I think a tough decision is very near!....

TROUBLED_ONE_2

Hi all, like many others on the various posts we have read within this forum we have finally taken a long hard & honest look at the finances and it is a scary picture we see before us!

...4 kids, one salary, big mortgage - what have we got to show for all the money spent: no foreign holidays, no major house improvements, only a few reasonable material posessions - basically money coming in was not enough to cover money going out, and looking back it seems this has been the situation for a while but we were 'robbing Peter to pay Paul' for a number of years. Over the next couple of months I think 'Peter' runs out of cash!.......

Last couple of years have been tough on a personal level so the finance management slipped down the priority order which has just excelerated the inevitable....

Not behind on any payments yet, made a few payments a couple of days late and missed a few payments but always caught up with payments when realised.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 4
Number of cars owned.................... 2
2 cars def required - both 15 years old so down grade not an option as no real value.

Monthly Income Details
Monthly income after tax................ 2281
Partners monthly income after tax....... 200 (student bursary)
Benefits................................ 344 (Child Tax Credit + Family Allowance)
Other income............................ 0
Total monthly income.................... 2825

Monthly Expense Details
Mortgage................................ 1155
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 110 (10 months)
Electricity............................. 45 (based on last 12 months usage)
Gas..................................... 69 (based on last 12 months uusage + b/fwd bal to be cleared)
Oil..................................... 0
Water rates............................. 40 (8 months)
Telephone (land line)................... 28 (kids use for mobiles occasionaly, prob need to block this as should only be line rental - also use 18866, approx £2/mth)
Mobile phone............................ 40 (£10 for me / £30 for wife who has 2 months of 18 mth contract to go)
TV Licence.............................. 12
Satellite/Cable TV...................... 49 (SKY - only real luxury we have now, neither of us smoke and we dont drink on a regular basis)
Internet Services....................... 8 (O2 - good deal!)
Groceries etc. ......................... 500 (£125 a week, shop at tesco for deals then off to Morrisions for main shop - extra £5 in petrol offset by £20/£25 saving on groceries)
Clothing................................ 20
Petrol/diesel........................... 225 (the price of petrol at the moment is ridiculous!)
Road tax................................ 30 ((190 x 2)/12) - will try and buy monthly car tax stamps from now on so not a big hit when due
Car Insurance........................... 40 - use the MSE techniques to get lowest quote and use cashback sites.
Car maintenance (including MOT)......... 40 (have usually paid on CC when required)
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 88 (2 kids for 2 days a week)
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 7
Pet insurance/vet bills................. 15
Buildings insurance..................... 6 - use the MSE techniques to get lowest quote and use cashback sites.
Contents insurance...................... 10 - use the MSE techniques to get lowest quote and use cashback sites.
Life assurance ......................... 30 (£15 each for term assurance to cover mortgage if ......)
Other insurance......................... 15 (Gas Boiler Ins - B Gas)
Presents (birthday, christmas etc)...... 20
Haircuts................................ 25
Entertainment........................... 55
Holiday................................. 0
Emergency fund.......................... 25
Total monthly expenses.................. 2727


Assets
Cash.................................... 0 (OH How I wish!)
House value (Gross)..................... 219000
Shares and bonds........................ 7500 (Company Scheme, shares need to be in scheme for 3 years before cash out and 5 years to avoid Tax - paid for via deduction in salary - not available for cash out)
Car(s).................................. 1000 (if lucky!..but can't sell)
Other assets............................ 0
Total Assets............................ 227500


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 175000...(1155).....5.9
Total secured & HP debts...... 175000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
MBNA CC........................9700......58........6.9
MINT CC........................9800......185.......16.9
LLOYDS TSB CC..................6800......120.......15.9
SANTANDER O/D..................3600......0.........8.9
NATWEST O/D....................1240......0.........0
HSBC O/D.......................1000......0.........19.9
TESCO CC.......................5700......135.......16.9
EGG CC.........................7600......200.......16.9
HSBC CC........................6900......165.......19.9
Total unsecured debts..........52340.....863.......-


Monthly Budget Summary
Total monthly income.................... 2,825
Expenses (including HP & secured debts). 2,727
Available for debt repayments........... 98
Monthly UNsecured debt repayments....... 863
Amount short for making debt repayments. -765

Personal Balance Sheet Summary
Total assets (things you own)........... 227,500
Total HP & Secured debt................. -175,000
Total Unsecured debt.................... -52,340
Net Assets.............................. 160

Created using the SOA calculator at makesenseofcards.com
Reproduced on Moneysavingexpert with permission, using Firefox browser.

Not sure what to do - think bankrupcy may be only option and likely forced upon us.....We think IVA would require more cash to be available after all other payments. Maybe CCJ for each debt but not sure we would get agreement for £10 or £15 per month repayments from all creditors, especially given the balances outstanding.

My wife will be employed in approx 15-18 months time earning £20K when she completes her uni degree, but obviously we will need to make a serious financial decision before that happens.

Any ideas/comments welcome - we know there is no easy fix and we will have to 'pay the piper' just sometimes wish we had spent the money on major house renovations and luxury holidays so we would have felt like we got someting for it! Its very demoralising/depressing looking back and realising all this money just frittered away over the years........

Thanks in advance,
Troubled_One

pure_dead_dopey

Hi Troubled

We were in a very similar situation to yourselves a couple of months ago and peter definitely ran out of money. We did the Debt remedy on the CCCS website and it came up with a couple of options, there are always options, you just need to find the one which is best for you. Ours was a DMP and we are 2 months in and I don't worry about money anything like I used to. It s great that you've posted your SOA and a lot of very experienced people will be along shortly to give you good advice. I just wanted to say well done and there will be an answer,

Take Care

PDDx

Willow_K

Is your mortgage repayment or Interest Only? If it is repayment, ask your provider if you can go interest only for a couple of years to reduce the monthly payments until your wife finishes her degree and gets a job - also ask if you can extend the term as this will reduce monthly payments.

What are the limits on your credit cards - Is there any scope for transfering balances around?

dancingfairy

Hi - a couple of things leap out from you SOA : - gas and electric seem huge. You really need to make sure you are on a competitive tariff and that you are not leaving any lights on , leaving things on standby, on overnight, get low energy lights where possible, maybe use economy 7 if possible, get everything insulated - 100 a month is waaaay too high.
Sky - you really need to cut this down
Mobiles - when the OH's contract is up can she get one for 15 pounds a month? or even PAYG?

The other thing is that you have about 98 'spare' after the bills are paid.
Your options I can see is a debt management plan - with one of the debt charities or bankruptcy.
You should have a couple hundred towards a debt management plan with the hope that once your OH gets a job you can substantially increase the payments into it.
Or you could go for bankruptcy.
I know nothing about IVA's so can't help there.
Have you approached one of the debt charities that Martin recommends - ie CCCS, National Debtline or your local CAB? CCCS have a website -if you enter your SOA it can give you a rough idea of what it recommends and you can then chat to an adviser.
Good Luck
df

andys15

Well I could go through the SOA and pinch a few quid here and there, but I think you are beyond that. Maybe hundred off the shopping, dont ever let the kids phone a mobile from the landline. The mortgage I presume is interest only. You have a fair bit of equity in the house, releasing some might help, releasing all and selling up WILL help. Is it a realistic value? How much would you have to drop to sell quick? Any room for lodgers? second income, selling everything. You might not drink or smoke, but you cannot possibly justify having sky because of it.

Tixy

Hi and welcome

I think you are probably right about not having enough funds to service an IVA. With regards to thinking about bankrutpcy this is obviously a major step, are the debts mostly in just one of your names?

Have you considered whether you could downsize to a cheaper house at all? I appreciate you have a large family but without knowing what is an average house value in your area thought it was worth asking.

Looking at your general expenses -
Mortgage................................ 1155
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 110 (10 months)is this £110 paid over 10ms of have you averaged out the cost?
Electricity............................. 45 (based on last 12 months usage)have you checked to see if you can get cheaper elsewhere? have you tried to reduce the usage (not easy with kids I know!)
Gas..................................... 69 (based on last 12 months uusage + b/fwd bal to be cleared)how much of this is arrears and how much current usage? how long until arrears repaid?
Oil..................................... 0
Water rates............................. 40 (8 months)
Telephone (land line)................... 28 (kids use for mobiles occasionaly, prob need to block this as should only be line rental - also use 18866, approx £2/mth)
Mobile phone............................ 40 (£10 for me / £30 for wife who has 2 months of 18 mth contract to go)has wife tried reducing package yet? you usually can towards the end of the contract. Can she get cheaper once out of contract?
TV Licence.............................. 12
Satellite/Cable TV...................... 49 (SKY - only real luxury we have now, neither of us smoke and we dont drink on a regular basis) I appreciate what you are saying here but you cannot afford any luxuries with the sort of shortfall you have - if you did opt for bankruptcy its simply not allowed as part of your expenditure. At the very least can you drop to the very basic package (or threaten to leave and they often given you a half price deal)
Internet Services....................... 8 (O2 - good deal!)
Groceries etc. ......................... 500 (£125 a week, shop at tesco for deals then off to Morrisions for main shop - extra £5 in petrol offset by £20/£25 saving on groceries)If £125per week that £542 a month. Not very excessive but see if you can trim by say £10 each week to get down to say £90pw. If you cut down gradually it can be easier.
Clothing................................ 20
Petrol/diesel........................... 225 (the price of petrol at the moment is ridiculous!)are all journeys essential? do you drive 'fuel efficently'?
Road tax................................ 30 ((190 x 2)/12) - will try and buy monthly car tax stamps from now on so not a big hit when due
Car Insurance........................... 40 - use the MSE techniques to get lowest quote and use cashback sites.
Car maintenance (including MOT)......... 40 (have usually paid on CC when required)
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 88 (2 kids for 2 days a week)is this whilst OH is at uni/college? is this cheapest available, unis often have discounted childcare (though this doesn't look expensive for a month)
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 7
Pet insurance/vet bills................. 15
Buildings insurance..................... 6 - use the MSE techniques to get lowest quote and use cashback sites.
Contents insurance...................... 10 - use the MSE techniques to get lowest quote and use cashback sites.
Life assurance ......................... 30 (£15 each for term assurance to cover mortgage if ......)
Other insurance......................... 15 (Gas Boiler Ins - B Gas)can you get cheaper elsewhere, bgas are quite expensive I think
Presents (birthday, christmas etc)...... 20
Haircuts................................ 25
Entertainment........................... 55
Holiday................................. 0
Emergency fund.......................... 25

Do you have anything you can sell? What were the debts run up on? any large items or just slowly on living beyond your means?
Read here about saving money on fuel - http://www.moneysavingexpert.com/travel/cheaper-fuel
and here to look for cheaper boiler insurance http://www.moneysavingexpert.com/utilities/boiler-insurance

I don't see any way you can make up the shortfall you have each month. Have you spoken to any of the debt charities yet? If not I think that has to be your next step.

Good luck.

debtdesperado

Hi Troubled One

I have a few additional suggestions:

1. "made a few payments a couple of days late and missed a few payments but always caught up with payments when realised" - this is quite concerning. Make a list of all your payments, the amount and then the day that it comes out of your account. If you are missing payments you are incurring late charges, which get added to the debt and also charged by your bank - when I did this I realised I had two payments which were supposed to come out the day before payday, incurring nearly £100 each month in charges... once I realised I swapped them round to after payday = no more charges.

2. "MBNA CC........................9700......58........6.9
MINT CC........................9800......185.......16.9
LLOYDS TSB CC..................6800......120.......15.9
SANTANDER O/D..................3600......0.........8.9
NATWEST O/D....................1240......0.........0
HSBC O/D.......................1000......0.........19.9
TESCO CC.......................5700......135.......16.9
EGG CC.........................7600......200.......16. 9
HSBC CC........................6900......165.......19.9"
Can you do any balance transfers to max out the cards with lower interest rates, thereby reducing the higher rate amounts? Eg assuming that your credit limit for each card is the figure rounded up the next whole thousand, take your HSBC OD, balance transfer 400 to Santander, 300 to MBNA, 200 to lloyds and 100 to Mint - then you've 'got rid' of one of the highest interest rated debts - keeping interest rates as low as possible is crucial as it means more of your cash is paying back the capital.

3. If you have lots of cc's, it means you have bought loads of stuff (am guessing, but I bet you have way more than you need of everything!), so get cracking on selling everything that is not absolutely essential.

4. can your wife defer her final year of uni for a year? Or split it into two and study part-time and work full time? Even if she can't earn a huge wage without completing her degree, whatever she earnt could be put towards the debt...plus I may have missed it, but I couldn't see a line for her university fees. If things are really at a crunch now, it's all hands to the financial pump straightaway and not in a couple of years time!

5. your wife should ask about the university hardship scheme and check whether she is eligible at her uni. You might get a couple of hundred pounds extra from this. Is she eligible for student loans? If so, she should get them and then balance transfer the most expensive credit cards onto them - she won't need to pay them back until she starts working which should give you time to make a serious dent in your credit cards in the meantime. If she has any unused textbooks she should sell them ASAP before they go out of date.

Hope this helps!

happyhaddock_2

Hi troubled, welcome and well done for posting. Have to echo Dopey about the debt management plan with CCCS. We are in a similar position to yourself and have just started with them, can't describe the relief of knowing that we are finally tackling the problem after all these years of contiually borrowing more just to keep up. Good luck!.

TROUBLED_ONE_2

Many thanks to the folks who have taken the time to read and comment....

PDD – glad it is working out for you, we have not contacted anyone yet...that will be the next step now we are prepared to accept the position we have gotten ourselves into...

Uni – wife has a bursary of £200 a month which I have included in ‘Income’ and there is only a £400 payment left to come to her for the student loan in June I think, rest has been used for fees, books, travel to placements,equip, etc.... We looked into Uni hardship scheme last year but I don’t think we qualified due to my salary but will take another look. Would be ‘challenging’ to split the year as she has already had some time off for stress and an unfortunate accident last year...

Mortgage – 2 years into a 5 year fixed rate repayment, cost of making changes may be high but could be an option.

Credit Cards – no surprise they are maxed out!... already done a fair bit of Bal Trf to try and resolve situation but did not deal with fundamental issue of us spending more than we were earning. Missed payments have been few and far between. We do not have ‘loads’ of stuff, will take a look in the loft but I think it unlikely we would raise more than few hundred pounds selling ‘stuff’, but that would be a few hundred pounds we don’t have now!...

Energy – just checked again on the various comparison websites and the deal we are on now cannot be bettered. Just recently switched from Economy 7 as overnight usage was not enough to warrant increased daily rates even though we had WM, DW & TD set overnight, and rarely used during the days. We do go round turning lights out, drawing curtains early to keep heat in, etc....loft is insulated but maybe could add another layer and prob need to check re cavity wall insulation. Monthly gas charge is made up of £49 for usage and £11 to repay b/fwd balance over next 12 months – so £60 per month not £69 – found £9 already!....

SKY – sorry, did not mean to imply we should keep it just because its the only real luxury ... and we have 6 months left on a 12 month contract.

Mobiles – yes we are looking to minimise the cost at renewal.

Home – no room for lodgers as bedrooms are all taken! Moving not really an option as cost of moving and the deposit required to re-buy would use up a lot of the equity. So we would likely be in a similar position but just in a smaller house. At this point renting is not a consideration. Nothing of note to sell that would generate significant funds.

Council Tax - £110 over 10 months (includes a 25% student discount as wife & daughter in education).

Shopping – we do not buy any specific brands on a regular basis, in fact ‘named’ brands tend only to be brought when on offer and that offer equals a lower per unit price than own brand. Always make use of 3 for 2, BOGOF or any other offers. We don’t eat ready meals, and usually have a meal cooked from scratch 5 days a week. Younger kids usually have a packed lunch (sandwich, yogurt, couple of snacks, piece of fruit – no crisps). Good idea to bake cakes for pack-up at the weekends to replace purchased snacks. Will try the 7 to 10 day shopping challenge to reduce monthly costs.

Petrol – need 2 cars as we live in a village and we both need to travel out of the village daily, we do usually walk around the village. I do tend to mostly drive fuel efficiently but my OH maybe not so much!.

Childcare - local afterschool club for 2 days a week when no parents or older bro/sis to pick up from school.

Boiler Ins – will look at alternatives to B gas

So seems we have 3 options:
- IVA – if we can reduce monthly outgoings to generate enough ‘spare’ funds.
- DMP – again will likely still need to reduce monthly outgoings
- Bankrutpcy – I think this will be the least preferred – Nat West OD & MBNA CC in name of OH, Santander OD Joint and the rest are in my name.


Again many thanks for responses and comments, I am feeling a 'little' better about the situation especially as I feel like its 'out there' now!...and we have more than one choice.......

Cheers, T_O

niccatw

Hey troubled one
Thought I'd let you know about my friend's Sky deal. She cancelled at the end of her contract as she couldn't pay. They called to "retain" her (at tea-time, kids screaming in the background). She gave them 5 minutes and as she really couldn't afford it, she kept sayiing no. In the end she was offered a 12 month contract for £10 per month and 4 packages. She snapped that up (especially as, in her area, she couldn't even pick up freeview on her Sky box when she didn't have it!) Ok, so it won't make a huge saving, but every little and all that! It's worth a go!

Definitely look at the debt charity web-sites. CCCS give you a break-down of your options that you can print off and digest in your own time, which will give you more time to think about what will suit your family best. http://www.cccs.co.uk/ There's also PayPlan http://www.payplan.com/ and National Debtline http://www.nationaldebtline.co.uk/ as well as good old Citizen's Advice.

I know it's terrifying and a long hard slog, but that's why we are all here - to keep each other motivated, to help through the low times, celebrate the small achievements and gently berate the silly mistakes! Have a look at some of the DFW diaries for inspiration and motivation; you're bound to find some-one who is paying off about the same amount of debt as you, and that always helps keep you motivated!

Good luck, whatever you decide the best option is for you. And keep popping back to let us know how you are getting on.

Take care .

Willow_K

TROUBLED_ONE wrote: »

Home – no room for lodgers as bedrooms are all taken! Moving not really an option as cost of moving and the deposit required to re-buy would use up a lot of the equity. So we would likely be in a similar position but just in a smaller house. At this point renting is not a consideration. Nothing of note to sell that would generate significant funds.

If you do have to go Bankrupt (which may be a possibility if you can't fund that shortfall) you would probably have to sell the house anyway and would end up renting and not being able to get a mortgage until you are discharged (although I do not know if having children would stop the official receiver forcing you to sell - I know it can prevent a forced sale through a charging order but I'm not sure with BR)

May be better to look into selling now, paying off the debts and putting the rest away until your wife is working rather than being forced to sell and stuck with a duff credit rating for up to six years.

I suspect that you would also be able to find rent cheaper than your current mortgage so you could put extra money away to try and build some of the money back up that you used out of the equity to pay the debts.

Hopefully you will be able to find the shortfall but just in case you can't it may be worth getting some estate agents in to do valuations and finding out how much a HIP would cost....just in case.