£35000 of debt, lots of equity but no-one will lend to us

carlyfarley

Hi
This is my first time posting so please be gentle!
My husband and I have about £35000 in debts. Our credit ratings are good, no defaults or missed payments but he is in his emergency overdraft at the moment.
Our outstanding mortgage is £116000 and house value is £190000. We originally tried to remortgage and release £30000 equity to cover our debts through Natwest via L&C, it was agreed in principal but it was declined because of the emergency O/D. We then applied through JustRemortgages. Again Principality agreed in principal but declined us due to the amount of debt.
We are now at the stage where we are considering and IVA/DMP as we cannot afford to live (figures below)
We approached StepChange who suggested a DMP.
I don't know where to go from here really. My latest attempt to remortgage was with Justremortages but they arent a whole market broker. I dont know if its worth trying to apply through Which? or another broker.
Any suggestions? I feel sad having to go down the DMP/IVA route when the credit rating is fair and we have equity, we just cant get at it!

Thanks for reading my essay xxx

Debts
Argos Store Card £2,600 £70 Me
Barclaycard Credit Card £7,200 £216 Me
Barclaycard Credit Card £8,000 £240 My Partner
Barclays Overdraft £2,200 £110 My Partner
HSBC Credit Card £819 £25 Me
HSBC Overdraft £1,500 £75 Me
Sainsburys Credit Card £3,555 £107 My Partner
Santander Personal Loan £3,200 £149 Me
Santander Credit Card £3,549 £107 Me
Santander Personal Loan £3,200 £131 My Partner

Housing Amount Comments
Rent
Mortgage £592
Secured loans
Charging / Inhibition order
Mortgage endowment premium
Service charge/ground rent
Water £46
Council tax £131
Gas £49
Electricity £49
Other household fuels
Household Services Amount Comments
Building/contents insurance £12
Telephone/mobile/internet £90
TV licence £13
Satellite/cable television £25
Repairs/maintenance
Household appliance rental
Child maintenance
Childcare £100
Fines/CCJs/decrees
Life insurance/pensions
Medical/accident insurance
Hire purchase
Transport Amount Comments
Spares/servicing £10
Road tax £20
Insurance £37
Breakdown cover
Fuel/parking £120
Public transport
Food & Housekeeping Amount Comments
Food, toiletries, cleaning £220
School meals/meals at work
Pets/pet foods/insurance £20
Tobacco
Misc. Goods & Services Amount Comments
School trips/activities £10
Medicine/prescriptions £10
Dentist/opticians £17
Hairdressing £10
Union/professional fees
Laundry/cleaning
Education fees
Personal & Leisure Amount Comments
Clothing/footwear £50
Newspaper/magazines
Sports/hobbies/entertainment £20
Children's pocket money
Religious contributions
Sundries & Emergencies Amount Comments
Sundries/emergencies £20
Loan from family/friends
About You Details
Date budget created 18 Jan 2015
No of adults 2
No of dependants 2
Your Income Amount
Take home pay £611
Partner's take home pay £1,480
Rent/board received
Pension received
Any other income
received
Income Support
Jobseekers Allowance
Incapacity Benefit/ESA
DLA/PIP
Working Tax Credit £50
Child Benefit £149
Child Tax Credit
Child Support
Total Income £2,290
Total Expenditure £2,022
Surplus (Deficit) £268
Budget Com

Tixy

Hi and welcome to the forum.

In terms of making a decision, do you know why you have ended up with so much debt? As that may alter the best way to tackle the debt.

Your budget is showing a surplus of £268 a month, but I am not sure where the figure of £2022 expenditure has come from? The expenses you have listed come to, I think, just under £1700 and your debt repayments are £1100.

In terms of your credit rating, whilst ideally nobody wants to ruin their credit history there is benefit in worrying about preserving it if your debts are at such a level that you wouldn't be accepted for any new credit for some time anyway due to your current level of indebtedness.

What repayment level have stepchange suggested for a DMP? and estimated length of the plan?

carlyfarley

Yes sorry the £268 is surplus after all essential bills etc, so £268 to repay the £35000 worth of debt each month.
I havent added in all of the little extras eg newspapers, pocket money, etc

carlyfarley

The reasons for all the debt....stupidity, availablity of credit, two babies, minimum wage job, filling the gap with credit cards

rising_from_the_ashes

carlyfarley wrote: »

I havent added in all of the little extras eg newspapers, pocket money, etc

Ahhhh but you need to add those up & include them as they're often where a lot of the 'lost' money goes!

It's great that you have a surplus, you really need to sit down and work out why you've built the debt before you can move forwards.

A DMP (or any type of money/debt restructuring) will sadly fail if you've not established and tackled the reasons for the debts as you'll just run them up again (voice of experience speaking here!)

Although you have equity, the lenders have no guarantees you'll clear the debts with the money and they have no guarantees you'll not spend on the cards / OD etc etc again - that's why it's often difficult to remortgage etc to clear debts


Keep a spending diary for a month - put down absolutely everything and see what the real spending is - it's usually a bit of an eye opener!

rising_from_the_ashes

carlyfarley wrote: »

The reasons for all the debt....stupidity, availablity of credit, two babies, minimum wage job, filling the gap with credit cards

Sorry you posted while I was typing!


So which of the above are no longer applicable ......

carlyfarley

Well we've been living without the aid of credit cards for about 6 months as they're all up to limits! I've learned a lot of valuable lessons, cut down shopping bills, saving for something rather than buying and worrying about paying later etc. However, its all a little too late now as we cannot meet the minimum repayments

carlyfarley

The length of the DMP suggested was 11 years.But to be totally honest, I have been reading up on both for the last month and I think an IVA would be better as I manage all the bills/mortgage etc, my husbands doesnt help at all and I dont think Id cope with all the phone calls etc on my own

Tixy

On the figures posted it would seem like a DMP would work for you.

Unless you can make any major changes to the figures, could you increase your earnings/ work more hours?

Another possible option would be selling up and moving to rented for a short period and then looking to buy again in perhaps a year? Its a big step and not for everyone but is an alternative to some form of debt management.

carlyfarley

We have a two year old and a five year old who goes to school two minutes up the road. Selling would probably be the best option but not one we would like to consider with such a young family. I appreciate your responses, they're very helpful. I am still thinking IVA

FireWyrm

Turning usecured debt into secured it never a good idea no matter how tempting it seems. At the moment, the worst that can happen is a CCJ or two that trashes your credit file - well, hello, it's already trashed so dont worry about that. The 'score' you have is meaningless rubbish as mortgage lenders have their own criteria by which they judge credit worthiness and as you have found out, they dont like you much at the moment.

Your best bet is a DMP managed by an approved party like StepChange, but there is no reason you cant self manage it. It's just writing to creditors, telling them the score and then paying them pro-rata what you can afford. However, before you go down that route, you really need to deal with the underlying problem, which is overspending and not paying attention to your finances. It really is the root of all evil and since you say "I havnt included all those little expenses", I can clearly see, you are not quite there yet. If you were, you would know, to the penny, all of those 'little expenses' you are pretending dont happen. They do happen and sticking your fingers in your ears and going 'la la la la' wont make it go away.

Your budget at the moment looks relatively sound, but are those amounts actually accurate. So, you will absolutely have £268 in hand at the end of this month? If not, why not? Have you looked at and analysed your past financial behaviour for the last 6 months? Do you have any idea how much you really spend on all those categories or are you guessing? Finger-in-the-air accounting wont help you get out of this. You need hard facts and figures.

The other thing that struck me is that you mention you and your partner and seem to be suggesting that your finances are largely separate. Is this the case? There are some on here who manage to make this work, but it is rare. If you are a unit, you should be calculating household income as a unit. It matters not who actually earns the money, it does matter that the bills are paid on time and in good order. Presumably you both ran up the credit cards and loans? You quite probably need to stop thinking of it as separate and start thinking of all income as household resource. That means, no one spends money that wasnt accounted for first. It's the only way.

So, to recap

First step is to get your account printouts for the last 6 months (all of them) and a packet of highlighters and start figuring out what you actually spent on what and getting some basic categories worked out in your mind. As a start, you would probably want to split household bills from general spends etc. You also possibly need to re-organise your finances a bit better. If you are putting all your money into one account and spending from that same account, trying to figure out what you have spent and how much is left is a bit like trying to hit a mouse size moving target with a tank....you cant. You have no idea where to aim. I would suggest splitting your accounts into something like a 'running account' into which all your money is paid and two separate personal accounts into which a stipend is paid (after the bills). You never spend from the bills account and the personal accounts only get what is left after all other essential spending is met.

Your next step is to put together a plan with a real budget based on real figures.

Get a spreadsheet and lay it all out. You can get some from https://www.vertex42.com for free, or a nice software program to do it for you called YNAB (google it). The latter is not free, but I promise it is worth every penny.

Once you have an actual budget, you'll be in a position to figure out how much you really have to pay debts. You then pay those debts just like you would pay a bill - 1st of the month, direct debit or bank transfer.

Then you just plod on. It gets boring after a while when your accounts are actually running, but that is what this board is for. Mutual support and advice.