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SOA and request for advice
recessionhater
Posts: 18 Forumite
At the age of 42 I have never before been in serious debt or on benefits, but I am now struggling a lot and wondering what to do. There are various facets of my difficulties:
1. I bought a house for £60K in 2009. I would like to move, and I am in a town with very few jobs (especially for graduates in my discipline) and so to get a full-time job I would need to move. The house has been for sale for 2 years and I have brought the asking price down to £53K, but still no takers. However, while I am in this house, my mortgage is only £235 a month, and so in a way I am living more cheaply than I could elsewhere. However, owing to my other financial difficulties, I have now gone into arrears on the mortgage, and by December that will be three months of arrears, and I don't know what will happen after that.
2. I was working freelance, earning quite a lot of money, but most of my work was suddenly cancelled owing to cutbacks, and I am now earning ca. £12K a year. My main client now says further streamlining is likely from March next year, and I don't yet know what that means financially for me, but I expect I will be earning much less than I do now. I am already only working 3 or 4 days a month.
3. Much of my work is paid quarterly, so my earnings in October and November were around £160 a month, but the December month should see me earn ca. £2500 (this doesn't add up to £12K a year, but I have some annual pieces of work in April and July that boost those months to an extent).
4. My overdraft is now very near its limit of £3150, my credit card has around £1500 on it. These aren't massive debts, but I still have around one month to survive with no income coming in. In addition to those debts, I missed a tax payment in July. As a self-employed person, I report the tax after the event, and so the tax bills in January 2011 and July 2011 related to money earned in April 2009-April 2010, when I was earning much more money. I hadn't expect a sudden reduction in my earnings, and did not save the tax. I had a tax bill of £6000+ in January and £3600 in July, and while I managed to pay the January amount, I only paid £1000 towards the July bill, and so still owe £2600. Unfortunately, the £9600 of tax due in the calendar year or 2011 is equivalent to the vast majority of my income in this calendar year, leaving me struggling to raise the money. Then there will more tax bills in January 2012 and July 2012 that will relate to 2010/11, during part of which I was earning more than I do now, and so further difficult tax bills are coming up. If from April 2012 my work does indeed halve as I expect, I may fall below the tax and NI thresholds from April 2012 onwards, but still have the £2600 owing from the July 2011 bill, as well as the January and July 2012 bills (relating to 2010/11) and the January and July 2013 bills (relating to 2011/12) to clear before I will no longer have any tax to pay. During each of those tax years my earnings steadily declined, but I will have some tax pay until July 2013 at least, leaving me struggling for years to pay bills that don't match my current ability to pay.
5. I have had a real crash in my stockmarket investments. There was £40K in my stock and shares ISA at the beginning of 2011, and had I derisked by taking £10K out then, I would have had enough to cover my current bills and give time for the rest of the stocks to recover. I now have only £13K on the stockmarket, but the company I invested in (an oil company going into production in 2012) has kept investors invested throughout the whole year by promising a near-term rally as they attempt to put together a financing package for their plans. As financial volatility remains extreme on the stockmarket, they are still trying to do so, but there could be a rerating of sorts if the do manage to gain bank finance. I could cash out my £13K, pay off my debts, and be OK for now - but with no hope for the future. And then by March, when my work halves in quantity, and the four more tax bills arrive in 2012 and 2013, I would be back to square one, and thinking about bankruptcy eventually. I would rather give the company I'm invested in a chance to recover its position over the next few months, and then possibly pay off my debts and still have money left over for my long-term future. To cash out now, at the bottom of the market, would leave me unable to pay debts from March 2012 anyway.
6. I would like to freeze my overdraft, credit card, mortgage and tax for a few months, but I don't see the companies and the HMRC agreeing to it. Is there anything I can do to get these people to give me a few more months?
7. If by January, and as bailiffs start knocking the door, I have to use the £13K I have on the stockmarket, what would my best avenue be? Pay it all into my mortgage (which is £38K) and then try to set up an IVA for HMRC, the overdraft, the credit card? The trouble is the tax demands will keep coming and coming and coming for years, relating to historic years when I was earning more. My current £13K would be enough to pay the £2600 tax outstanding, the £3150 overdraft outstanding, the £1500 creditcard outstanding, and probably the January 2012 and July 2012 tax bills, but then I would be left with no savings, an income just about to fall below the income tax threshold, leaving me unable to pay the tax bills due in January and July 2013. If I paid my savings into my mortgage, could I set up an IVA to pay some of what I owe, or would they take equity from my mortgage for the IVA anyway?
8. In extremis, if I have to liquidate all my savings, could I, eg, pay £10K of the money I have on the stockmarket into my SIPP, and then use the remaining £3000 to pay what debts I could, and then either go for an IVA or bankruptcy? What are the rules on paying money into SIPPs when you have debts? I know the government wants us to have pension savings, but some of the creditors might argue their debts come first?
9. As I am earning almost nothing most months and then £2000-£3000 in the third month, I now don't buy anything not in the Value range at the supermarket, and I wondered at what point I could get income support/JSA, especially next year when my work is expected to halve in quantity. The various benefit checker sites seem to state that I would get government help if my income fell below £60 a week, but none of the income support calculators I have found took any account of mortgage payments. At what point could I decide that my business is just not working? Could I give it up, voluntarily, even though it is paying something, albeit declining amounts, or should I hold onto to whatever I can get at the moment? It seems the benefits system works better a) for people who don't own a house (although my house is one of the most modest in the country), as mortgage payments confuse the system; b) for people who have children (as I can't get any family tax credits); and c) for people who are not self-employed, and who can apply for contribution-based benefits.
I just don't know how to cope with all these factors without losing every single penny I have. If anyone can make any suggestions, I would appreciate it.
1. I bought a house for £60K in 2009. I would like to move, and I am in a town with very few jobs (especially for graduates in my discipline) and so to get a full-time job I would need to move. The house has been for sale for 2 years and I have brought the asking price down to £53K, but still no takers. However, while I am in this house, my mortgage is only £235 a month, and so in a way I am living more cheaply than I could elsewhere. However, owing to my other financial difficulties, I have now gone into arrears on the mortgage, and by December that will be three months of arrears, and I don't know what will happen after that.
2. I was working freelance, earning quite a lot of money, but most of my work was suddenly cancelled owing to cutbacks, and I am now earning ca. £12K a year. My main client now says further streamlining is likely from March next year, and I don't yet know what that means financially for me, but I expect I will be earning much less than I do now. I am already only working 3 or 4 days a month.
3. Much of my work is paid quarterly, so my earnings in October and November were around £160 a month, but the December month should see me earn ca. £2500 (this doesn't add up to £12K a year, but I have some annual pieces of work in April and July that boost those months to an extent).
4. My overdraft is now very near its limit of £3150, my credit card has around £1500 on it. These aren't massive debts, but I still have around one month to survive with no income coming in. In addition to those debts, I missed a tax payment in July. As a self-employed person, I report the tax after the event, and so the tax bills in January 2011 and July 2011 related to money earned in April 2009-April 2010, when I was earning much more money. I hadn't expect a sudden reduction in my earnings, and did not save the tax. I had a tax bill of £6000+ in January and £3600 in July, and while I managed to pay the January amount, I only paid £1000 towards the July bill, and so still owe £2600. Unfortunately, the £9600 of tax due in the calendar year or 2011 is equivalent to the vast majority of my income in this calendar year, leaving me struggling to raise the money. Then there will more tax bills in January 2012 and July 2012 that will relate to 2010/11, during part of which I was earning more than I do now, and so further difficult tax bills are coming up. If from April 2012 my work does indeed halve as I expect, I may fall below the tax and NI thresholds from April 2012 onwards, but still have the £2600 owing from the July 2011 bill, as well as the January and July 2012 bills (relating to 2010/11) and the January and July 2013 bills (relating to 2011/12) to clear before I will no longer have any tax to pay. During each of those tax years my earnings steadily declined, but I will have some tax pay until July 2013 at least, leaving me struggling for years to pay bills that don't match my current ability to pay.
5. I have had a real crash in my stockmarket investments. There was £40K in my stock and shares ISA at the beginning of 2011, and had I derisked by taking £10K out then, I would have had enough to cover my current bills and give time for the rest of the stocks to recover. I now have only £13K on the stockmarket, but the company I invested in (an oil company going into production in 2012) has kept investors invested throughout the whole year by promising a near-term rally as they attempt to put together a financing package for their plans. As financial volatility remains extreme on the stockmarket, they are still trying to do so, but there could be a rerating of sorts if the do manage to gain bank finance. I could cash out my £13K, pay off my debts, and be OK for now - but with no hope for the future. And then by March, when my work halves in quantity, and the four more tax bills arrive in 2012 and 2013, I would be back to square one, and thinking about bankruptcy eventually. I would rather give the company I'm invested in a chance to recover its position over the next few months, and then possibly pay off my debts and still have money left over for my long-term future. To cash out now, at the bottom of the market, would leave me unable to pay debts from March 2012 anyway.
6. I would like to freeze my overdraft, credit card, mortgage and tax for a few months, but I don't see the companies and the HMRC agreeing to it. Is there anything I can do to get these people to give me a few more months?
7. If by January, and as bailiffs start knocking the door, I have to use the £13K I have on the stockmarket, what would my best avenue be? Pay it all into my mortgage (which is £38K) and then try to set up an IVA for HMRC, the overdraft, the credit card? The trouble is the tax demands will keep coming and coming and coming for years, relating to historic years when I was earning more. My current £13K would be enough to pay the £2600 tax outstanding, the £3150 overdraft outstanding, the £1500 creditcard outstanding, and probably the January 2012 and July 2012 tax bills, but then I would be left with no savings, an income just about to fall below the income tax threshold, leaving me unable to pay the tax bills due in January and July 2013. If I paid my savings into my mortgage, could I set up an IVA to pay some of what I owe, or would they take equity from my mortgage for the IVA anyway?
8. In extremis, if I have to liquidate all my savings, could I, eg, pay £10K of the money I have on the stockmarket into my SIPP, and then use the remaining £3000 to pay what debts I could, and then either go for an IVA or bankruptcy? What are the rules on paying money into SIPPs when you have debts? I know the government wants us to have pension savings, but some of the creditors might argue their debts come first?
9. As I am earning almost nothing most months and then £2000-£3000 in the third month, I now don't buy anything not in the Value range at the supermarket, and I wondered at what point I could get income support/JSA, especially next year when my work is expected to halve in quantity. The various benefit checker sites seem to state that I would get government help if my income fell below £60 a week, but none of the income support calculators I have found took any account of mortgage payments. At what point could I decide that my business is just not working? Could I give it up, voluntarily, even though it is paying something, albeit declining amounts, or should I hold onto to whatever I can get at the moment? It seems the benefits system works better a) for people who don't own a house (although my house is one of the most modest in the country), as mortgage payments confuse the system; b) for people who have children (as I can't get any family tax credits); and c) for people who are not self-employed, and who can apply for contribution-based benefits.
I just don't know how to cope with all these factors without losing every single penny I have. If anyone can make any suggestions, I would appreciate it.
0
Comments
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Hi,
I can't speak with authority on many of the points you raise, but I'm not going to read and run. As it's quite late tonight, I think it's unlikely you'll get many replies just yet so I'd suggest you add another post in the morning when it will attract more attention.
Your situation, however, is reminiscent of someone who was posting here over quite a long time and who found that relying on their usual source of income just didn't make ends meet. They were reluctant to claim benefits and when eventually they tried this, they found that because of peculiarities in the system they were only eligible for a very small amount. However, I'd advise you to start the process of claiming as soon as you can if, as seems from your post, your income is not going to cover expenses in the foreseeable future.
The other suggestion I'd make is to look for other employment, even if it's part time and not in itself sufficient to cover expenses. This could make you eligible for some benefits, though you will have to verify that with someone more knowledgeable than I am. You could consider part time or relief work if you feel your current work will still pay enough to be worth keeping up in the current economic climate.
My suggestions are only that - suggestions - and it may be that in your circumstances there is a better way forward. What I've said is based on what I've learned from the other person who, as I've said, seemed to be in a similar situation. One thing that's significantly different, though, is that you have your own house. Have you looked into having a tenant?
Wishing you all the best - and do add a post or so in the morning, when the brains will be on hand to help out!
Miggy
MEMBER OF MIKE'S MOB!
Every Penny a Prisoner
This article is about coffeehouse bartenders. For lawyers, see Barrister. (Wikipedia)0 -
thanks, I'm looking for a part time job.
As for finding a lodger - it is a 2 bedroom house with a bathroom on the ground floor. I feel that lodging with someone in a small house, partiicularly one where you would have to go downstairs (and through the kitchen) to the toilet in the middle of the night would be a little awkward. I suppose I might find someone, but it would be hard.0 -
Hi recessionhater - welcome to MSE, loads of supportive people on here & great advice.
May I suggest that you complete your SOA in the "mse style" http://www.makesenseofcards.com/soacalc.html - it's a lot easier to see exactly what's coming in / going out / owed:) and I'm sure you'll get loads of advice then.Grocery Challenge £211/£455 (01/01-31/03)
2016 Sell: £125/£250
£1,000 Emergency Fund Challenge #78 £3.96 / £1,000Vet Fund: £410.93 / £1,000
Debt free & determined to stay that way!0 -
recessionhater wrote: »thanks, I'm looking for a part time job.
As for finding a lodger - it is a 2 bedroom house with a bathroom on the ground floor. I feel that lodging with someone in a small house, partiicularly one where you would have to go downstairs (and through the kitchen) to the toilet in the middle of the night would be a little awkward. I suppose I might find someone, but it would be hard.
Good luck with the job hunt. Be bold and try fields you wouldn't normally think of - I'm sure that someone who is self employed is going to be able to use their initiative, think on their feet and have lots of transferable skills. Personally I work in care and have colleagues from all sorts of work backgrounds, and I expect that applies in other sectors too.
Re: tenants, I see that it might be a bit difficult to share space with someone full time, but there may still be groups of people who need somewhere say, during the week?Miggy
MEMBER OF MIKE'S MOB!
Every Penny a Prisoner
This article is about coffeehouse bartenders. For lawyers, see Barrister. (Wikipedia)0 -
Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 0
Monthly Income Details
Monthly income after tax................ 900
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 900
Monthly Expense Details
Mortgage................................ 235
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 70
Electricity............................. 28
Gas..................................... 30
Oil..................................... 0
Water rates............................. 11
Telephone (land line)................... 17
Mobile phone............................ 5
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 18
Groceries etc. ......................... 120
Clothing................................ 0
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
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..................... 13
Contents insurance...................... 8
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 7
Entertainment........................... 0
Holiday................................. 0
Emergency fund..........................
Gym........................................38 (this is my one luxury, and without it I would have nothing to do at all)
Total monthly expenses.................. 600
Assets
Cash.................................... 0
House value (Gross)..................... 50000
Shares and bonds........................ 13000
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 63000
Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 38000....(235)......4.84
Total secured & HP debts...... 38000.....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
credit card....................1500......30........(unsure of the exact rate, but it amounts to a £30 monthly charge at the moment, but is set to creep up)
overdraft......................3100......50........(unsure of the exact rate, but I have been phoned by the bank to warn me I am close to getting additional charges and I am paying £50 a month on this)
tax arrears....................2600......0.........0
Total unsecured debts..........7200......80........-
Monthly Budget Summary
Total monthly income.................... 900
Expenses (including HP & secured debts). 600
Available for debt repayments........... 300
Monthly UNsecured debt repayments....... 80
Amount left after debt repayments....... 220
Personal Balance Sheet Summary
Total assets (things you own)........... 63,000
Total HP & Secured debt................. -38,000
Total Unsecured debt.................... -7,200
Net Assets.............................. 17,800
I included the tax debt of £2600 in this, but as I am not on PAYE and pay tax in arrears, there is likely to be a further bill in January 2012 ,and then July 2012, and then in January 2013 and then in July 2013, all relating to income earned before I lost some of my freelance work. So while it looks like I can manage on my income and outgoings at the moment, that does not take into account 5 tax bills. If I set up a monthly plan to pay the correct amount o tax and NI for my current income, I would have £220 left each month as this SOA shows, but with 5 tax bills likely to amount to more than £10K in total due to arrive in stages, and with my income likely to halve from March/April next year anyway, the situation is worse than it looks!0 -
You have net assets worth £17,800, (I appreciate that includes equity on your home) but if you sell and cash in your shares, you will be debt free (including the forthcoming tax bills).
That is a bit drastic I know, but you if cash in your shares and repay your debt, you will have an extra £80 a month (even more if you include the tax arrears), and the remaining £5k can repay your forthcoming tax bill and you could ask the tax office if they would accept a repayment plan for the rest of it. Taking a lodger in will help your situation as well.0 -
Hi, merlot123, I know that. But if I did that, my life would be totally destroyed for good. I would have nothing and never have any prospect of having anything. Of course I know I can run all my savings down to nothing, pay my debts, and then be in a situation from next March where I will be earning £6K a year, living in a town with almost zero jobs and zero in my line of expertise. I will be left living in a tiny terraced house with every prospect of losing that eventually too.
I am seeking advice that would prevent me from losing absolutely everything. Selling everything and eliminating any future for myself to pay tax bills so people working in HMRC can earn salaries double, triple, quadruple, or more above the national average and so the government can fritter £23bn a year on foreign aid and net contribution to the EU - well, where is the upside for me? I don't want to simply survive on a pittance with no social life, no hobbies, no car - my savings are for my long-term future, and so I am seeking a way of managing my debts without destroying my life permanently.0 -
I have two things to take from this:
1. You spend too much on electricity and gas.
2. You'll definitely get through this on to better things!
You also don't pay a penny for travel (somehow) and no TV licence... how do you get around that?0 -
Rather than be bitter about what (very few) people in HMRC earn how about you consider moving town to where there is some work?
If you are unwilling to take the obvious answer (sell shares / repay debt / start again) you are going to have to be a bit more flexible and lateral. Good luck, with enough determination I am sure you can turn it around.Thinking critically since 1996....0 -
I don't spend a penny for travel because I can't afford to go anywhere. And I don't watch TV. I keep changing energy suppliers, but with electricity and gas prices through the roof, I don't know how I can spend most of the day in the house and have no significant energy bills. Believe me I am reluctant to turn the heating on. Even if I had no electricity and gas, and saved £58 a month, the nature of my problem is the overhang of tax bills for several years after the period they apply to, and the way I could only pay what is a transient bill by cashing out of all my long-term savings at the very bottom of the market and thus eliminating my long-term future. If I lived in cold and darkness, that would not solve those problems - which is why I didn't fill in the SOA in the first post, as paring down expenditure it not my problem. I already live a life much inferior to that of people on welfare.
Basically I would like to put off the tax people, and ideally the overdraft and the mortgage for at least six months, when I **might** have the money to pay those debts and still have savings left over (and if I didn't, ie if the shares didn't recover, I would be in the same situation I am in now). How quick are the tax people to send debt collectors round? Does the fact that the mortgage company refused my request for a six month payment holiday in September and put me on a 3 month arrears programme, with someone to be agreed by December, mean they are going to try to repossess the house in December?
The other thing I was hoping to find out is whether people on £6K a year can close their businesses and go on the JSA/income support, or whether I have to struggle on to the bitter end until every single income stream closes itself down by factors out of my control?0
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