No money for anything...where do I go first

taffy056

You are only getting £80 in benefits, contact the tax credits people to review your income, spread out your council tax over 12 months instead of 10. Are you getting child allowance in that income? You are paying £100 a month for internet/landline/sky , combine the lot for about £30 a month

jamesd

One good thing there is that it's relatively early in the debt accumulation process, so you still have time to recover.

Defaulting on the unsecured debt is not sufficient to recover from this but you probably will have to do it as part of the solution. You might end up able to offer token £1 payments.

A benefits review is key, try CAB.

Also read about the mortgage rescue scheme that may be able to help you by greatly reducing your outgoings. Key here is that you do have substantial equity in the property. I'm not sure that it's the best solution, switching to a cheaper and possibly smaller property or one in a cheaper area may be a better approach to reducing outgoings.

Without more benefits or other income, downsizing or mortgage rescue may fail anyway, due to a continued lack of sufficient income. Downsizing to a two bedroom flat is about the minimum that'd be appropriate for a family with one child. Assuming that would halve the mortgage amount you'd still have a £400 mortgage bill, too high for your current income.

A mortgage to rent scheme might work but after selling the property you'd have significant capital left over and that would disqualify you from means tested benefits until most of it was used up.

Contacting your mortgage lender is something that you should do but only after CAB or if you're going to miss a payment. Inform them that your income is too low to pay all priority bills and ask them to make offers that may assist during the time until a new job can be found. They may offer to capitalise repayments - add the repayments to the amount owed. If they make this offer it would eliminate the need to make mortgage payments for some time. The massive advantages of this for you is that it could eliminate the mortgage payment expense for a while and you don't need to move or sell the place. Eliminating that mortgage payment and defaulting on the unsecured debt while also eliminating non-essential expenses would get you back into a barely stable situation where you can just about cover the priority expenses. This sort of offer from them is only possible because you have so much equity available. it's only a temporary solution for a year or three but that may be sufficient.

I don't know whether a mortgage lender who's capitalising repayments would also agree to porting and downsizing to reduce the rate at which the unpaid money is accumulating.

So two critical things:

1. CAB for benefits and situation review.
2. Mortgage lender to ask for assistance for some time until a new job is found, with capitalising of payments being what appears to be required since interest only won't be sufficient to allow you to pay priority bills unless more benefits are available.