Debt getting me down.. Which option for me?

Nicedayjames

Hi

I would appreciate some advise from people who have been in similar postion to me. For about 5years I have had debts of between 20-30k on loans and cards and I'm getting nowhere paying them off. I have not yet missed a payment but now my salary has been cut due to change of job and I now have more going out than coming in.

I haven't put any extra on cards or loan for a while now but I'm scared I will start soon if I don't get this under control.

What option do you think is best for me? Any advise is greatly appreciated.

dreamdreamer

Hiya, welcome to MSE first of all!

You need to work out a budget to see how much more your outgoings are than your incomings with your new salary. This link will take you to an SOA calculator, which you can post to here, and people will be able to advise where you can cut back, and what your debt options might be.

At first glance your debt is too high for a DRO, but a DMP might work, if you can't jiggle your outgoings so that you can afford repayments. Often creditors freeze interest on DMPs, so that might help you make a bit of a dent, but it would affect your credit rating.

Tixy

Hi james and welcome

For people to be able to advise I think its worth you completing a statement of affairs to show your income, outgoings and your debts (with APRS etc). If you can give that information people may be able to suggest what options you may have.
We use this format http://www.makesenseofcards.com/soacalc.html and if you can post the results on here we'll see if we can help.

Nicedayjames

Thanks for the advise guys .. its doesn't make for good reading but here it is:

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2000
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 625
Management charge (leasehold property).. 0
Council tax............................. 100
Electricity............................. 60
Gas..................................... 50
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 40
Mobile phone............................ 40
TV Licence.............................. 12
Satellite/Cable TV...................... 20
Internet Services....................... 10
Groceries etc. ......................... 400
Clothing................................ 150
Petrol/diesel........................... 100
Road tax................................ 40
Car Insurance........................... 60
Car maintenance (including MOT)......... 50
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 22
Other insurance......................... 0
Presents (birthday, christmas etc)...... 60
Haircuts................................ 30
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1969

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................9000......0.........18
credit cards...................20000......0.........22
overdraft......................1000......0.........20
Total unsecured debts..........30000.....0.........-

Monthly Budget Summary
Total monthly income.................... 2,000
Expenses (including HP & secured debts). 1,969
Available for debt repayments........... 31
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 31
Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -30,000
Net Assets.............................. -28,500

Soph86_2

Nicedayjames wrote: »

Thanks for the advise guys .. its doesn't make for good reading but here it is:

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2000
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 625
Management charge (leasehold property).. 0
Council tax............................. 100
Electricity............................. 60
Gas..................................... 50
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 40 - This seems really high, especially when you are already paying the same for a mobile phone contract.
Mobile phone............................ 40 - How many mobiles is this for? Consider switching to PAYG/reducing the contract
TV Licence.............................. 12
Satellite/Cable TV...................... 20
Internet Services....................... 10
Groceries etc. ......................... 400 - this is really high, a lot of people on here eat (very well!) on half this
Clothing................................ 150 - can you stop spending on clothes for a few months? This is really high too.
Petrol/diesel........................... 100
Road tax................................ 40
Car Insurance........................... 60
Car maintenance (including MOT)......... 50
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0 - really, nothing?
Contents insurance...................... 0 - ditto
Life assurance ......................... 22
Other insurance......................... 0
Presents (birthday, christmas etc)...... 60 - again, this is really high
Haircuts................................ 30
Entertainment........................... 100 - ditto
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1969

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................9000......0.........18
credit cards...................20000......0.........22
overdraft......................1000......0.........20
Total unsecured debts..........30000.....0.........-

Monthly Budget Summary
Total monthly income.................... 2,000
Expenses (including HP & secured debts). 1,969
Available for debt repayments........... 31
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 31
Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -30,000
Net Assets.............................. -28,500

I've tried to note areas that I think you could substantially cut down on. If you end up on a DMP you will have to substantially cut down your spending - you won't be allowed anywhere near the amount you are spending on groceries, clothes and entertainment - probably more a maximum of £200, £20, £20 respectively. My feeling is that if you cut back your spending to DMP level, you could easily meet your repayments and make overpayments.

As an idea, I live by myself but spend around £15 a week on food (cook everything from scratch, bulk cook, freeze leftovers) and generally eat very well, even if I do eat a lot of home made soup! I allow myself £15 a week for entertainment but end up saving most of this towards debt repayments. I buy all my clothes off ebay and greatly reduced at sale time and probably spend £100 a year on clothes.

How much are your monthly repayments on the credit cards? You don't give a figure.

Soph x

dreamdreamer

Great suggestions on cutting back above. Two initial things stand out to me:

1) You need to put the minimum repayments in for your debts because at the moment youre showing a surplus but you're not factoring in debt repayments - you also need to work these out accurately as any debt relief programme will need exact figures (for example your credit card debt is £21k as per your original post but only £20k in your SOA). If repayments are around £900 a month then you're nearly £900 month short of making your repayments -which is high compared to your income.
2) If your partner is not working then you are probably entitled to tax credits - do you receive these? Is it your possible your partner could get some part-time work around your children's school hours to help with your budget?
3) Do you need 2 cars?

There will be far more expert people than me along to help - but you're going to have to make some serious cuts to your lifestyle to have enough left over to pay, for example, a DMP. Given that you rent a house and your assets are low, it MAY be worth considering bankruptcy, but that would depend on many other factors (your job etc).

[Deleted User]

Household Information (Is this SOA based on what your new income will be?)
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2 (do you need 2 cars?)
Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 0 (Can your partner work at all, even part-time?)

Total monthly income.................... 2000

Monthly Expense Details
Rent.................................... 625 (Is this competative for the area you are living in? Can you downsize? Move area?)
Council tax............................. 100 (are you paying this over 10 months, see if you can switch to 12)
Electricity............................. 60 (This is quite high - see comparison sites to ensure you are on the best tariff for your area/usage - often duel fuel and online tariffs are cheaper)
Gas..................................... 50 (as above)
Water rates............................. 0 (don't you need something here?)
Telephone (land line)................... 40 (Check that there's not a cheaper alternative - Skypee?)
Mobile phone............................ 40 (Also high, if you are in contract see if you can drop a tariff or two, if out of contract consider SIM only or PAYG)
TV Licence.............................. 12
Satellite/Cable TV...................... 20 (Cancel, or see if cheaper combined with internet and home phone?)
Internet Services....................... 10 (as above)
Groceries etc. ......................... 400 (this is very high, even for 4 - check the old style board for advice. Drop brands, batch cook, meal plan etc)
Clothing................................ 150 (every month - buy essentials only until debts are paid down)
Petrol/diesel........................... 100 (If this is all you use, is it worthwhile having two cars, or even one car?)
Road tax................................ 40
Car Insurance........................... 60 (check comparison sites)
Car maintenance (including MOT)......... 50
Contents insurance...................... 0 (probably need something here)
Life assurance ......................... 22 (check comparison sites)
Presents (birthday, christmas etc)...... 60 (reduce until debts are paid down - people will understand)
Haircuts................................ 30 (check to see if there's a college convenient to you and get a cheap trainee cut - or go an extra week or two in between cuts)
Entertainment........................... 100 (what does this cover, can it be reduced? Shop around)
Total monthly expenses.................. 1969

Assets
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR (what are the minimums that you pay each month?)
credit cards...................20000......0.........22 (do you have a good credit rating, could you do any balance transfer to 0% card, or any card with APR lower than 22%?)
loan...........................9000......0.........18
overdraft......................1000......0.........20
Total unsecured debts..........30000.....0.........-

Monthly Budget Summary
Total monthly income.................... 2,000
Expenses (including HP & secured debts). 1,969
Available for debt repayments........... 31
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 31 (it's good that you have a surplus at the end of each month, this means that you will not get further into debt)

Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -30,000
Net Assets.............................. -28,500

I have made some comments above, and with a little tweaking and some cutbacks here and there you will be able to increase your surplus and make over payments. Once you have paid the minimum off everything, overpay any surplus you have (no matter how small) towards the debt with the highest APR (and is costing you the most).

HTH

Domino9

Tixy

Well done for posting James.

I've put in a few comments/questions below.

Nicedayjames wrote: »

Thanks for the advise guys .. its doesn't make for good reading but here it is:

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 0 does your partner not work? do they get any benefits?
Benefits................................ 0 what are you getting here? child benefit? anything else?
Other income............................ 0
Total monthly income.................... 2000
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 625
Management charge (leasehold property).. 0
Council tax............................. 100
Electricity............................. 60 this is high - do you have arrears? have you shopped around to see if you can find a cheaper supplier or a better tariff?
Gas..................................... 50
Oil..................................... 0
Water rates............................. 0 don't you have this? or is this part of council tax?
Telephone (land line)................... 40 see if you can get a cheaper deal for landline, tv & internet, should start at around £40 for all 3
Mobile phone............................ 40
TV Licence.............................. 12
Satellite/Cable TV...................... 20 see above or consider switching to freeview
Internet Services....................... 10 see above
Groceries etc. ......................... 400 high for 4 people. See if you can cut this back. Some can manage on around £200 for a family your size but even if you reduce to £300 thats still a big chunk freed up each month. Lots of tips on the oldstyle board for reducing this.
Clothing................................ 150 you don't need this every month and cannot afford it. Cut to say £50 for essentials for the kids only
Petrol/diesel........................... 100
Road tax................................ 40 is this right? £480 a year? is the second car needed if your partner does not work?
Car Insurance........................... 60
Car maintenance (including MOT)......... 50
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 22
Other insurance......................... 0
Presents (birthday, christmas etc)...... 60 need to try to reduce until you have made some headway with your debts.
Haircuts................................ 30
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1969

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................9000......0.........18 what should you be paying on all of these? how far behind are you with repayments currently?
credit cards...................20000......0.........22
overdraft......................1000......0.........20
Total unsecured debts..........30000.....0.........-

Monthly Budget Summary
Total monthly income.................... 2,000
Expenses (including HP & secured debts). 1,969
Available for debt repayments........... 31
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 31
Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -30,000
Net Assets.............................. -28,500

Nicedayjames

Thanks to all for your inputs. I think I should sit down with the missus and list everything again with more exact figures. One thing I do know is I have 2k coming in and 3k going out at the moment, so something has to give.

I'll be in touch soon for more advise but I'm seriously considering the IVA route or bankruptcy due to the fact that I have no assets and all the borrowing was unsecured. Please don't tell me I'm mad to do this because I'm pulling my hair out here. :eek:

saltnvinegar

Nicedayjames wrote: »

I'll be in touch soon for more advise but I'm seriously considering the IVA route or bankruptcy due to the fact that I have no assets and all the borrowing was unsecured. Please don't tell me I'm mad to do this because I'm pulling my hair out here. :eek:

You're not mad to do this. You are tackling things in the right way rather than burying your head in the sand.

Regards which financial route you should go down have a chat with impartial (and more importantly FREE) advisors who would be able to give you guidance on your best option. Have a look here:

Where to seek professional impartial advice about your debts

Best

SnV

yeshuaisiam

I would suggest that you begin a lifestyle change of becoming extremely frugal. When you are in debt you are paying money basically to banks that could otherwise be yours. If you can become more frugal and live cheaply, then you will be able to start paying off your debt faster. Once you do this, you will quit paying off as much interest. As you eliminate one source of debt, continue to eliminate more and more sources of debt. Compile it all together and you'll pay off the debt quicker than you imagine. But it starts first by becoming more frugal.