Help with Boyfriends Debts

minxystar

Situation so far:

Boyf has accrued over £43k worth of debt since leaving Uni in 1996. This debt breaks covers 4 things – student debt, over-exhuberant living debt (!), share deal debt (shares lost value due to dotcom bust), share deal debt 2 (shares lost money due to 9/11 and fall in financial services stock).

The situation now is that he lives with me and earns £32,500k per annum. He also gets a bonus but this is quarterly and has only amounted to £1100 this year and £3000 in total since Jan 2005.

His monthly SOA is as follows:

Monthly Salary (net)
£1980

Household Bills
Rent* (payable to me) including all bills = £300
Mobile* = £60 (soon to be reduced to £40)
Petrol = £100
Car Insurance = £60 (now finished payments until next Feb)

Total = £460
*NB I have tried to help him reduce his household outgoings wherever possible.

Debt Payments
HSBC = 230.74
Household Bank = £184.78
Egg = £237.10
Citifinancial = £231.29
Virgin = £105
Lloyds TSB = £90
Capital One – was £10 but I have just paid this off in full. This card has a limit of £200 and will be used for Business Expenses.

Total = £1078.91

Savings
None

Assets
Car (worth approx 3k)

As you can see, for someone who earns a decent wage (which at his age and career area still has the potential to increase quite a lot) he has a lot of outgoings and very little spare income. He is in fact left with £441.06 a month to live on. This means that if there are any repairs needed on the car or other unexpected outgoings or business expenses then he is very seriously strapped for cash, the impact of which can be felt for months.

My statement of affairs is as follows:

Monthly Salary (net)
£1750 (plus significant bonuses which have amounted to around £12k gross so far this year)

Rent (paid to me by Boyf)
£300

Household Bills
Mortgage = £1000 (including £404 overpayment)
Other bills = £236.22

Debt Payments
Credit card = currently £0 (I tend to pay it off monthly if I have used it, either from the rent or from my bonus)

Savings
£2500 in Abbey FTSE Tracker ISA
£2000 of current bonus in First Direct Savings Acc
£500 in ICICI savings
£200 for Xmas in First Direct Savings

Assets
Flat is worth approx £180k with a mortgage of £85k. I bought at £90k in 2002, re-mortgaged for an extra £15k in 2004 to do some major renovations and currently have a mortgage of £85k left.

Obviously, I am in the position to help him out, but there are some issues with this and we are confused about my options:

What we have done so far:

1) Contacted Egg, Household Bank, Virgin, Citifinancial to ask it they will increase current lending to consolidate other debts (they won’t!)
2) Confirmed the settlement cost of each debt
3) Prioritised the debts so the highest interest debts get paid first
4) Spoken to HSBC (Boyfs current account provider) re lending options and consolidation
5) Spoken to First Direct (my current account provider) and Egg about lending options.

We had been thinking that I could get a personal loan of £21,500 to pay off the worst debts (Virgin, LTSB & Capital One). However, a lady at First Direct spent a lot of time speaking to me on this and raised the following issues:

1) It’s unlikely I would be lent this amount, although my credit record is excellent, due to my relatively low salary and current mortgage borrowing. (However, according to First Direct, they wouldn’t have lent me my current mortgage amount!!)
2) A large loan might mess up my credit score and hinder my ability to get a credit card (I am a committed rate tart) or re-mortgage in the future (which would be a very bad thing, as I re-mortgage whenever my current special rate ends)
3) The whole issue of borrowing to help someone else out of debt (which I am well aware of the risks, legal implications etc)

I raised these issues with Egg who didn’t really have much to say, other than that they couldn’t give any financial advice and suggested that I spoke to a FA!

So now I am unsure of what to do next. This is the man I intend on marrying and spending the rest of my life with. When I sell my flat (probably in the next year or so) we will be moving to a cheaper area so enough equity will be released for me to clear a large portion of his debt (if not all). This makes sense as in the future, I plan on being a SAHM so he will be supporting me and any future babies anyway, and I would rather we didn’t have to be forking out debt repayments at that point in time. This which is partly why I am willing to try and help him out now. In the meantime though, we need to find a way to make Boyfs monthly outgoings a little lower, so life is a little easier for all of us.

As I see it, our options are:

1) For me to do nothing, and for him to keep paying just over the minimum off all debts and try to consolidate them as they get smaller.
2) For me to re-mortgage and get a lump sum to pay off part of the debts, which he then pays me back monthly
3) For me to get a secured loan to pay off part of the debts, which he then pays me back monthly
4) Go to a debt counsellor (although I’m not sure what new info they can give us, as I think we are pretty aware of the situation)

Currently, we would be unwilling to consider either bankruptcy or an IVA.

I am just worried that if I screw up my credit record by borrowing a huge amount, then we are both b*ggered. At least one of us is in a good financial position atm. But we do desperately need to sort out this situation and try to reduce his monthly outgoings

Thanks for reading this far, all advice very gratefully received.

shayshay

Dont mean to sound harsh but having £400 plus a month to live on would be heaven to some of us who have kids and have even less to live on.

Yes you could argue their is £43k debt but not many people on here will be getting £32,500 in to combat it. As ever cutbacks will help increase what is available at the end of the month to get by on, and with that extra £400 plus sacrifice the enjoyment it brings to knock a debt off rather than get a consolidation.

bonnie_2

No, no, no, don't go there how do you know your'e not gonna pay his debts of and his going to do a runner and leave you with the repayments. None of us know people that well and i have seen it happen so many times.
£400 a month to live on well, say no more his debts are not your respnsibility.

lavidaloca

Totally agree with above posts please DO NOT pay his debts. He has enough income to pay them himself.

Miss_Moneypenny_6

Hi there,

If you can post a more detailed list of hosehold bills etc someone might be able to advise where to get the same for cheaper & I agree with shayshay, I wish I had £400 a month to fall back on.

One think I would say is don't re-mortgage & don't consolidate, try getting him to cut back everywhere else first, food, changing electric/gas supplier etc, I was going to do what you are suggesting just a month ago, but thanks to the great people on this site, I discovered that if I changed providers, insurers and where I shopped, took packed lunches etc that I can be break even at the end of every month.

Good luck

CLAPTON

first things first, he should find out where his money actually goes each month..he is very lucky to only spend 300 on rent and all bills. he needs to start a spending diary and write down absolutely everything he spends with a view to freeing up at least an extra couple of hundred to pay towards his debts.
the main point here is that he needs to learn to budget ... he's had 10 years since leaving uni and he's only paying the minimum on his debts. From your point of view, if you want kids you need to be confident that he can control his spending on what will be a much reduced family income.

i think that in no circumstances should you consider a loan in your name..
just too many risks about this.

if you really want to help i would suggest something along the lines of matching any saving he can make .. so for every extra 100 he frees up to pay off his debts each month, you contribute either the same or some proportion you're confortable with, so there is a direct incentive for him to reduce spending and start to pay off his debts.

if this works out then review the situation is six months.

Mrs_pbradley936

Do not allow his debts to become your responsibility or you will both end up broke. If you are determind (because you are young and in love) to help him the most cost effective way would be re-mortgage to release a bit of your equity and use that, then make sure that he covers the cost of the higher repayments. Please be sure that he is trustworthy I would hate for you to be posting in a few months saying he has run off and is now debt free thanks to you.

BT_man

you should dump him and find yourself a millionaire...:)

FatJock

Hi Minxystar,

I'd have to agree with the other posters on this at the moment. Don't consolidate any debt unless absolutely necessary. Your BF is obviously aware of the issues and with your help is starting to tackle them. You both seem to be making a good head start. I assume you've used the snowball calculator (sorry dont have a link to this).

From what you've written there is now an 'extra' £90 available to pay off the highest % debt (mobile, car ins, capital one). If you can post a full and frank SOA other more experienced DFW's may be able to offer better advice.

good luck and keep up the good work.

Regards,
FatJock

jamesp_3

I'm in harsh mode.

There is no way on earth that someone who has been good with their finances (you!) and put together some savings etc should help out someone who was willing to use Credit as a means for purchasing dot com shares. That has to be one of the most stupid financial decisions i have ever heard. If you make an idiotic decision like that, you have to get out of the financial hole when it goes wrong yourself. Only play with money you have.

Don't pay for anything. By all means, help him change his ways and maybe even come to some arrangements with rent but that as far as you should take it. However, in his financial position he must reduce his phone bills (£60 for a mobile - idiotic!)/car bills etc. I am careful with my money and am in no debt, but still don't have much more that £600 per month to play with. Therefore, his £400 per month before getting rid of things he doesn't need isn;t too bad really.

Jim

Red_Fraggle_3

I helped my ex with his bills - he would pay me back - he didn't :-( I'm sorted now but no thanks to him - sorry I know i sound bitter prob am lol