What to do?

stressedoutscot

Hey people,

New to this, so bear with me.

Both my wife and I work fulltime and are currently £48k in debt to credit cards, paying nearly £1200pm in payments to all of these unsecured lenders. Which has a hugely crippling effect on our life, after paying all our fixed outgoings every month we are left with around £500 for food/fuel/clothing repairs etc, some months we make this work others we can't and have to use a CC to pay what is required.

We have just found out my wife is now pregnant so will be at some point in the future off work for a time which will have a drastic effect on our earning not to mention another mouth to feed.

So far we have paid our debts on time, occasionally a week late but always in the same month but fear it is only a matter of time before we cannot afford to pay our debtors any longer.

We have some equity in our house, so I did wonder if we sold our house we could raise about 50-60% of the debts would CC companies accept this as a full payment?

I would appreciate any advice, or suggestions who to talk to where to go for further information as I/we are really depressed at what should be a joyous time.

Thanks in advance.

Stressed.

dancingfairy

Congratulations on the pregnancy. Now seems to be a perfect time to get the finances sorted.
I suggest phoning National Debtline, StepChange or popping into your local CAB. National Debtline also has loads of really useful factsheets.
In terms of options - there are loads a dmp, IVA,Bankruptcy etc etc.
It's really going to depend on how much money you have each month after the essentials are paid each month to put towards the debts.
In terms of settlements I don't think your plan will work, sorry. Where would you live if you sold your house? Would renting be any cheaper? Also whilst offering settlements is a good idea at the moment you haven't actually missed any payments and the debts are still with the original lenders (From what you've said).
df

dancingfairy

From what you've said the main options for you seem to be either a debt management plan (dmp) or an IVA.
In a dmp you would pay whatever you have 'spare' after essential bills are paid towards you debts and ask that all interest and charges are suspended. A quick play with a spreadsheet says 48 months if you paid 1,000 a month, to 96 months if you could only manage 500 a month (Assuming interest and charges are stopped). As you earn you could pay more and bring your debt free date earlier, earn less and pay less it would take longer. You could also, after a few years start thinking about making full and final settlement offers. Obviously this will have an impact on your credit rating.
Another option would be to consider an IVA. This is similar to bankruptcy but would mean that you could protect any assets such as a car or your house. You would agree your budget with the person in charge of your IVA and offer to pay that for 3/4 years. You can vary it but it is not as flexible as a dmp, and is legally binding. You would also have to try and remortgage your house at a certain point to release some equity or make an extra years payments. So you'd pay for 3/4 years and then release the equity in your house or pay for another year.
That's a brief overview of them but one of the debt charities should be able to talk you through your options and give you the pros and cons of each one.
df
Edit: first job is to draw up your budget: http://www.stoozing.com/calculator/soa.php You will either need this to go through with a debt charity or can post it here for more help and suggestions.
Also I believe StepChange has a debt remedy on it's website (it used to when it was called CCCS) which if you fill it in will give you a rough idea of what it recommends for your situation (obviously it is only a computer program so can only give you a recommendation of what to investigate and in the end it may come down to personal prefences).