Being made redundant in January

rams_2

Hi

My wife and myself are both being made redundant as we both work for the same company.

Question
With the redundancy package on offer and the savings we have saved we could clear our mortgage, but that would still leave us with our credit card bills to pay.

The dilemma we have is
would this be the best thing to do, or should we pay off the credit cards first? and then use the rest to pay off the majority of the mortgage?

Any advice on this matter would be greatly appreciated.

Many thanks in advance.

getmore4less

What will you live off if you use all the money to pay off debts?

Debts usualy pay highest rates first.

Cut costs and start paying down debt ASAP.

McKneff

I personally would pay off the credit cards first, the interest on them would presumably be far higher than your mortgage.
At least they wont be to think of while your on JSA

Pay as much as you can off them until then.

And good luck to yu both in finding new jobs.

rams_2

There is a chance of one of us getting redeployed but at a greatly reduced wage, so if that was to happen we could hopefully survive on that wage with cutbacks until the other one found work. And we were thinking that with the mortgage paid up it would take the worry of us not having to find that large amount of money each month and also guaranteeing a roof over our heads. Therefore we could take lesser paid jobs till the economy picks up. Then with what money we had spare could then pay the credit cards off gradually.

WestonDave

You might get help paying your mortgage, you won't get help paying credit card bills, so financially (maybe not morally) the best approach is to use the money to clear debts you won't get help with, and leave balances that you might - given that you will have paid off most of your mortgage as well it will still be relatively OK.

getmore4less

rams wrote: »

There is a chance of one of us getting redeployed but at a greatly reduced wage, so if that was to happen we could hopefully survive on that wage with cutbacks until the other one found work. And we were thinking that with the mortgage paid up it would take the worry of us not having to find that large amount of money each month and also guaranteeing a roof over our heads. Therefore we could take lesser paid jobs till the economy picks up. Then with what money we had spare could then pay the credit cards off gradually.

You don't have to find a large amount every month you have a large cash pot to draw down from(if you don't use it to pay off the mortgage).

The cost is the interest.

When income is unknown cash is king.

Poosmate

Wow! What a double whammy for you both! I guess you are in the fortunate situation that you know you will be able to pay at least some of your debts/mortgage off.

I really wouldn't know which to pay off tbh there is sense in both ways. I don't think you can use all of your redundancy pay to pay off your debts though because you won't be able to claim Unemployment benefit for a certain period (not sure how long that is). Also, as WestonDave said, you should get help with the interest element of your mortgage from the state. Have you got any payment protection insurance which covers you for redundancy? Those policies should kick in so I wouldn't do anything rash.

There are things you can do to prepare yourself for tough times ahead. Start by cutting back on your spends (obviously). Start right now. If you are currently chucking food out because it goes off before you can eat it buy less. However, rather than reduce your shopping bill why not buy foodstuff or toiletries cleaning products (stuff with a long shelf life) and store it so that when the lean months come you can cut back on your shopping bill then.

If you want to go "Armageddon" style preparedness how about this Christmas you give each other a different kind of Christmas present - a huge box of household products! lol I ask my mom to give me stuff like this (mainly because there isn't anything that I really really want that is cheap enough to expect her to buy for me).

I made a thread a couple of years ago called "Preparing For Strike Action". I was worried at the time because I knew a couple of days less pay would have made the difference between me being able to make a payment on a debt and not. Thankfully I'm in a better position today though with rising prices I could find myself close to the edge again though not through strike action.

Another thread you might find interesting is "If Push Comes To Shove" (I think). These are old threads as i haven't been active in these forums for a while.

Good luck anyway.

Poo

AMILLIONDOLLARS

I'd pay off mortgage, this would reduce the worry of losing your home should you both turn out to be long term unemployed. Could you rent out a room to bring in some extra income? that could be used to pay off the credit card bills, its worth a thought.

AMD

SarEl

Defore you go paying off anything, please get some proper advice first. There are circumstances where the benefits people can treat money you have disposed of in this way as still in your bank. It is possible to pay off your febts and end up with no benefits to live on. With the hreatest respect for all the advice on here - and I know very little about benefits - you should always get it checked. I often advise people to see a lawyer even though I am one - necause I don't always have enough detailed information to be 100% sure on a website. So please do be careful that you don't end up spending what you may need, or even spending it on the wrong thing! There is more to this than what is the best thing to pay off - there is also what the benfits office may think of it.

JamesK10

rams wrote: »

Hi

My wife and myself are both being made redundant as we both work for the same company.

Question
With the redundancy package on offer and the savings we have saved we could clear our mortgage, but that would still leave us with our credit card bills to pay.

The dilemma we have is
would this be the best thing to do, or should we pay off the credit cards first? and then use the rest to pay off the majority of the mortgage?

Any advice on this matter would be greatly appreciated.

Many thanks in advance.

Comiserations on the situation. I will assume you have already begun jobhunting during this consultation period to get yourself back into the routine of it.

I vote cancel Christmas - explain the situation and give everyone a card and make it up to them when you get new jobs - then kill the mortgage. A little interest on all your cards, whilst Martin wouldn't like it, is neither here nor there compared to that 25 year grind which you could free yourself from, forever, and future salaries would go on the upkeep of the place and any vehicle. When you both sign on you will be able to use the six months' contribution-based JSA to help with all other bills especially energy for winter. From my experience up to 2009 the benefits people looked at savings with an upper threshold of five grand, this may have changed, but if you have mortgage insurance and claim on it, you will not receive any income based JSA whatsoever regardless of how long you've paid in to the system. I leave it up to you whether you combine a Council Tax benefit application with that of your JSA, as it's a separate bunch of people in your financial affairs, after the first couple of times of them clawing it back I just paid it for an easy life whatever the circumstances.

Your job ends in January, you don't need to tell anyone that, shop around for the best and longest 0% credit card deals where you could structure your payments over the interest-free term, and get transferring to a new card to stop interest being as big an issue until 2013 (take the 2-3% hits). Divide the total figure by the length of the interest free term to see your repayments and never use that new card for purchases. If you're worried about discipline, cut up the old cards as you carry the transfers out.

At the same time as all this, contact the HMRC before your P45 and settlement is issued and badger them for any outstanding tax rebates from at least the past four years which covers their system errors, don't let what you've already earned stay with them. After two years of messing me around they gave me last year's, the final one outstanding, in three weeks. That can be dumped into ISAs for emergencies as well.

Bear in mind my suggestions are what I would do after my experience of multiple redundancies and sign-ons, advice is probably a good move but not being a slave to the bank anymore and having the deeds on your property with your name on it, that's "the dream" generally for me.

moneybuster

AMILLIONDOLLARS wrote: »

I'd pay off mortgage, this would reduce the worry of losing your home should you both turn out to be long term unemployed. Could you rent out a room to bring in some extra income? that could be used to pay off the credit card bills, its worth a thought.

AMD

On another note for you to consider, do you have dependent children to keep a roof over there heads if so this could be a bargaining point for any repo, paying off the mortgage leaves you with an asset that if needs be could be/may be sold from under you to pay back the credit cards (or at least a charging order on the property) if they are large enough debts, or for you to sell and find alternative accommodation, not good news but a reality, get job hunting at least if one of you gain employment that's 50% of the problem solved. Start a money saving exercise now, get all your bills down to a minimum cancel things you will not need, i think the size of the CCard bills play a significant role in this and any loan secured or not,


ATB M.