortgage company for early redemption due to their refusal to port our mortgage accross to the new property when they found that my wife was on a temporary contract at work.

I have recently lost my job (dismissal, my fault again), and my wife, whose stress levels have been through the roof, to the point where physical illness has become a regular occurrence, has quit her full-time job to pursue a private music teaching practice (potential same money for half the hours).

The impact of this is that whereas before, when we were both employed, we were just managing minimum payments and living on our wits through card tarting etc (we've been really good for the last year or so), we have now reached the point where we will not be able to meet the direct debits scheduled for 1st April.

I now have a window-cleaning business which is expanding slowly, and has good earning potential, but is still about 35% short of where I need it to be, and it keeps raining. We can still meet the mortgage and the council tax, utilities etc, but can only just manage about £100 of the £700+ per month of debt repayment.

Anyway here's the SOA in detail:

Debts:

First Direct repayment agreement: £24768.00, £275 P.M.
Intelligent Finance loan: £6118.00, £114.28 P.M.
La Redoute catalogue: £115.48, £5 P.M.
LTSB Mastercard: £4311.10, £87.00 approx minimum payment
Amazon Mastercard: £1657.64, £33.13 approx minimum payment
Halifax Mastercard: £1377.57, £27.54 approx minimum payment
MBNA Mastercard: £0.00 yippee (credit limit £3k)
Barclaycard Visa: £5041.50, £127 approx minimum payment
Debenhams storecard: approx £600, £25 approx minimum payment

Total: approx £43989.29, £697.95 approx monthly payments

We also have a mortgage of £89,995, paid at a fixed rate for 3 years @£512.82 P.M.

Other monthly outgoings:

Service charge on flat: £54
Mortgage life cover: £33.24
Council tax: £105
Gas/electric £48
Gas/electric debt (until 25th May 06) £38
Water (metered) £28
Mobile phone (new contract, necessary for biz): £35
Mobile phone PAYG £10
Income protection policy (replaces policies on cards) £20
Broadband/line rental/free weekend calls (5 months left on contract) £33
Call 1899/18185: approx £4
Prescriptions £13
Charitable donations £12
Car/contents insurance (with same company) £57.28
Car tax £10
Business expenses £26
Haircuts £20
Clothing £25

Total: £571.52

Weekly expenditure:

Fuel: £35
Shopping (inc toiletries & pet food): £80
Tax (put away for self employment): £30.83
NI Contributions: £4.20
Entertainment: £30
Weekly total: £180.03

Monthly total: (weekly total x 52)/12 = £780.13

Monthly Income

This is very complicated to calculate, but it comes in on average for the two of us at £1760.24

Conclusion: we're about £600 down per month.

We have already taken several measures to drive down costs, as per MSE site tips:

Ditched credit card payment protection schemes
Tarted with LOB rates and low fixed term rates on credit cards
Changed and threatened to change utilities and phone providers respectively
Joined call 1899 & call 18185 for phone calls
Got cheap line rental/broadband/weekend calls deal

We are also in the process of investigating reclaiming our unfair bank charges, which we estimate to be in the region of £4000.

Tomorrow, we shall be contacting one of the free debt support agencies, probably the CAB, to consider our options. I shall also be contacting various companies who we pay direct debits to, in order to try and get payments spread out across the month rather than all on the 1st.

So, that's our situation in a very large and complicated, seemingly inescapable nutshell. At present, it is affecting every aspect of our lives and is taking away all of our choices. I know that this is a direct result of my irresponsibility, but it is not the fault of my wife, and it is sadly ironic that it is her health and mental wellbeing that is suffering as a result, as opposed to mine. I am now desperately looking for a practical solution that will help us get on our feet again. I am very disappointed that I can no longer solve the problem through simple hard work and moneysaving - something that I though would be possible when we made what we thought was the ultimate sacrifice when we sold our house.

In particular, we need to know whether we will be able to continue running our own businesses, whether we will be able to keep our flat and car, and where we will stand with my wife paying for necessary training in relation to tax paid on her self employment. Also, now that we are on a considerably lower income, will we be entitled to any government help such as tax credits?

Any advice will be very much appreciated.

It may also be useful to know that as yet we have no CCJs or defaults, although I cannot see that being the case in about two months time.

john_kent

I was in a similar postition . I have ditched the self employed but and going back to full time work. My creditors just didnt wnat to talk , but as soon as I could proof I was looking for work , they helped.

Just a quick look through I see a few small quick wins

1) Get rid of the PAYG phone. Us eyour biz mobile for all calls if necessary
2) prescriptions. There is a way to pay a fixed fee for all prescriptions. Pay it and then your covered for a year
3) Charitable Donations. Are they necessary. I use dto pay £8 a month to a charity. Cnat afford it , but offer 3 hours of my time a month in the local shop. Just sorting stuff for sale.
4) £80 is a lot for a week shop for two. In myhous e, we now bulk buy non edibles like washing powder from Costco. Cut out all the stuf that are treats like crisps sweets etc. Look through this site and se ethe many great ideas for good tasty food at really cheap prices. I recommend the Asda noodles at 8p a pack.


Now the long term gains. gains you wont see for a while

1) Turn off lights. Recycle water (bath water is good for plants around house). Use showers. Use saucepan lids to cut down on lost heat. Only boil what you need
2) Walk if you can
3) Cut up the cards. It will be hard , but this forced me into accepting a new lifestyle
4) Find a part time job. I work 12 hours a week delivering takeaways. Free food per shift and tips as well. Gives me £340 a month in earnings plus £60 in tips. It may be a c**P job , but it makes a massive difference £4800 a year differnece

In summary , there are many ways you can get help. CAN or CCCS have helped me. But the question is

DO I WANT TO CLEAR MY DEBTS OR DO I WANT TO RESTRUCTURE MY DEBT SO I CAN CONTINUE MY LIFESTYLE?

If its the first , then you will need to look at your whole lifestyle from what you eat when , walking , tv , phones. Everything.

Good luck and you have found the right place

debtman_3

Good Morning Derrick

I read through your post & I'm the last person to tell you how to cut back, but you said your wife was teaching music, at least that probably helps her keep her sanity & her stress levels down a bit, I don't have any tips for saving money but could you take on any small handyman jobs with your window washing customers, that may throw a little more money in the pot, I'm in a similar situation as you but more than double your debt 98.000 unsecured, never been behind in any payments & unles I get a secured loan on my house in the next 4-5 weeks I'll start going behind 1st of may, but anyway back to your dilemma don't give up even if you do default on a few debts, your obviously hard workers & as your post shows you love your wife & thats all a recipe for success if ever I saw one

Derek_Trotter_2

Thanks John

I appreciate the time taken to read & reply.

I hope the following doesn't sound like someone making excuses, being negative or unwilling to change; read on past it and you'll see that there are some of your ideas that I am willing to consider and/or change.

Unfortunately, the self-employed pays more than I can imagine getting anywhere else - I'm earning more through 16 days per month (and I'm still canvassing) than I was full-time on an £18.5k salaried job which was what I considered to be at the top of my career ladder (no window cleaning pun intended).

I've already cut the cards up.

The PAYG mobile is for my own biz, pretty much incoming calls, apart from when I'm not with wife (at which times I make all the calls either on her phone or on the landline, whichever would be cheaper.

As far as I see it, the pre-pay prescriptions idea is only cost-effective if you are already getting 3 or more per month, and we only get two.

We already shower rather than bath, the lights are going off quickly as poss, and we hardly use the kettle.

The charity is our religion (the group we belong to) and is taken through gift aid, so comes off our tax bill. We (voluntarily) see it is a duty to give something to it and have reluctantly reduced it to the current level.

Now the positives:

Shopping. We know its too much and the big reason is wine - very stressed etc, going through 1-2 bottles of Soave (£2.52, cheapest we can find) most nights. Also a big expenditure is the amount of fresh fruit and veg we get through - my wife's got irritable bowel and the processed stuff, although cheap, really makes her ill. But theoretically, the wine can be really cut down on. Any more tips on buying in bulk (who/where are Costco? Do they operate in/near Norwich?) would be useful.

Walking. We are very environmentally concious (I'm a keen recycler and also use (https://www.freecycle.org) and feel guilty all the time! The car is used for shopping, driving to window cleaning customers, and I'm looking into ways to reduce driving all the time.

Thanks again, also to Debtman.

tyllwyd

Hi! It is going to be tough trying to sort things out in time for your direct debits at the start of April - I agree you should try to ring up any of the companies so that, if possible, you don't end up with huge bank charges when they fail

Haircuts, clothes, entertainment - those are all going to have to wait, I think! And as someone said, £80 per week on food is a lot for just two of you.

Have you sold everything you can spare - books, music etc?

From what you say, if you want to keep on with your self-employment I think you need to find something to go alongside your windowcleaning to keep you going through the winter. Something like Hillary's blinds came to mind - you could do that in evenings/weekends, or Kleeneze or one of the other similar companies. Or if direct sales was your wife's kind of thing, Bodyshop at home, Virgin Vie or one of the other partyplan companies might be worth looking into. Do you do any gardening, anything like that?

When it comes to tax credits, I guess that you are going to have to ring them up and ask. I'm self-employed though, and I don't find that the tax credit system works very well for me, because I think they base their figures on my earnings in the previous tax year and adjust it later when more accurate figures arrive. 2005/06 hasn't ended yet, so if you were employed in 2004/05 they might end up taking that as their initial figure, which is going to be hopelessly wrong. Even the figures for 2005/06 aren't going to reflect your current situation. But having said that, I'm pretty mystified by the tax credit system so I may be completely wrong and you should definitely speak to someone who knows what they are on about!

CLAPTON

there is some scope for reducing your spending although it doesnot seem enough to meet the shortfall. ..shopping at 80 per week for only two people is quite high and could be reduced, going out at 30 is a cost you can't afford, charity donation need to be suspended until your finances improve, but this probably only saves about 70 per month which is far too little

you options are basically:
increase income....what is the realistic potential for you and OH to increase your income and in what timeframe?

if increasing income is not realistic then the you simply can't pay your debts. Depending upon how much equity is in the flat and whose debts they are (are they in your name only or spend between you), then you need to either enter a debt management plan /IVA of some sort or become bankrupt.
In any event you need to talk to CAB or CCCS/Payplan about these options

sanfrancisco

where is your mortgage or rent payment?

Your income seems to EXCEED your outgoings? Am I missing something?

Cantdance_2

Welcome to the site and good luck on getting your debts manageable! My wife and I have a similar debt level to you and although we have two good salaries coming in we're only just making ends meet at the moment. We actually considered downsizing to a flat same as you did, honestly I'm glad we didn't because we hadn't had a lightbulb moment and wouldn't have adjusted our lifestyle accordingly.

Anyway, most of us here now know where we went wrong and are trying our hardest to make things work!

My wife also has quite strict dietary requirements (dairy allergy) and I insist on eating lots of fresh fruit and vegetables every day, yet I just managed to do a whole month's shopping for the 2 of us and the cat on £100. I figure we'll also need to spend about £5 a week on fruit and veg.

I don't know if you have a Tesco nearby but my local Tesco has just cut the price of all their Value range of fruit and veg by half so there are now some incredible bargains to be had. 10 bananas for 47p, 8 apples for 45p, 8 pears for 44p, big stalk of brocolli 23p, 2 kilos of carrots for 43p, 500g of mushrooms for 64p, the list goes on!

If you're not too fussy about varieties or how the fruit and veg look (they taste great!) then these are a godsend.

The other way I've saved is by shopping around. Nearby to me, I have Tesco, Asda, Sainsbury, Waitrose, Aldi, Lidl, Netto, Wilkinson, Poundland and several local greengrocers and butchers. I spent one Saturday trudging round all these shops comparing prices on the things on my shopping list and then went home and put it all into a spreadsheet, so all I need to do for my monthly shop is pick an item from a drop down list and find the cheapest shop. Yes it took a day out of my life and probably cost me a couple of quid on petrol but it's saved me loads!

For reference, I now buy the majority of tinned and packaged goods from Netto and Aldi, with my fresh stuff coming from Tesco and the toiletries from Wilkinsons.

Hope this helps!

James

Pennywise

I don't want to put a dampener on your enthusiasm and the excellent advice already offered, but I see a major flaw in your plan.

Your provision tax and national insurance on your self employed income seems exceptionally low. You say that your s/e earnings are more than £18k p.a. which suggests your tax and NIC liability will be a few thousand per year.

Whilst it is extremely useful in the short term to use all your s/e income against your debts, you need to have a plan for your forthcoming tax/NIC liabilities which do catch a lot of people by surprise.

January is probably the worst time for you to have a tax bill because you'll probably not have been doing much s/e work over the winter. The tax office are not particularly lenient so will want their pound of flesh relatively quickly after the due date.

As for tax credits, whatever you do, make sure you apply immediately, even if your combined income suggests you may not be eligible. The reason is that claims can only be backdated for 3 months. Make a provisional claim based on whatever historical or current information they ask for. If it results in a "nil" award, don't despair as it can be amended later when your accurate income is known. A "nil" award can be amended to a real amount when more accurate information is known, say a year later, and backdated for that year, but if you don't apply at all, it can only ever be backdated for 3 months.

tyllwyd

Derek_Trotter wrote:

Any more tips on buying in bulk (who/where are Costco? Do they operate in/near Norwich?) would be useful.

Costco are a cash and carry warehouse (http://www.costco.co.uk/default.htm). You have to pay a membership but as you are self-employed you should qualify. If they are not close to you, it would be worth looking to see if there is anything else similar.

fatheralice

As far as I see it, the pre-pay prescriptions idea is only cost-effective if you are already getting 3 or more per month, and we only get two.

The cost is approx £34 for 4 months, or £94 for 12 months - this works out as 5 and a bit Rx items in 4 months or 13 and a bit in 12 months (currently £6.50 each going up to £6.65 1/4/06.

Therefore it IS worth while if you have 2 items per month for 28 days supply at a time ie this would be 8 items in a 4 month period, plus any additional acute items such as a/biotics.

Note the increase 1/4/06 - the cost of the prepayments will also increase, so it is worth getting one now if you think it worthwhile.

Also, be aware that you can back date claims, so ask the pharmacy for an fp57 reciept when you get it dispensed- that way, if you have just got a Rx, and only later decide to get the pre payment - you can claim back the original Rx charges.