Income is so much lower that outgoings....SOA attached

Delboysgal

Hi, I'm new to posting on here but not new to MSE as I have been a lurker for sometime! MSE has helped me on other things,but I have never been brave enough to post...so here I am posting for the first time and basically tell you all!! EEEKKKK!!:eek:

Here's a bit of background before you look at SOA

My DH lost his job in Dec 2008. TBH we were just about keeping out heads above the water around then and was relying on DH sometimes good bonus' or using CC's for shopping and fuel. We was lucky to have a very good redundancy policy that not only covered our mortgage but paid the HP loan and almost all the essential outgoings. We used the policy on the 2nd secured loan to cover that each month. All this and JSA and WTC meant that we was actually BETTER off than when DH was employed in fairly well paid job!

Good news hubby was re-employed recently, but the pay is lower than the job he had to leave. Along with us having to pay mortgage/2nd mortgage and no benefits, it has hit hard that our outgoings are far larger than our income.

Whilst DH was unemployed, we negotiated with Virgin and Halifax CC's to reduce the payments as they were our 2 biggest unsecured debts. After much negotiation, the figures on our SOA is the agreed figures. We have put the mortgage on interest only (figure as on SOA), but will be looking to contact mortgage lender to enquire about Homeowner Support Scheme. I have read about it on Direct.gov and it looks like it may apply to us.

I am in the process of applying for a 2nd part time job which will provide some much needed income, but will in no way be enough to cover all our outgoings also my DH will get store bonus', but these are not guaranteed and are not a set amount, so cannot be included.

Oh I haven't included APRS as I would need to sort out paperwork and thought that they would be irrelevant as we wont be changing CC's..

We are in the process of writing letters to all CC/SC debts stating no money(will use template letter from National Debtline) and will say about how we are trying to increase income... We have not been able to pay any of our CC & SC debts this month

Any help/advice/suggestions or questions are greatly appreciated and welcome. I know from being a long time lurker that the majority of you all a very nice

Thanking you in advance

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.................... 2

Monthly Income Details
Monthly income after tax................ 577
Partners monthly income after tax....... 1686
Benefits................................ 132
Other income............................ 0
Total monthly income.................... 2395

Monthly Expense Details
Mortgage................................ 872
Secured/HP loan repayments.............. 880
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 187
Electricity............................. 100
Gas..................................... 0
Oil..................................... 0
Water rates............................. 52
Telephone (land line)................... 19
Mobile phone............................ 50
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 17
Groceries etc. ......................... 250
Clothing................................ 0
Petrol/diesel........................... 250
Road tax................................ 22
Car Insurance........................... 60
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 25
Contents insurance...................... 0
Life assurance ......................... 33
Other insurance......................... 75
Presents (birthday, christmas etc)...... 10
Haircuts................................ 15
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2949


Assets
Cash.................................... 0
House value (Gross)..................... 200000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 201000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 171000...(872)......6
Secured Debt.................. 62000....(540)......0
Hire Purchase (HP) debt ...... 10000....(340)......0
Total secured & HP debts...... 243000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Virgin CC......................11812.....150.......0
Halifax CC.....................8231......99.5......0
Egg CC.........................7200......198.......0
Evans..........................250.......10........0
Dorothy Perkins SC.............278.......10........0
Barclaycard CC.................1764......39........0
Abbey CC.......................2242......53........0
RBS CC.........................4097......70........0
mint CC........................3248......75........0
Total unsecured debts..........39122.....704.5.....-


Monthly Budget Summary
Total monthly income.................... 2,395
Expenses (including HP & secured debts). 2,949
Available for debt repayments........... -554
Monthly UNsecured debt repayments....... 704.5
Amount short for making debt repayments. -1,258.5

Personal Balance Sheet Summary
Total assets (things you own)........... 201,000
Total HP & Secured debt................. -243,000
Total Unsecured debt.................... -39,122
Net Assets.............................. -81,122

rupe34

:Tfor posting delboysgal - the experts will be along soon I'm sure - but well done for putting it all down in black and white :T

Delboysgal

Thankyou Rupe34

It's a tad late for most so not expecting too much to happen tonight...

MrsTinks

Initially looking at those figures I think you need to speak to one of the debt charities and discuss bankruptcy... the gap is simply too big and your partners entire income goes towards covering your mortgage and secured loan. It may mean giving up your home but with the secured loan you are in so much negative equity that a clean slate may be the best way forward...

firestronaut

Delboysgal wrote: »

Hi, I'm new to posting on here but not new to MSE as I have been a lurker for sometime! MSE has helped me on other things,but I have never been brave enough to post...so here I am posting for the first time and basically tell you all!! EEEKKKK!!:eek:

Here's a bit of background before you look at SOA

My DH lost his job in Dec 2008. TBH we were just about keeping out heads above the water around then and was relying on DH sometimes good bonus' or using CC's for shopping and fuel. We was lucky to have a very good redundancy policy that not only covered our mortgage but paid the HP loan and almost all the essential outgoings. We used the policy on the 2nd secured loan to cover that each month. All this and JSA and WTC meant that we was actually BETTER off than when DH was employed in fairly well paid job!

Good news hubby was re-employed recently, but the pay is lower than the job he had to leave. Along with us having to pay mortgage/2nd mortgage and no benefits, it has hit hard that our outgoings are far larger than our income.

Whilst DH was unemployed, we negotiated with Virgin and Halifax CC's to reduce the payments as they were our 2 biggest unsecured debts. After much negotiation, the figures on our SOA is the agreed figures. We have put the mortgage on interest only (figure as on SOA), but will be looking to contact mortgage lender to enquire about Homeowner Support Scheme. I have read about it on Direct.gov and it looks like it may apply to us.

I am in the process of applying for a 2nd part time job which will provide some much needed income, but will in no way be enough to cover all our outgoings also my DH will get store bonus', but these are not guaranteed and are not a set amount, so cannot be included.

Oh I haven't included APRS as I would need to sort out paperwork and thought that they would be irrelevant as we wont be changing CC's..

We are in the process of writing letters to all CC/SC debts stating no money(will use template letter from National Debtline) and will say about how we are trying to increase income... We have not been able to pay any of our CC & SC debts this month

Any help/advice/suggestions or questions are greatly appreciated and welcome. I know from being a long time lurker that the majority of you all a very nice

Thanking you in advance

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.................... 2 Do you really need two cars? Your immediate answer might be yes, but have a long hard think about whether you can manage with one.

Monthly Income Details
Monthly income after tax................ 577
Partners monthly income after tax....... 1686
Benefits................................ 132
Other income............................ 0
Total monthly income.................... 2395

Monthly Expense Details
Mortgage................................ 872
Secured/HP loan repayments.............. 880
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 187
Electricity............................. 100 Is this the cheapest tariff in your area? There's plenty of ways to save on electricity
Gas..................................... 0 is this correct?
Oil..................................... 0
Water rates............................. 52
Telephone (land line)................... 19
Mobile phone............................ 50 As you have a landline, you shouldn't need to make too many phone calls from your mobile, see if you can reduce your tariff.
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 17
Groceries etc. ......................... 250 an excellent amount! I can't fault you on this, but there's also room for improvement try dropping a brand or two and plan meals in advance
Clothing................................ 0
Petrol/diesel........................... 250 Combine errands to save petrol, walk or use public transport at least once a week and for short journeys not requiring a car
Road tax................................ 22
Car Insurance........................... 60
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 25
Contents insurance...................... 0
Life assurance ......................... 33
Other insurance......................... 75 what is this for? is it really necessary?
Presents (birthday, christmas etc)...... 10
Haircuts................................ 15 how many heads are in this budget?
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2949


Assets
Cash.................................... 0
House value (Gross)..................... 200000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 201000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 171000...(872)......6
Secured Debt.................. 62000....(540)......0
Hire Purchase (HP) debt ...... 10000....(340)......0
Total secured & HP debts...... 243000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Virgin CC......................11812.....150.......0
Halifax CC.....................8231......99.5......0
Egg CC.........................7200......198.......0
Evans..........................250.......10........0
Dorothy Perkins SC.............278.......10........0
Barclaycard CC.................1764......39........0
Abbey CC.......................2242......53........0
RBS CC.........................4097......70........0
mint CC........................3248......75........0
Total unsecured debts..........39122.....704.5.....-


Monthly Budget Summary
Total monthly income.................... 2,395
Expenses (including HP & secured debts). 2,949
Available for debt repayments........... -554
Monthly UNsecured debt repayments....... 704.5
Amount short for making debt repayments. -1,258.5

Personal Balance Sheet Summary
Total assets (things you own)........... 201,000
Total HP & Secured debt................. -243,000
Total Unsecured debt.................... -39,122
Net Assets.............................. -81,122

Start a spending diary as money is easily frittered away.
Hope this helps

property.advert

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

Monthly Income Details
Monthly income after tax................ 577
Partners monthly income after tax....... 1686
Benefits................................ 132
Other income............................ 0
Total monthly income.................... 2395

Monthly Expense Details
Mortgage................................ 872
Secured/HP loan repayments.............. 880
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 187 seems high for a property valued at only 200k ?
Electricity............................. 100
Gas..................................... 0
Oil..................................... 0
Water rates............................. 52
Telephone (land line)................... 19
Mobile phone............................ 50 high - still in contract ? if so, can you reduce ?
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 17
Groceries etc. ......................... 250 not bad for 4 people, could shave some off but not much
Clothing................................ 0
Petrol/diesel........................... 250 I don't know what petrol is but if £5 a gallon and 40 to a gallon then you are doing 250/5*40=2000 miles a month. Seems very high
Road tax................................ 22
Car Insurance........................... 60
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 25
Contents insurance...................... 0 no contents insurance ?
Life assurance ......................... 33
Other insurance......................... 75 what is this for ?
Presents (birthday, christmas etc)...... 10
Haircuts................................ 15
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2949

where do you account for the money you have in your pocket to pay for lunch or to buy a newspaper or a snack ?

Assets
Cash.................................... 0
House value (Gross)..................... 200000
Shares and bonds........................ 0
Car(s).................................. 1000 no interest in what I am presuming is the second car on HP ?
Other assets............................ 0
Total Assets............................ 201000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 171000...(872)......6
Secured Debt.................. 62000....(540)......0
Hire Purchase (HP) debt ...... 10000....(340)......0 is this for one of the cars ?
Total secured & HP debts...... 243000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Virgin CC......................11812.....150.......0
Halifax CC.....................8231......99.5......0
Egg CC.........................7200......198.......0
Evans..........................250.......10........0
Dorothy Perkins SC.............278.......10........0
Barclaycard CC.................1764......39........0
Abbey CC.......................2242......53........0
RBS CC.........................4097......70........0
mint CC........................3248......75........0
Total unsecured debts..........39122.....704.5.....-


Monthly Budget Summary
Total monthly income.................... 2,395
Expenses (including HP & secured debts). 2,949
Available for debt repayments........... -554
Monthly UNsecured debt repayments....... 704.5
Amount short for making debt repayments. -1,258.5

Personal Balance Sheet Summary
Total assets (things you own)........... 201,000
Total HP & Secured debt................. -243,000
Total Unsecured debt.................... -39,122
Net Assets.............................. -81,122[/QUOTE]


OK, How you got to 243k on a house worth 200k I'm not sure.

£171k costing you £872 on interest only is a rate of 6.12% - is this right ?
£62k costing you £540 a month on interest only is a rate of 10.45% is that right ?

If you chuck all your cards, you'd need £1400 or so for the mortgages and you get £2400 or thereabouts. The second car would have to go as you can't afford the £340 a month for that. That leaves you around £850 after council tax.

You'd be trimming something off your fuel, insurance and tax for losing the second car. A couple of answers to some points might explain what the other amounts you have put down represent.

You might as well take repayments on ccs down to £1 a month as you cannot pay them.

Not sure how you go BR and keep the house in this one. You'd be 40k in debt on the house and the second charge would lose all of it. I'd personally not worry about the negative equity as that will surely come right in years to come. I would worry about the second charge.

Your first mortgage only needs 171k back from around a 200k property. They are not pressurised to do a deal with you to push your interest rate down from a very high 6%+ to a more normal 3-4% or so.

However, the same is not true of your second mortgage holder. If you go BR and chuck the house away as well, then they are going to get nothing back. Likely not a penny, a maximum of perhaps 10k but most probably nothing.

Them losing 60k is not so straightforward. They can offset that 60k against profits elsewhere so technically, they would only lose maybe about 40k.

If they were to reduce the interest rate to 5% then your interest only repayments would fall from £540 a month to £258. They would stand a chance of getting their money back and would be getting 5% on their money. I don't mean a deferred interest deal, but where they simply rip one deal up and give you another one at a much lower interest rate.

Now the BR experts will say whether that could be structured. I'm not one of them, knowing all the technicalities. I just try to think out of the box and approach problems from a business perspective.

From my chair, if I am your second lender, I've lost my money as soon as you go BR and I only have the tax offset to come back so I'm down around 40k with no chance ever of getting that back. On the other hand, here is deal which, at worst, sees me no worse off, save for the 20k tax credit and I can write the whole 60k down as a bad debt in year one anyway but I might get something back, over time, and some interest in the meanwhile. I reckon I would go for that.

Now hopefully someone who knows the ins and outs will help out how or if you could do that.

milliemonster

I agree with the others, I think the only option avai;lable to you realistically is bankruptcy, due to the amount of income you have against what the house is costing you.

Although you are in negative equity and there are no assets in the house that would be taken in BR, the fact that repayments are costing you 3/4 of your income would mean that the Official Receiver would probably take the house and expect you to rent somewhere cheaper. This would mean that all your debts would be wiped, your secured loan would become unsecured and also wiped and you would be mortgage free to start over. Its a big step, I know. You wouldn't be expected to leave your house straight away after BR, as you have children the OR wouldn't be interested in your house for up to a year anyway.

However, if you did go down the BR route, you would be better off voluntarily surrendering your house beforehand, finding somewhere to rent beforehand, changing your bank account to a basic account and then not paying anything at all towards your debts (including the mortgages) to save the fees for BR, but before you do consider any of this you need professional advice

I know all this sounds incredibly scary but even if you went on a DMP, it would take you years to pay it off and even then you would still be struggling just to pay your normal monthly bills with that house.

You need to speak to one of the debt charities urgently and even pop over to the bankruptcy board for advice, they are a brilliant bunch on there.

If I were in your shoes, I would be seriously considering it as an option

Delboysgal

I would like to thank those who have come forward with questions and advice and answer them.

Firstly may I say that BR is such a scary word and makes my stomach flip just saying it...I agree that it is an option but I don't think this is my first option.

We will not and do not want to stay in this situation. The income is not set in stone forever and the house prices will at some point go up, although I am not basing my finances on that assumption.
My DH WILL move back up the ladder, increasing his income. I WILL go full time and would consider keeping the 2nd part time job I am currently applying for. I agree that if we get to the point of paying "something" off of our debts, then it will be a very long time before its paid off, but with the amount of debt we have, it would of been a long time on minimum payments.

So to answer some of the questions and suggestions I will go through them as they appear on the threads...

Really need 2nd car? ...We live in a rural area, no shops, schools, amenities etc etc. Our nearest corner shop is over 3 miles away and with bendy country roads with no paths and that you can drive at 60mph on, they are not ideal for popping to the shop. Our nearest supermarket is 10miles away. I work 10miles(one way) from home and my DH works 40miles(one way) from home. We work in separate directions and at different times. Bus service is infrequent and only takes you to next village where you need to catch another bus. So unfortuantley so that My DH and I can work to bring in an income we both need a car. However I am mindful of petrol costs and keep trips to essential. Up until recently I was having my shopping delivered from supermarket as I had discovered free delivery codes on MSE..however these have dwindled recently and it has become necessary for me to use the car to shop. I try to combine this with another trip to save.

Cheapest Elec Tarriff?..Yes we have had several problems with current supplier after switching to them 16months ago. Bills have not been right and so our bills are slightly higher to pay off outstanding amount.

Gas?.....We are all electric no gas.

Mobiles....too early in contracts to negotiate down,but of course will as soon as poss

What is £75 other income?...This is a redundancy/sickness insurance. This is what saved our bacon when my husband was made redundant last year. I feel this is an essential outgoing what with the economic climate and esp as my husband is new to a company.

How many heads for haircuts?..2, my DH & DD make do at home

Council tax high?....Yes it is until April 10. We are paying slightly more due to error whilst on CT Benefit last year. I estimate that CT will be around £130 in April.

Petrol costs......as already stated where we live and work, I drive about 100 miles pw and my DH around 400 miles pw...so the figures are spot on.

Contents insurance?....Yes included in £25 stated for Building Ins...I didn't have paperwork to hand to split it...sorry!

Money for lunch/newspaper?.....Not essential, newspaper is yesterdays news anyway!

HP debt?.......is for one of the cars. The £1k asset is the other car.

How can mortgage&2nd loan be more than house is worth?........re mortgaged when house prices were higher, household had better income. 2nd loan allowed you to borrow upto 135% of value after 1st mortgage

Interest rate for Mortgage & 2nd loan correct?.....Yes to mortgage as this was fixed for 5years. Done when interest rates & house prices moving up. 2nd loan is with First plus(anyone familiar will know they are not the best option). This loan is on a variable rate and has increased several times since having it, even when base rate was being reduced!

Advised to rent...tbh the rental would be around what we are paying for our mortgage and if it was suggested to move closer to one of our work places, cutting down the need for a car also. This would actually mean even higher rental as you are talking towns. Plus there would be a schooling issue so a car would be required for a while for that.

Just one other thing....I still have the option of trying to get onto the Homeowner Mortgage Support Scheme. Our bank is signed upto it and it looks like we could be ideal. If that was successful and we paid back the minimum 30% of our interest payments then this would be £261. Take the £50 odd saving in CT in April and we have around £660 to come off the total outgoings. Add another £200 from 2nd income and we are upto £860. By my working out we could have around £300 to pay towards the CC's. And all this and my DH could earn bonus'..I know not guaranteed but one of the bonus' is 6% of year salary...all will go into pot to pay off debts.

Our hope and vision is that we get back to where we once was. We may still have debt, but as far as I am concerned debt is only a problem when you can't pay it

Thanking you all again

MrsTinks

Ok I still think you're looking at too big a gap but it ultimately is your choice

In the mean time - the car on HP - have you looked at the agreement? Once you have paid half of it can you hand back the keys without penalty? If you can then this would be seriously worth looking at and buying a MUCH cheaper car for your OH. What is the big concern is that right now the numbers say that you can't afford your essentials AND your secured debts. Forget the unsecured for a second - they're of little importance in the grand scheme.
How soon can you go full time and what salary are you looking at getting when you do? Can your OH take on a second job too?
I don't usually scaremonger but the deficit you are looking at is to say the least considerable... shaving £50 off here and there isn't going to cut the mustard. You need over £550 just to manage your secured debts and bills - On top of that you need another £700 to meet the minimum repayments on your unsecured debts. So making absolutely minimal inroads into your debts...
Bonuses... forget about them - they may happen, but right now unlikely to materialise. If they come along consider them a bonus.

Whilst I never tell people to look at BR as a first option then I think given all the figures here then if you take them to one of the debt charities this is exactly what they will tell you too...

In the mean time - good luck with the government schemethingy. It would certainly help you a little along the way - I just thing things have gone too far as they stand to get out without a serious increase in income (nearly £1300 worth a month minimum...) and also some spending habits that look like they need to change

Tixy

Sorry if I'm misunderstanding but if you cut your outgoings by £660 and can increase income by £200 then you'll be £860 better off - but you'd still be short of meeting your debt repayments by (1259-860) £400 per month. So I can't see where you get the £300 to pay additional off the credit cards?

I do agree with the others that you need some professional advice and soon. Because you are in such a serious position I would get advice from at least 2 sources.

I know the idea of BR is scary but don't write it off altogether.

Regarding the life assurance & other insurance, whilst I agree its a good idea to have this it does seem very costly, shop around to see if you can get a comparable policy for less (not forgetting cashback sites).

How much is the £10k HP car worth? you have included the debt not the asset? How far into the repayments are you? (wondering if you could hand back and get a cheaper run around, giving you one less debt to service each month).

I do understand your statement that debt is only a problem when you can't pay it but the fact is you cannot pay it right now.

In the meantime are you entitled to any tax credits? how many hours do you work? are you not full time due to the age of children and how soon could you resume full time working? will your current employer give you a full time job?

Good luck and do seek some professional advice.

MrsTinks

Tixy wrote: »

I do understand your statement that debt is only a problem when you can't pay it but the fact is you cannot pay it right now.

I was going to say this too but thought I might be coming across a little negative - however Tixy is right... this IS a problem because right now you CAN'T pay.