Pay plan recomend an IVA with SOA

silvdo

Hi,

I've got some significant debts which have built up over the last 10 years. Last January we bought a house and had a child, this stretched our expenses more than we could afford and now we are struggling to get tot he end of each month with any money left. I don't think were missing by much but were still beginning to miss payments randomly at the end of every month. At the moment im not at the point of panic but things are getting steadily worse and i'm certain that things wont improve unless i do anything.

So I phoned Pay Plan and they have ended up recommending an IVA which im beginning to accept as the best thing to do but i have a few concerns. Namely is there a better way forward, and what happens if something serious happens with my house, car ect? how will i be able to afford to repair it? I had originally hoped for a Debt management plan but Payplan are saying an IVA is better because it is a quicker route. They also keep mentioning Bankruptcy which i find a bit disconcerting.
The other complication is that my wife is having her working hours reduced from October so this will have a knock on effect, on both income and childcare.

So i guess what im looking for is some encouragement or some word of warning from the wise?

I'm a little embarrassed as i work for Citizens Advice and should probably have know better but the debt pre dates my current job.

Heres the SOA and just a note both me and my wife currently get Childcare vouchers to the tune of £257 each this is not included in either our salary or childcare costs.

[Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2200
Partners monthly income after tax....... 1100
Benefits................................ 80
Other income............................ 0
Total monthly income.................... 3380
Monthly Expense Details
Mortgage................................ 1119
Secured/HP loan repayments.............. 166
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 155
Electricity............................. 30
Gas..................................... 50
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 25
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 10
Groceries etc. ......................... 300
Clothing................................ 30
Petrol/diesel........................... 100
Road tax................................ 40
Car Insurance........................... 140
Car maintenance (including MOT)......... 40
Car parking............................. 0
Other travel............................ 100
Childcare/nursery....................... 150
Other child related expenses............ 30
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 60
Buildings insurance..................... 35
Contents insurance...................... 0
Life assurance ......................... 55
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 15
Entertainment........................... 40
Holiday................................. 50
Emergency fund.......................... 50
Total monthly expenses.................. 2882

Assets
Cash.................................... 0
House value (Gross)..................... 220000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 227000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 198000...(1119).....4.9
Hire Purchase (HP) debt ...... 7000.....(166)......NaN
Total secured & HP debts...... 205000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Personal Loan COOP.............5000......210.......7
Credit Card (MBNA).............5500......125.......9.9
Credit Card (Halifax)..........7000......60........9.9
Overdraft (First D) Wifes......2000......0.........0
Overdraft (Smile) Joint acc....500.......0.........0
Overdaft (RBS).................3000......0.........0
Credit Card (lloyds)...........200.......5.........14
Total unsecured debts..........23200.....400.......-

Monthly Budget Summary
Total monthly income.................... 3,380
Expenses (including HP & secured debts). 2,882
Available for debt repayments........... 498
Monthly UNsecured debt repayments....... 400
Amount left after debt repayments....... 98
Personal Balance Sheet Summary
Total assets (things you own)........... 227,000
Total HP & Secured debt................. -205,000
Total Unsecured debt.................... -23,200
Net Assets.............................. -1,200
Created using the SOA calculator at Reproduced on Moneysavingexpert with permission, using IE browser.

Tixy

Hi

I'm certainly not an expert on IVAs but I would say before you decide to sign up for one have you had some advice from one of the charities as well as payplan? I understand you might not want to speak to the debt specialists at work but perhaps be worth speaking to CCCS or filling in their debt remedy tool online?

One thing I do know about IVAs is that people can have problems if their income reduces and they cannot keep up with repayments, have you mentioned your wife's reducing income to payplan?

Are you thinking of an IVA for both or just one of you? how are your debts split?

I have to say just from what you have put above I would wonder if you couldn't make a few savings and cutbacks and manage to start repaying your debts without need for an IVA or DMP. I've just run a quick snowball for if you could afford £550 a month rather than the current £498 you show - that would have you paid off in 53 months, so quicker than an IVA (I've guessed the Overdraft aprs at 15% as you haven't put them on).

I'd have thought there was easily £50 of reductions you could make to your outgoings to be able to afford the £550, if you could cut back further and pay £600 a month the snowball comes out as just 48months. Just worth considering perhaps.

elsiepac

Hi silvdo

Following on from Tixy's post regarding the snowball calculator and the fact that maybe you could just be paying an extra £50-£100 a month and that would sort you out, I thought i'd make a couple of comments on your SOA to see if they help.. Also, I did notice your overdrafts seem to have no interest rate - is this definitely correct?

Good luck

LC

silvdo wrote: »

Hi,

I've got some significant debts which have built up over the last 10 years. Last January we bought a house and had a child, this stretched our expenses more than we could afford and now we are struggling to get tot he end of each month with any money left. I don't think were missing by much but were still beginning to miss payments randomly at the end of every month. At the moment im not at the point of panic but things are getting steadily worse and i'm certain that things wont improve unless i do anything.

So I phoned Pay Plan and they have ended up recommending an IVA which im beginning to accept as the best thing to do but i have a few concerns. Namely is there a better way forward, and what happens if something serious happens with my house, car ect? how will i be able to afford to repair it? I had originally hoped for a Debt management plan but Payplan are saying an IVA is better because it is a quicker route. They also keep mentioning Bankruptcy which i find a bit disconcerting.
The other complication is that my wife is having her working hours reduced from October so this will have a knock on effect, on both income and childcare.

So i guess what im looking for is some encouragement or some word of warning from the wise?

I'm a little embarrassed as i work for Citizens Advice and should probably have know better but the debt pre dates my current job.

Heres the SOA and just a note both me and my wife currently get Childcare vouchers to the tune of £257 each this is not included in either our salary or childcare costs.

[Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2200
Partners monthly income after tax....... 1100
Benefits................................ 80
Other income............................ 0
Total monthly income.................... 3380
Monthly Expense Details
Mortgage................................ 1119
Secured/HP loan repayments.............. 166
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 155
Electricity............................. 30
Gas..................................... 50
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 25 this is very high for a land line cost - I assume you have some extras added on. You need to work out from your last 3 months bills if you genuinely use enough minutes that are covered by them to make them worthwhile. Moving on from there, you should be able to reduce your tariff if you are still in contract. If you are out of contract, you could consider switching providers. If either of your mobiles are with O2, they offer a fantastic deal on land line rental, something in the region of £7 a month. If not, you still may not need to pay £25...worth having a look around for offers etc. I think you may be able to save £5-£10 a month here.
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 10
Groceries etc. ......................... 300 this is high but I appreciate you have a young child to consider as well. If your child is still in nappies are you buying them on offers? Also other baby products, always look out for 3 for 2s etc, and ensure you use any extra points vouchers. Have you signed up to the Boots Parents Club? You get extra offers etc there too. Otherwise, on things like food, could you look at starting to batch cook things and maybe freeze them for another day if you don't want two meals in a row the same? There are some very good ideas on the Old Style thread, and a great website is this one - it's extreme but has fantastic principles so worth checking out for ideas. Also, are you meal planning and do you stick to it? It will make a difference if you're not. I think in the first month you could try to reduce this by £20 and see how you get on while you get used to it, but overall I think it may be possible to save in excess of £50 here without making too many major sacrifices - or more if you want to!!
Clothing................................ 30
Petrol/diesel........................... 100
Road tax................................ 40
Car Insurance........................... 140 this seems very high, is this the correct monthly figure? If so, are there extras you could remove at all? Could you shop around etc?
Car maintenance (including MOT)......... 40
Car parking............................. 0
Other travel............................ 100 what does this cover?
Childcare/nursery....................... 150 do you spend £257 x 2 worth of childcare vouchers each month, and then this £150 on top? I was a bit unclear on that one
Other child related expenses............ 30 what is this one?
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 60 seems high, can you shop around for a better deal at all?
Buildings insurance..................... 35
Contents insurance...................... 0
Life assurance ......................... 55
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 15
Entertainment........................... 40
Holiday................................. 50 Could you do without a holiday until your debt is paid off? Or at least half this and have a cheap UK break as a compromise? Possible saving of £25-£50 here
Emergency fund.......................... 50 You've said you have no cash assets so have you not been putting aside an emergency fund yet? I appreciate you may have included for the purpose of the SOA. Even so, even just reducing by £10 a month makes a difference in your overall situation and you can still build up a decent pot. You have a realistic figure for car maintenance in a separate pot so it hopefully shouldn't impact you too badly.
Total monthly expenses.................. 2882

Assets
Cash.................................... 0
House value (Gross)..................... 220000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 227000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 198000...(1119).....4.9
Hire Purchase (HP) debt ...... 7000.....(166)......NaN
Total secured & HP debts...... 205000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Personal Loan COOP.............5000......210.......7
Credit Card (MBNA).............5500......125.......9.9
Credit Card (Halifax)..........7000......60........9.9
Overdraft (First D) Wifes......2000......0.........0
Overdraft (Smile) Joint acc....500.......0.........0
Overdaft (RBS).................3000......0.........0
Credit Card (lloyds)...........200.......5.........14
Total unsecured debts..........23200.....400.......-

Monthly Budget Summary
Total monthly income.................... 3,380
Expenses (including HP & secured debts). 2,882
Available for debt repayments........... 498
Monthly UNsecured debt repayments....... 400
Amount left after debt repayments....... 98
Personal Balance Sheet Summary
Total assets (things you own)........... 227,000
Total HP & Secured debt................. -205,000
Total Unsecured debt.................... -23,200
Net Assets.............................. -1,200
Created using the SOA calculator at Reproduced on Moneysavingexpert with permission, using IE browser.

chevalier

Hi there You SOA says that you have £98 left over each month. But do you? If you don't know where this is going, then you and your OH need to do a spending diary for a couple of months, to track where this is getting spent. Ouch to the council tax. Have you asked if you can pay this over 12 months not 10 as this would help the overall monthly budget. Your groceries are quite high. have a look on the moneysaving oldstyle forum for the thread for cheap and healthy meals. But also do a freezer and cupboard inventory to see if you can eat out of there for a couple of weeks. Think of it as a challenge. Ref extra income. Could either of your do mystery shopping, or what about online surveys. As a male you would probably get quite alot, as often they need males to make the surveys statistically valid. I am surprise that payplan are suggesting an IVA. I think you can turn this around with some hard budgeting. The car insurance is eyewatering. Are you under 25, with points or have a high performance car? The first two you can't do anything about, but have a look if the third thing is correct, maybe you could downsize the car, and decrease the insurance at the same time. make sure you use price comparison websites when it comes due again. You spend £30 on clothes each month. I am guessing this is mainly for the little one. But check on freecycle and freegle for free clothes, as well as ebay. Ref the emergency fund. Is there any money in this currently. If so then i would suggest that the emergency is here and you need to start using it to pay down debt, especially if your OH hours are going to be cut (is she looking for new work to fill up the time, or are you going to see if your save more money with less child care?) good luck. I think it is doable to start sorting this by cutting back Save even £50 a month from grocery, £50 from emergency fund, £20 from clothes, and x from getting the council tax paid over 12 months, and you have a fair bit to over pay these debts..... good luck chev

silvdo

Hi,

Thanks everyone, it seems i do have to go back to budget properly and check what we can save. At present it really doesn't feel like we can save any money each month, but i have to admit i haven't fully examined what and where all the money goes.

The majority of the debts are in my name, only the HP car loan and the FD overdraft is in my wife's name, But we have a smaller overdraft in a joint name. So i don't think she can get an IVA as well.

I am quite worried about what happens when my wife's income goes down in October, She loses a day and a half of work but its hard to tell what that translates to in terms of money.

On a couple of other issues

Car insurance
This is for both cars via Admiral Multicar i did shop around and this is the cheapest i could find, We've both had licences for a while live in a fairly safe neighbourhood with clean licences, the only thing i can think of is that we haven't had a car for very long so only 2 years of no claims bonuses. Both of our jobs mean we need a car unfortunately. They are not particularly fancy cars a 10 year old laguna and a 4 year old Peugot 308.

Other travel
This is for rail fairs to the office whilst most days i use my car and expenses are covered via work i do have to go in to the office once or twice a week, so i can get a season ticket. in reality this travel is between £50 and £100 per month

Child care vouchers
On my SOA i have not included any account for Child care vouchers, They come out before my taxable salary and so i've only included the additional £150 on the SOA.

Emergency fund and holidays
we haven't put money aside for this rather this was my estimate on how much i would like ot be putting aside. one of the things im worried about is that if i get an IVA then i lose the ability to use credit for a real emergency and so had wanted this fund here for that purpose, if it now seems that that i can do it without cutting everything up then this can be changed fully.

Pet insurance also covers the cost of food, i didn't know where to put this and the insurance column seemd the most relevant.

Telephone also includes my broardband line, didn't notice the separate entry. were in a contract with TalkTalk until January

Food - This seems to be the big area of savings, maybe we can do something here, Because we havn't been budgeting that well its hard to tell what we spend month by month. But i guess we will have to dig in in this category. We've signed up for mystery shopping thanks for that.

Overdrafts - I'm sorry to say that i just don't know what the interest rate on our overdrafts are.

From what you guys are saying it might be that we are not quite at the point of needing an IVA yet. More thinking to do! I've made some changes to the SOA so have republished. It now looks like its achieveable without much trouble but if thats the case why don't i have any money left at the end of the month. This even allows for things that i don't at present do like putting money asside for the MOT (thats just going to hit me when October comes arround).

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2200
Partners monthly income after tax....... 1100
Benefits................................ 80
Other income............................ 0
Total monthly income.................... 3380
Monthly Expense Details
Mortgage................................ 1119
Secured/HP loan repayments.............. 166
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 155
Electricity............................. 30
Gas..................................... 50
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 0
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 25
Groceries etc. ......................... 275
Clothing................................ 30
Petrol/diesel........................... 100
Road tax................................ 40
Car Insurance........................... 140
Car maintenance (including MOT)......... 40
Car parking............................. 0
Other travel............................ 100
Childcare/nursery....................... 150
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 60
Buildings insurance..................... 35
Contents insurance...................... 0
Life assurance ......................... 55
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 15
Entertainment........................... 40
Holiday................................. 25
Emergency fund.......................... 0
Total monthly expenses.................. 2742

Assets
Cash.................................... 0
House value (Gross)..................... 220000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 227000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 198000...(1119).....4.9
Hire Purchase (HP) debt ...... 7000.....(166)......NaN
Total secured & HP debts...... 205000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Personal Loan COOP.............5000......210.......7
Credit Card (MBNA).............5500......125.......9.9
Credit Card (Halifax)..........7000......60........9.9
Overdraft (First D) W..........2000......0.........15
Overdraft (Smile) JA...........500.......0.........15
Overdaft (RBS).................3000......0.........15
Credit Card (lloyds)...........200.......5.........14
Total unsecured debts..........23200.....400.......-

Monthly Budget Summary
Total monthly income.................... 3,380
Expenses (including HP & secured debts). 2,742
Available for debt repayments........... 638
Monthly UNsecured debt repayments....... 400
Amount left after debt repayments....... 238
Personal Balance Sheet Summary
Total assets (things you own)........... 227,000
Total HP & Secured debt................. -205,000
Total Unsecured debt.................... -23,200
Net Assets.............................. -1,200

Created using the SOA calculator at

Reproduced on Moneysavingexpert with permission, using IE browser.

eyeopener2

Hi

I was just wondering how long you have left on the Loan @ £210 per month?

If you could adjust your budget down, which will have to be done anyway if you join us in DMP land, by forgetting the holidays, entertainment and drastically cutting back on presents until the loan is paid off it may give you something to work towards.

Your situation seems fixable if a realistic budget is put in place.

E2

eyeopener2

If you don't know where your money is going, write it all down. You will be amazed at what you spend it on. Mine were newspapers, magazines, the bottle of wine on the way home from work cos you just need it (well a bit more than that in my case, ahem), coffee when your out window shopping. It all adds up.

Write it all down in a little book, and your OH as well.

silvdo

little book - a great idea!

silvdo

oh and the loan runs out august 2013, i had been hoping to make till then but it just seems to be getting harder each month.

katsu

To calculate a simple effect on your wife's change of hours:

Take her current annual salary (in my example 20k to make the maths easy). Divide by 5 and that gives you the value of a day. Halve it and you get a half day. You can then take off the 1.5 day value from her annual salary.

EG 20,000/5 = 4,000
4000/2 = 2000

20,000-6000 = 14,000

Take new annual salary and divde by 12 to get a monthly figure then multiply that by 0.75 to get the rough after tax and NI figure (assuming she is not a higher rate taxpayer). You then have roughly her new net salary

14,000/12 = 11667
11667*0.75 = 875.

So in my example her pay would have been 1666 per month and has dropped to 875.

HTH

Tixy

Katsu - I think your calc makes it look a little worse than it would be, as it looks like the salary will halve. I think the £1666 was the gross monthly income before but the £875 is the net monthly income after.:o On your method I think a salary of £20k would drop from 1249 to 875.

Silvdo - assuming your wife is on a standard tax code (no benefits in kind) and isn't paying a pension it looks like her current gross salary is around £16k. If she drops from 5days to 3.5 that would change the salary to 11200 per annum. Which works out as take home pay of £830 a month, so dropping by around £270 a month.
When her hours reduce will you be able to stop all of the additional £150 childcare? if so then overall you would be down by £140 a month, certainly tight but maybe she could look for a second part time job to try to earn that money back (perhaps evenings/weekends so that it doesn't conflict with your work and then you wouldn't need extra childcare again)?