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I can't quite believe it's got this bad

edited 30 November -1 at 1:00AM in Debt-Free Wannabe
159 replies 47K views
TalheedinTalheedin Forumite
21 posts
edited 30 November -1 at 1:00AM in Debt-Free Wannabe
Insert From Martin.

This thread below really moved me (and i suspect will continue to do so as it grows). It shows that there still is community even in the virtual world, with people willing to give time and effort to help others, without any reward. Long may it continue and thanks to all those who contribute, both here and to the rest of the Forum. If you've just come from the tip and have serious debt problems yourself, please first read 'Where to start with problem debts' to get the lie of the land.

On with the actual discussion

_____________________________________________________

Hi MoneySavers,

I’m hoping for some advice about what we should be doing to sort out our debts. I’ve listed our outgoings followed by some history and explanation and a list of what we are currently doing to try and dig ourselves out of the financial black hole we find ourselves in.


Total Owed
LLoydsTSB Plat. Over Draft £3500 £40/month 11.2%APR
Egg Credit Card £1000 £20/Month 15.9%APR
Cahoot Flexible Loan £10400 £300/Month 8.9%APR
Capital One Credit Card £9500 £300/Month 6.5%APR
LloydsTSB Loan £17200 £292/Month ?%APR
NatWest Mortgage £96000 £658/Month 4.85%APR

Total £137600 £1610/Month

The LLoydsTSB loan is unsecured with 5 years and 9 months to go and a redemption penalty of about £180.
The mortgage was fixed for 5 years and has 2 years 3 months to go with redemption penalties of 5%4%3%2%1% so at the minute it would probably be around £3000.

Bills
TV/Phone/Internet £80/Month
Gas/Electricity £100/Month
Water £26/Month
Life Assurance £18/Month
Council Tax £113/Month
Dog Insurance £15/Month
Washing Machine rental £13/Month

Total £365/Month

Car
Petrol £170/Month
Car tax £175/Year
Car service/MOT £800/Year
Insurance £377/Year

Total £170/Month + £1352/Year

Other
Childcare £44/Month
Childrens Savings £40/Month
House insurance £469/Year
Magazine Subscrip. £30/Quarter
Mobile Phones £15/Month
Food £400/Month
Clothes £60/Month

Total £559/Month + £30/Quarter + £469/Year

Savings
Egg Savings £43/Month

(Take Home) Income
My Wage £1850/Month
My Wife’s Wage £537/Month
Child Benefit £169/Month
My Wife’s CSA Payment £442/Month

Total £2998/Month


In vs Out
Out £34929/Year
In £35976/Year

Balance £1047/Year To pay for everything else for a family of seven!

OK, so there are people that I can blame for this (and I will in a minute) but most of the blame probably lies with me as I’m rubbish with money. I’ve just never learnt to budget until now when it’s really too late. I don’t even go out and buy everything I want at the drop of a hat (all though I do sometimes), I just pay for things as they come in thinking that I’ll pay the credit card later but there’s always something else so the card doesn’t get paid. My lovely Wife on the other hand is really good with money and never buys anything she hasn’t got the money for (she won’t even get a credit card). My other problem is that I like to splash out on loved ones when it’s their birthday or Christmas and as we’ve got five kids between us it gets kind of expensive.
The rest of the blame goes to the CSA and my Wife’s ex (always good to blame him). As soon as we got married he stopped paying maintenance and the CSA took 18 months to do anything about it and have refused to give us any compensation towards the debts we incurred because of this (any advice about this would be useful). We also found out that we were expecting our second child together just before our wedding and so all the plans we had about her going back to work to pay for the wedding went out of the window leaving us spiralling into the red. On top of that we had bought two cars from an auction both of which died just over a year later (within a month of each other) leaving us needing to buy another car and having wasted thousands on the other two.

We’re really starting to get desperate now.

To do something about this I’ve got an appointment with an advisor at NatWest this week to see if I can add the extra debt to my existing mortgage (and then cut up the credit cards). The 12 month contract with Sky is up in a couple of months so I’m going to drop down to the basic package and also get broadband with them which should save us £30 - £40 a month. I’ve even started jogging to work two or three times a week which I’ve worked out saves about £3 every time I do it and makes me feel much better. There are also small things here and there that we are trying to do to cut costs and raise a little cash but all of it seems fairly pitiful when compared to the nearly £1000 a month I pay out in unsecured debts alone.

There are a couple of rays of light though. First of all our house is now worth approximately £175000 so we have plenty of equity. Secondly all the debts are in my name as is the house and we don’t have any joint accounts so I believe that my wife’s financial record shouldn’t be tarred by mine. Finally we’ve realised what a mess we’re in and want to do something about it!

If I can’t get a good deal with my mortgage company then I’m going to go to the CCCS but I’m really worried about what will happen if we do that. The mortgage I’ve got at the minute is pretty good (4.85% fixed for five years) but runs out in just over two years time, will I be able to get another good mortgage while I’m doing the CCCS plan? What happens if I get made redundant or the CSA money stops coming in again or the car dies and we need a new one before the end of the plan? Presumably the creditors won’t be happy if I can’t stick to the plan, will they get together and take the house?

Just as an aside: all the debt management adverts say “We can even write off up to 70% of your debt!”, how can they claim this? Can they (or the CCCS as I wouldn’t go to one of them after the posts on this forum) actually write this debt off or is it just a gimmick?

Looking forward to some friendly advice and some sleep at night.

Thanks

Talheedin
«13456716

Replies

  • bikerqueenbikerqueen Forumite
    427 posts
    they can set you up on an IVA which will be an agreement between you and your creditors to wipe out a large proportion of your debt. however, you will have an unpleasant credit record for a a fair while, there are many threads and articles on this site about DMP, IVA, or bankruptcy, have a good read :)
  • Hi Talheedin,

    Welcome to MSE. You have options.

    e.g if you remortgaged all your debt onto your mortgage you would have (over 25 years) about £830 pound per month on a new 137K or so mortgage

    (instead of paying £1600 per month at the moment on mortgage + loans).

    However the DANGERS of consolidation onto the mortgage are

    1) You could well pay more interest overall because the debt is on a longer term.
    2)You are converting unsecured debt onto your house and if you default you increase the risk of losing your house.
    3)If you consolidate you may not change your spending habits and run up a fresh load of debt on credit cards etc

    First I would try to minimise spending / maximise income.

    Could you transfer some of the debt onto lower levels of interest rates / zero % interest rate cards ?

    Your house insurance looks high to me.

    Magazine subscription cancel.

    Childrens savings cancel and throw at debt.

    Anyway I wish you well keep posting.

    Best,
  • Hi Talheedin,

    Just my thoughts below...

    Talheedin wrote:
    Hi MoneySavers,

    Total Owed
    LLoydsTSB Plat. Over Draft £3500 £40/month 11.2%APR
    Egg Credit Card £1000 £20/Month 15.9%APR
    Cahoot Flexible Loan £10400 £300/Month 8.9%APR
    Capital One Credit Card £9500 £300/Month 6.5%APR
    LloydsTSB Loan £17200 £292/Month ?%APR
    NatWest Mortgage £96000 £658/Month 4.85%APR

    Total £137600 £1610/Month

    The LLoydsTSB loan is unsecured with 5 years and 9 months to go and a redemption penalty of about £180.
    The mortgage was fixed for 5 years and has 2 years 3 months to go with redemption penalties of 5%4%3%2%1% so at the minute it would probably be around £3000.

    Bills
    TV/Phone/Internet £80/Month
    Gas/Electricity £100/Month (this is very high - try uswitch to see if can be reduced)
    Water £26/Month
    Life Assurance £18/Month
    Council Tax £113/Month
    Dog Insurance £15/Month
    Washing Machine rental £13/Month (Any chance you can have a look for a cheap one to but - would cost in the sort term by save in the long term!)

    Total £365/Month

    Car
    Petrol £170/Month
    Car tax £175/Year
    Car service/MOT £800/Year (£800 per year? What for?)
    Insurance £377/Year

    Total £170/Month + £1352/Year

    Other
    Childcare £44/Month
    Childrens Savings £40/Month (This be stopped until you're back on your feet!)
    House insurance £469/Year (Wow seems high)
    Magazine Subscrip. £30/Quarter (Cancel these)
    Mobile Phones £15/Month
    Food £400/Month (Have a look at OS board - lots of savings to be made)
    Clothes £60/Month

    Total £559/Month + £30/Quarter + £469/Year

    Savings
    Egg Savings £43/Month (Throw at debts - saves you more in the interest saved on those high apr cards!)

    (Take Home) Income
    My Wage £1850/Month
    My Wife’s Wage £537/Month
    Child Benefit £169/Month
    My Wife’s CSA Payment £442/Month

    Total £2998/Month


    In vs Out
    Out £34929/Year
    In £35976/Year

    Balance £1047/Year To pay for everything else for a family of seven!
  • KatrinaC_2KatrinaC_2 Forumite
    532 posts
    Just to be a complete pain in the ***e I'm going to re-order everything as it makes the sums easier :)




    Income
    (Take Home) Income
    My Wage £1850/Month
    My Wife’s Wage £537/Month
    Child Benefit £169/Month
    My Wife’s CSA Payment £442/Month

    Total £2998/Month

    This is a very good income level, but is there anyway you can supplement it? What about selling old DVDs etc on e-bay, selling the kids old clothing by the bin-bag full in the Admag (or your local equivalent) and so on?

    Outgoings


    Bills
    TV/Phone/Internet £80/MonthWhat do each of these break down to? Assuming £12 for a TV license, that leaves £68 for the other two. Unless there is some reason why you have to have a really expensive line rental or your work requires ultra-high speed broadband these can be reduced by shopping around for broadband and looking for a cheap call carrier service like One-Tel. The telephones board should be able to help with both of those
    Gas/Electricity £100/Month Again, is there a reason why these are so high, especially in the summer? As a guideline, we can heat a very large, very old, very damp house in midwinter for less than £50 per month for both gas and electric. Check that everything you aren't using is turned off, not just put on standby and look for energy saving options for the things you can't turn off.
    Water £26/Month
    Life Assurance £18/Month
    Council Tax £113/Month
    Dog Insurance £15/Month Do you really need to insure your dog?
    Washing Machine rental £13/MonthTake a look on Freecycle and try asking whether anyone has a washing machine free to a good home. Failing that, try looking on your local supermarket small ads boards.

    Car
    Petrol £170/MonthCan you cut this back by using the car less and walking or cycling more, especially now that it is summer. If you use the car for work, do you get your mileage paid back?
    Car tax £175/Year
    Car service/MOT £800/Year How much?! Again, is there a reason this is so high? Is this spent getting an old banger through it's MOT, or is it haivng a full service performed at the dealership? If it is the former, you might be better off trading in your car for something a bit more reliable, if it is the latter, think about getting it serviced somewhere cheaper or even forgoing the service until you get back on your feet
    Insurance £377/Year

    Other
    Childcare £44/Month
    Childrens Savings £40/Month I know it seems heartless, but stop saving for the kids. You are getting a couple of percent on their savings but paying out 15% on your cards. Re-start when you have cleared some of the debt and pay in double or treble the amount you pay in now.
    House insurance £469/Year
    Magazine Subscrip. £30/Quarter Get rid of the subscriptions. £10 per month is a lot for magazines which you throw away after a couple of weeks. Get a library card and use online magazine/newspapers instead
    Mobile Phones £15/Month
    Food £400/MonthHow many people is this for? Does it include packed lunches, coffees etc?
    Clothes £60/Month This is a lot of clothing - I realise that you have a large family, but this needs to be reduced, say by half

    Savings
    Egg Savings £43/MonthAgain, lose the savings - I bet you're getting 5% interest at most on your savings, but paying 12% interest on your Lloyds TSB overdraft. Have you got much in the way of savings built up? If so, use them to pay off the debts with the highest APRs such as the overdraft and the Egg card. The same applies to the money you have put aside for the kids


    Total Monthly outgoings £2910 Potential savings of £300 per month



    Total Owed
    LLoydsTSB Plat. Over Draft £3500 £40/month 11.2%APR
    Egg Credit Card £1000 £20/Month 15.9%APR
    Cahoot Flexible Loan £10400 £300/Month 8.9%APR
    Capital One Credit Card £9500 £300/Month 6.5%APR
    LloydsTSB Loan £17200 £292/Month ?%APR
    NatWest Mortgage £96000 £658/Month 4.85%APR

    Total £137600 £1610/Month

    By my reckoning, you are left with about £90 per month to pay off £1610 of debts. Even by cutting back harder than I've suggested you are unlikely to be able to manage the type of economising you need to be doing. I think you need to be considering at least talking to someone like CCCS to see what options they feel are best for you, whether this be re-mortgaging your house or going onto an IVA or DMP.

    Kat
  • lazy&indebtlazy&indebt Forumite
    597 posts
    I agree with everyone but one more thing to add...

    What car are you driving? Your tax is high. If you were driving a car with low CO2 emissions (registered after march 2001 I believe) or an older car with a smaller engine this would be cheaper. My car has very low CO2 emmissions and as a result costs me only £100 to tax for twelve months
    Was debt free... then went travelling!
  • Hi Everyone,

    Thanks for all your comments and suggestions I’ll certainly be acting on them.

    As KatrinaC said it’ll be difficult to save enough this way to be able to turn things around so I’m faced with either a re-mortgage or an IVA or DMP. What I’m most worried about is losing the house if we go on an IVA or DMP through CCCS. I’m also fairly concerned about the amount of income we’ll be left with on one of these plans. Could someone tell me what they involve and what the chances are of having to sell the house?

    I’ve got a meeting with the NatWest (where my current mortgage is) mortgage advisor this afternoon. So I’ll see how that goes and then give CCCS a ring.

    Just to answer a few points that people commented on:

    First the gas and electricity, I was with Amerada and paying £45 a month and always in the black. Then they were bought out by Powergen and I didn’t receive a bill for around two years but continued to pay the £45 a month. When they finally sent me a bill it was for over £800 arrears plus what they wanted me to pay monthly. Now, I’ve cleared this and reduced the payments but I agree they are still high. I will look at switching.

    We decided to rent a washing machine because it’s on four or five times a day and they only last about two years at this level of use. When I looked at this problem it was cheaper to rent than to buy and get the extended warranty. We’ve since been shown the large semi industrial machines that cost a lot more but would do our washing in one or two loads and would last for years. When the rental contract runs out I was going to look at one of these but I’m not sure I’ll be able to if we go on an IVA or DMP.

    The Dog does need to be insured. He’s a biggun! If he takes a nip at someone it’s likely to take their leg and cost a lot in legal fees. It’s been quite amusing to watch the thieves run (not just from my house but from all those around) when he stands up at the front door and starts barking at them; especially after being burgled twice in the last six years. However, as all dog owners will say, he’s as nice as pie and is all mouth and no trousers.

    I know £800 seems a lot for a car through the year but really I don’t think it’s that much. If you factor in tyres, exhausts, clutches (all of which can go), minor service (it’s 10 years old and so it will need one of these), major service, MOT, extras that are needed every now and then (cam belt change this year), etc it can easily mount up. The car is reliable and in extremely good condition for its age and I try to keep it that way. If I were to buy a newer car it may cost me slightly less in running costs but probably much more in initial costs that would have to be put on credit. It is a big car (Laguna estate) but I have got five kids and a big dog. I know this has started sounding like making excuses to keep stuff but the car really is an essential. I have however started jogging to work whenever I don’t have meetings that I don’t need to drive to.

    The house insurance is high. Two burglaries and a burst water pipe in the loft will see to that. However, when it comes time to renew again the burglaries should be off the record.

    I will be cancelling the magazine subscription. I’ll miss it (New Scientist, very interesting) but, while I used to read every issue cover to cover, I am finding less and less time to get to it.

    Food at £400 a month does seem excessive but what I should actually have put is household shopping because this includes all the washing powder, toilet rolls (and we go through a lot of these), cling film and shampoo, etc, etc, etc. We have spent the last year trying to get this cost down and now practice a mix of bulk buying and cheap shopping (3 chillies from ASDA 54p 10 chillies from Asian supermarket 10p!) at markets and specialised grocers.

    I agree with the savings and I will start putting those against the debts now. It will be a real wrench to stop the kid’s savings though.

    The TV Phone and internet break down to £11 TV licence, approximately £26-£27 Broadband and phone and calls with Pipex (I will be leaving them to go to Sky soon and so this should almost disappear) and 42.50 with sky. Yes I know, the sky thing is terrible especially seeing as no one watches the sports. The initial contract is up in 2 months time and I will be going to the basic package all of which should take the £80 down to around £40.

    Thanks

    Talheedin
  • lynzpowerlynzpower Forumite
    25.3K posts
    Can I make a suggestion.

    You seem to be making a fair amount of excuses/ justification for your spending.

    We use the washing machine at least 3 times a day (im a bit of a washing obsessive) adn we have no problem with it in 2 years of owning it. I paid over the odds for mine as i wanted a chrome one ( :wall:) but it has paid for itself already. Renting washing machines is a silly idea.
    Food at £400 a month does seem excessive but what I should actually have put is household shopping because this includes all the washing powder, toilet rolls (and we go through a lot of these), cling film and shampoo, etc, etc, etc. We have spent the last year trying to get this cost down and now practice a mix of bulk buying and cheap shopping (3 chillies from ASDA 54p 10 chillies from Asian supermarket 10p!) at markets and specialised grocers.

    Yep, thats what most of us include. We do 100 pcm but reducing, all toiletries, washing powder, food , lunches the lot. INcluding a fair amount of organic, fair trade and "finest". See how low you CAN get your food/cleaning bills, instead of saying you cant.

    your house insurance is high, mine is half that, and I dont think Ive got the cheapest, im with CIS.

    Cancel sky now, dont hang about losing money!!, lots of people have threatened to leave and got reductions in the meantime then cancelled once the reductions have expired.
    :beer: Well aint funny how its the little things in life that mean the most? Not where you live, the car you drive or the price tag on your clothes.
    Theres no dollar sign on piece of mind
    This Ive come to know...
    So if you agree have a drink with me, raise your glasses for a toast :beer:
  • Richie23_2Richie23_2 Forumite
    582 posts
    Hi

    You dont have to wait for you contract to run out before you drop some channels on Sky.. If your paying full package at £42.50 yo ucan drop sky movies and sports and have it for £31 or go even further and pay the minimum which i think is £21..ithink. Saved yourself £21.50 already a month. Use that towards something else then.

    Good luck.. i'm in debt to and currently asing advice to clear debt.. we are in the same boat!
  • calleywcalleyw Forumite
    9.4K posts
    Part of the Furniture 1,000 Posts I've been Money Tipped!
    ✭✭✭✭
    I agree with what ever has been said. But as I said to another poster today it is case of slash and burn on your budget and no excuses. As lynn has already pointed out.

    One I will take point up with you is you blaming the CSA for getting in to this mess. No you did, you spent more than you had coming in. CSA money should never be relied as it can stop at any time due to loss of job etc. And once the children leave school or college then it stops as well. You can included it in budgets but don't ever rely on it.

    As has been said drop the sky down to bare min and then get rid of and get a freeview box that will save you once it is binned will save £42.50 a month

    TV/Phone/Internet £80/Month I assume sky is inlcuded in this. Line rental is only £11. And to be blunt hardly anyone unless they are hardcore downloader needs highspeed internet access. I have two pc's that access internet at the same time on a 2mb line and it is not really slow. Use someone like 1866/1899 for calls.

    Food £400 on food needs to come down I spend between £60-£100 a month for two hungry adults plus another £10 a month from washing powder. I am still not sure how many there are in the household. But even if there are 5 of you £300 a month on food/household should be more than enough. If you plan.

    Car £800 a year. Tax is only £160 a year and new tyres once a year say £150 and a service say £150 that is only £460 a year.

    Magazines got to go. Clothes drop to 40 a month as an adult I suspect you have lots of clothes so you and your wife should not need any more.

    Child savings/egg savings have to go as well.

    Also you need to just stop spending if you don't need it you don't buy it. Sell unwanted stuff on ebay.

    I would not add your debts to your mortgage if you can't pay the mortgage then you have no home.

    I would approach either payplan/cccs now. And cancel the appointment with the bank.

    I wish you all the best.

    I would add up the savings I have suggested but I am at work and feeling really lazy sorry :o

    Yours


    Calley
    Hope for everything and expect nothing!!!

    Good enough is almost always good enough -Prof Barry Schwartz

    If it scares you, it might be a good thing to try -Seth Godin
  • TalheedinTalheedin Forumite
    21 posts
    Went to NatWest last night to be told that the appointment I’d made with the mortgage advisor hadn’t been booked in and when the mortgage advisor came out to apologise for this he told me that he wasn’t the person to speak to anyway and I had to ring a number to talk to someone about it. So according to NatWest a mortgage advisor doesn’t advise about mortgages! I rang the number and was told that adding the debts onto my mortgage (which would actually be a second mortgage) would be around £345 per month over 18 years (same length as my current mortgage). This is pretty much what I’d expected and what I think is affordable. However, to find out if I can get it I would have to apply which would mean a credit search and if rejected could stuff me for getting a re-mortgage with someone else. What I wanted to do was to sit down with someone at NatWest first and talk through the options but apparently “there’s another way” that they do it.

    So I then rang CCCS who went through a load of stuff with me and booked a telephone appointment for the 18th August. But I was even more worried about this after the call than I was before. I was shaking when I put the phone down. Especially when he told me to open a cash card account and just move my priority direct debits to it as the creditors can just take what they want through the direct debits on my current account(especially Lloyds for the loan I have with them). Though after sleeping on it I’m not as worried about this as I was yesterday.

    So my options are: apply for the second mortgage with NatWest and if I can’t get it continue with the CCCS appointment or scrap the NatWest idea and just go with CCCS.

    What I really, really need to know are the following:
    - Will my Wife’s income (and child benefit and CSA money) be taken into account by the creditors seeing as there is no financial link between us other than that we are married?
    - Will they be able to force me to sell the house or file for bankruptcy or something similar?
    - How long is a DMP likely to last?
    - Will I have to accept that I won’t be able to move my mortgage when the fixed term ends in two and a bit years time?

    I will be so grateful if someone could answer these questions for me.

    On the plus side I have:
    - Joined the local library and will be stopping my New Scientist subscription this afternoon.
    - Dug out my Pipex contract and found that I am no longer in the penalty phase so I will be ringing them tonight to try and barter this down or leave.
    - Talked to my wife about reducing the sky package down to basic and she’s looking into what channels she wants.
    - Given all my cards to my Wife (who can’t and wouldn’t use them either) so that I can’t spend any more.
    - Acquired a pocket diary from work so that I can start a spending diary (although I haven’t spent anything since).

    That’s all I can bare to do for one day. I will be doing more tomorrow.

    Thanks

    Talheedin
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