Increasing Debt - Should I risk IVA

JG007

Okay , first post on this board but starting to have some problems


I took out a loan with lloyds about 2 years ago and have found that recently due to the ammount I am paying per month it is starting to cause me some problems as ther is nothing left over to pay for any extra's so they been going on my lloyds credit card meaning that it has slowly been creeping up .

overall I think that my debt has stayed roughly static but it is is not going down at all and it is making it hard to pay for anything except the basics

I have spoken to lloyds this morning and while speaking with them they canceled my lloyds credit card and refered me to payplan but I am really worried about going down the route.

the first thing that makes me hesitate is that I have not missed a single payment and until I spoke to lloyds this morning as far as I know I had a great credit record

I have 3 kids and my own house with a mortgage that has about 20 years on it so am also really worried about the risk to my house and the lack of money for unexpected emergencies and the complete change of not being able to use credit cards for anything again :eek:

I have not got full details of our household budget together yet but know that realy really stretching it we can just about pay all commitments with nothing to spare for anything other than basic food and all extras like clothes , broken appliances , dvd rentals (rare) have been going on credit card

One other thing that I am worried about is that the two credit cards are on 6% special rates and I am worried that if I speak to payplan I may lose that rate making me even worse off.

sorry that this is a bit incomplete but just looking for any advice as have probably only really realised today how bad things are

Nargleblast

Hello JG and welcome. First thing you need to do, and you will know about this if you have posted on other boards, is a Statement of Affairs. Post it on here and we can see where you are starting from and offer advice about cutting costs and maybe increasing income. We will also have a better idea of whether an IVA is feasible for you. No need to rush into any one solution, it is always important to check out all the facts first. You might be better off going bankrupt, or going down the debt management plan route, it all depends on your total debt and how long it could take to pay off. One thing I do recommend though - if you have any loans or credit cards with your current bank then you will need to change to a bank where you have no other connections. Open up a new current account (one without cheque book or OD facility) - you might be in time to get a debit card with your new bank if you haven't defaulted on any payments yet and there are no black marks on your credit record.( If not then it will be direct debits and cash for everything from now on.) Then transfer your wages, benefits and bills to the new account.
You will find your statement of affairs makes horrible reading when it is down there in black and white, but I am sure there will have been worse ones posted on here so don't worry. At least you will know your baseline and it will give you something to start from.

JG007

Hi, Thanks for replying and I will try to do an SOA later on today

When I spoke to lloyds they did not say that I would lose my debit card with them if I spoke to payplan and only advised that my credit card would be canceled , do you think that they will definately cancel my debit card if I go for IVA as that would cause me BIG problems as almost everything I do is online now and I virtaully never use cash

JG007

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 3
Number of cars owned.................... 0
Monthly Income Details
Monthly income after tax................ 1198
Partners monthly income after tax....... 0
Benefits................................ 800
Other income............................ 0
Total monthly income.................... 1998
Monthly Expense Details
Mortgage................................ 340
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 118
Electricity............................. 55
Gas..................................... 85
Oil..................................... 0
Water rates............................. 25
Telephone (land line)................... 20
Mobile phone............................ 30
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 15
Groceries etc. ......................... 400
Clothing................................ 40
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 10
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 16.52
Contents insurance...................... 0
Life assurance ......................... 7.1
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 20
Entertainment........................... 20
Holiday................................. 30
Emergency fund.......................... 40
Total monthly expenses.................. 1313.74

Assets
Cash.................................... 0
House value (Gross)..................... 70000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 70000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 48000....(340)......0
Total secured & HP debts...... 48000.....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card 1..................4457......102.......6.99
Credit Card 2..................4175......106.......6.99
Credit Card 3..................400.......20........24.5
Loan...........................1000......100.......7.8
Loan...........................7000......240.......9.2
Partner Card 4.................400.......20........0
Partner Card 3.................600.......25........0
Partner Card 2.................1600......65........0
Partner Card 1.................2300......60........0
Total unsecured debts..........21932.....738.......-

Monthly Budget Summary
Total monthly income.................... 1,998
Expenses (including HP & secured debts). 1,313.74
Available for debt repayments........... 684.26
Monthly UNsecured debt repayments....... 738
Amount short for making debt repayments. -53.74
Personal Balance Sheet Summary
Total assets (things you own)........... 70,000
Total HP & Secured debt................. -48,000
Total Unsecured debt.................... -21,932
Net Assets.............................. 68
Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using IE browser.

Nargleblast

So, you are looking at a £50-odd shortfall to make ends meet? Obvious things that jump out from your SOA are your electricity and gas - have you tried switching suppliers? You might find a dual fuel deal that works out cheaper. Also mobile phone bills - you might find a cheaper tariff or go Pay as you go and cut it to say £15 a month. Grocery costs not too bad for 5 of you, but you could look at what you buy and maybe switch to cheaper brands of some things. Also fruit and veg from markets are often better and cheaper than supermarket stuff. Meat can also sometimes be found cheaper and better quality at a local butchers. The Old style moneysaving forum is a good resource for living on restricted budgets. The items you list for entertainment, emergencies, clothes, presents - even if you reduced them slightly you might find that you have achieved enough of a saving to manage all your commitments for now. However, you will still be close to the wire, and if the car breaks down or the washing machine goes kaput you will be stuck, so a chat with either Payplan or CCCS (both recommended by people on here) might be in order. One thing you will need to do though is stop using the cards - in fact, destroy them. They are too much of a temptation and before you know it your debt will have rocketed up further. Lloyds might play fair and let you keep a debit card, maybe replacing it with a Visa Electron which I believe will not allow you to spend more than what is in your account. However, if any of your loans or credit cards are Lloyds then you are in danger of them claiming their right of offset - in other words, if you don't keep up with payments, then they can dip into your current account when your salary goes in and there you are without the means to pay your regular bills or buy food! Just a few things to think about. You might find it helpful to go on to the Debt free wannabe board as more people tend to lurk on there, and there are some very nice and knowledgeable people around. This board can be a bit quiet at times.

JG007

Thanks for the reply,

I have only just switched gas and electric companies recently and I think with kids and washing it will be hard to cut those bills any further especially with the recent cold weather and increased tumble dryer bills

I could maybe drop the costs that you mention slightly but think I would find it hard to lower them more than £10-20 , also I have added them for the SOA purposes but at present they have been going on credit cards when required as I did not have anyhting left to save!

Lloyds have 'kindly' canceled my credit card already while I was talking to them and as this was the only card that I was using currently it will stop me using my credit card as the other two cards were only there because I moved debt on to them for a 6.9% rate and I don't even remember the pin numbers for them or know where the cards are

unfortunately the more I look at the costs I am starting to think that the only way to lower the debt in a reasonable time scale would be the IVA but I will be trying to look more at expenses this week so any other sugestions or thoughts on IVA would be great

Nargleblast

Some of the stickies at the top of the threads list should give you more of an insight into IVAs, and there are one or two regular posters who work in the finance industry who may be able to clarify things for you (Charco is one that comes to mind). I am in an IVA myself and I feel it was the right solution for me, it certainly would have taken a lot longer than 5 years to clear my debts by Debt Management Plan. Someone may be able to post a link for you to a list of IVA providers, it would not hurt for you to have a chat with one or two firms - don't commit yourself to anything until you have all the facts and figures to hand, and avoid companies that try and charge you a fee just to introduce you to an IVA provider (there are a few of them scallywags about, so be warned!). Also think about posting on the Debt Free Wannabe forum, you will find lots of helpful people on there.

trudij

There is also an IVA forum, (cant remember the address, but google it and it will come up - think its iva.com or co.uk ) where there are lots of reviews of various companies. The people on here can also give you reviews of the companies they are with - Im in my last 5 months of an IVA with Blair Endersby, and Ive found them great - but if you search for them on here, there seems to be me and one other person who are happy - the other people who have used them arent so happy for various reasons!! the CCCS will chat to you for free, but their IVA arm make charges I think, Payplan are another good set of people to chat with,really you need Charco or the other person who work in the industry to help you further.

Your SOA isnt half as scary as mine was when I sat down and worked it out - and I am single with no dependents (other than a horse and two dogs!!!) Good luck, and dont panic, its not the end of the world (though I completely understand that it feels like it sometimes) you will get lots of help on here.

Max_1066

Welcome JG. Looking at your current SOA it certainly looks as though you could just about manage the existing debts provided there are no emergencies (!!).

One thing to bear in mind with DMP's and IVA's is that these will trash your credit history for 5 - 6 years. So whilst they might seem like an attractive option think carefully and take professional advice. I used the CCCS and would recommend them just to help you think clearly.

p.s. don't forget that there could be a clause in an IVA regarding equity release and in five years time your home will (hopefully) be worth more than it currently is.

JG007

Thanks for all the replies, we have looked over the figures over the last few days and looks like we can just about make it so we are going to try cutting back on a few things and see how it goes.

much as it was anoying that Lloyds canceled my credit card immediately after banking with them for 16 years and never missing a payment it is probably still a good thing and will at least force me to stop using credit cards to pay for silly unecessary things.

Nargleblast

So much for loyalty, eh? Good luck, hope you manage to make some savings - you will find loads of tips in different forums on this site.