Help me please, I'm so confused and worried!

Slimy1

Ok currently I owe around 43,000 to loans and credit cards and overdraft. I am living with a housemate at present and can just about afford the repayments, although it's a struggle!

Circumstances have changed and I am having to leave my current place and move into a new property within the next couple of months. This will be much more expensive for me and will no longer be able to keep up with repayments.

The solution that someone has suggested to me is as follows....

Open a new basic current account whilst my credit rating is still good with a new bank, as my current account is also with the bank I have most of the debt with.

Then find a new property to rent, as I will only be able to start renting whilst my credit rating is good.

Next I get my wages paid into my new account and transfer my day to day direct debits (bills, mobile etc) to this new account.

This way when I cannot pay the next payments for my debts Lloyds will not be able to just take th money from my account.

Then contact the creditors and explain the situation, balance sheet etc and how much I can afford to pay them each month (offer IVA)

Does this sound a sensible way of going about this?

Also on my monthly budget sheet am I missing anything else that I am entitled to put down as an expenditure?

Rent £650
Council Tax £140
Electric £40
Gas £35
Water £35
Telephone £15
Mobile £45 (contract)
Internet £15
Television £45 (including licence)
Petrol £200
Food £220 including meals at work
Contents Insurance £15
Clothing £50

Anything else I'm missing? And are these reasonable rates or too high or too low?

Regards
S

Tixy

Hi

I would agree that if you can continue with payments until you have rented a new place that would be a good idea. And yes if you cannot meet payments and have debts with your bank then you will need to open a new bank account and change your salary so it goes into the new account.

So far so good.

When it comes to offering reduced payments you mention an IVA - an IVA can only be dealt with by an insolvency practioner and all your creditors have to agree to it. It sounds like you are thinking of a debt management plan - where you offer reduced payments to each creditor.

A DMP can be a good idea if you have some surplus to pay to creditors but not enough to meet your repayments. It is usually advisable to speak to one of the debt charities first for some guidance on your budget - and they will also run your DMP for you if you wish (where you pay a monthly amount to them and they split it between your creditors).

They'll also explain the consequences of a DMP and how to work out payments- eg you will ruin your credit file for at least 6years, creditors do not have to freeze interest, creditor can still decide to take you to court (not common but it does happen).
You are not allowed to take out any more credit whilst on a DMP. All creditors should be treated equally - eg offered pro-rata payments based on the balances owing.

I would suggest you complete a full statement of affairs using this link - http://www.makesenseofcards.com/soacalc.html - to ensure you include all costs - eg you don't have road tax, car insurance, car maintenance, presents etc in the list above.

Assuming this is for you only £220 is high for food, petrol is quite high at £200 but if you can justify thats okay.
TV, internet & landline look high - might not be allowed paid tv on a DMP unless the overall cost can be reduced.
Clothing is too high at £50/month.

If you post your SoA on here from the calculator people should be able to help advise if a DMP is a good option. Might be worth a quick read of this The Big Guide to Becoming Debt Free thread.

Gigglepig

I don't know much about DMPs so other people will have to help you on that account.

However, if this is what you are spending and you are looking to reduce it:

Is there a way you could find a cheaper place to live (rent a room, move in with family?) until things get better? Ideally find somewhere to live next to work so you can bike/walk and reduce your petrol costs.

Also, can you reduce the council tax if it is only you?

Your mobile phone bill is really high, is there a way you can cancel the contract and use a cheap sim deal instead (for example tesco, you get quite a few minutes and data for 10-15 a month)

Can you lower the internet/tv costs, get a cheap broadband deal and drop any pay tv..

Personally i would not prioritise contents insurance, but rather look at a disability/accident insurance for myself.

Hope some of these ideas helped, best of luck.