Should I Get an IVA??

seanym007

Hi All,

I'm after some advice. I'm a married man in my 30s, and pretty much my entire adult life I have been in debt.. I've always lived off the notion that as I earn more the debt will be repaid, but in fact the opposite occurs.. I now find myself with £32k owed. This is a combination of two loans, two credit cards and an overdraft (maxed out of course). All of the debt is in my name, since my wife got an IVA shortly after we got together. This has only recently completed, and I'm thinking of doing the same? My concern being how it would affect us going forward, i.e. getting a mortgage (we rent privately at the moment). We're both on decent wages (£60k combined per year), but the problem is that a large portion of my earnings are going towards paying the debt (£1k per month). The loans are going down, but its the cards that are the problem.

Since I've overstretched myself, I don't have the available cash to react to any unexpected circumstances, such as car repairs, or birthdays, christmas. We don't go on holidays, and I have gone through all our bills to reduce what I can (cancelled sky, change broadband supplier, changed elec/gas, reduce mobile phone contract, shop at aldi rather than asda, changed car to a smaller more economical). this has made a small difference, in that I've probably got around £50 more a month..

We've also agreed not to use the cards this christmas, instead we're both volunteering for as much overtime as possible so all christmas stuff can be paid with cash.

this though is not sustainable, especially as my wife wants to have children very soon. I worry about the financial impact both initially and longer term to support my family. I feel very vulnerable and unable to do anything to change my circumstances

my plan was to combine the one expensive loan and both cards into one loan. If I could get an APR of between 10-15% that would save me £150-£200 per month, but predictably I was declined, probably due to my high credit amount..

So, i either manage as I have, trying to save where I can, contact a debt management company to freeze the interest, allowing me to repay more quickly, or go IVA..

I hate the idea of asking for help, but I have to accept that what I think is best is not working, and I really want to be debt free!

Thank-you

DandelionPatrol

Post a Statement of Affairs http://www.stoozing.com/calculator/soa.php Include the APR's on the debts. Then we can take a look and give opinions. If you still have your head above water, it may be better in the long run to default and go on a DMP than go on an IVA - if you can dodge a CCJ in the process.

seanym007

Ok thank-you!

FireWyrm

Lets try to address these issues as best we can. Remember, the SOA is really necessary in order to comment on actual spend, but frankly, I think the effort involved in compiling and thinking about as SOA is probably far more valuable than the results produced.

What you need to do is change your spending habits. You need to look at your finances differently and that isnt going to happen over night.

To give you some encouragement, 4 years ago, I was paid in the last working day of the month. On the 5th of the month, I went to a supermarket with the intention of buying the month's shopping, i.e, providing what we needed, not just splurging on whatever. My bank card was refused at the till and that meant that since my OD was £1500 and the bank had cut me off, it was hovering around the £2000 mark, five days after pay day with an entire month to go.

I went home, I printed out my bank accounts (which stretched to dozens of pages) and I sat down with a box of highlighters, a pen and a powerful determination. I was no longer going to live like this. Something had to change. I found that I owed £26,000 in total including all the maxed out overdrafts and I was quite literally broke.

Today....It is 15 days to payday and I dont even care when I get paid. There is a fridge full of food and my accounts are showing about £14,000 in the black. All because I changed the way I look at money. I stopped living day to day, finger in the air and a prayer. I started using real finance software, planning, budgeting, paying attention.

seanym007 wrote: »

I'm after some advice. I'm a married man in my 30s, and pretty much my entire adult life I have been in debt.. I've always lived off the notion that as I earn more the debt will be repaid, but in fact the opposite occurs.. I now find myself with £32k owed. This is a combination of two loans, two credit cards and an overdraft (maxed out of course).

Simply put...this is because you have been frittering your money and not paying attention to where it is going. This is what needs to change and urgently.

seanym007 wrote: »

My concern being how it would affect us going forward, i.e. getting a mortgage (we rent privately at the moment).

All debt management plans carry stigma. If you do this instead of self managing and rigorous accounting...you wont get a mortgage for another 6 years until the markers drop off the credit files.

seanym007 wrote: »

We're both on decent wages (£60k combined per year), but the problem is that a large portion of my earnings are going towards paying the debt (£1k per month). The loans are going down, but its the cards that are the problem.

You earn more than I do.

Quite probably, a larger portion could go towards your debts if you really put your mind to it. I'm not saying it will be easy, it really isnt, but it is what you need to do.

seanym007 wrote: »

Since I've overstretched myself, I don't have the available cash to react to any unexpected circumstances, such as car repairs, or birthdays, christmas. We don't go on holidays, and I have gone through all our bills to reduce what I can (cancelled sky, change broadband supplier, changed elec/gas, reduce mobile phone contract, shop at aldi rather than asda, changed car to a smaller more economical). this has made a small difference, in that I've probably got around £50 more a month..

Reducing bills helps, but what helps even more is controlling incidental spending. You need a real budget, a real plan and you need to stick to it. If you give yourself £10 a week for coffees, that's fine, but dont spent £12.

Secondly, stop thinking of those items as 'unexpected'. Christmas happens every year, it has done all of your life and likely will continue as a national holiday for generations to come. How is that unexpected? Pretending that it is 'unexpected' or an 'emergency' gets you nothing except more trouble to fix next year. As part of your budget, this needs to be accounted for. Likewise, car maintenance, and birthdays are in no way 'unexpected' and this is the first lie you can stop telling yourself. The trick to this type of accounting is ruthless honesty. It is the first thing that people are taught in AA meetings incidentally and for the same reason.

seanym007 wrote: »

We've also agreed not to use the cards this christmas, instead we're both volunteering for as much overtime as possible so all christmas stuff can be paid with cash.

A good start. So, what is your budget? What presents do you plan to buy? What food do you plan to buy? What alcahol do you plan to buy? My plans for Christmas start in January for instance. I know what I am going to buy, from where and how much I am going to pay for it. Since Christmas is not an 'unexpected' expense, I have budgeted for it. I have been saving £100 a month for the last 12 months and I now have £1100 in my account. I use premium bonds because the money is hard to get to (it is not like a normal bank account), I dont 'see' it every time I open my accounts and I can fantasize that I'll win the £1million prize. It's like playing the lottery all year for free. Since I have to save the money anyway, might as well. Yeah, TSB pay 3% and you could put the money on a merry-go-round to satisfy the T's&C's but frankly, life is just a little too short.

I'm not saying that you can start with this amount - I didnt. The first year, I saved £30 a month and that bought all presents, food and booze for the holiday season. I dont actually spend all of that accumulated £1200 either....it actually serves as my emergency car repair fund as well.

seanym007 wrote: »

this though is not sustainable, especially as my wife wants to have children very soon. I worry about the financial impact both initially and longer term to support my family. I feel very vulnerable and unable to do anything to change my circumstances

Been there, done that. Got the T-shirt. Stop moping and do something.

seanym007 wrote: »

my plan was to combine the one expensive loan and both cards into one loan. If I could get an APR of between 10-15% that would save me £150-£200 per month, but predictably I was declined, probably due to my high credit amount..

But...not this.

Consolidations loans never work. Ask anyone on this forum. Most of us have done it atleast twice. For some of us, it took even longer for the penny to drop and we went round another few times just for good measure.

There is no easy road to being debt free, no short cuts, no magic bullet. What you need to do is plan the use of every penny you have and then stick to it. There are tricks you can do to reduce your fixed costs, but at the end of the day, it is all about prioritizing your spending, planning for the unexpected and just plain plugging along.

seanym007 wrote: »

So, i either manage as I have, trying to save where I can, contact a debt management company to freeze the interest, allowing me to repay more quickly, or go IVA..

No. Free up spare money from your correctly formulated and meticulously planned budget to overpay debts. It wont be pleasant for the first year or two, but you will get there in the end. I promise.

seanym007 wrote: »

and I really want to be debt free!

Do you? Really? How much are you prepared to sacrifice to make it happen? If the answer is, not much, then you havnt hit rock bottom yet. You need to believe, truly and completely believe that you cannot and will not continue in this life for another day. You have to completely embrace a totally new way of life from now to the end of your life. You have to research, plan, invest effort and time. None of this comes without commitment.

concrete_kid

Great advice from FireWyrm. As mentioned above, the key is changing your midset, and although it is difficult at first, the feeling of being in control and on top of things will keep you going - even if you do have a way to go. I was similar, at one point I only knew my bank balance was 0 when my card declined - I didn't check my balance, ever! By the sounds of it you are very motivated, and if you keep this up you'll succeed.

I have to agree with the above, birthdays, christmas etc are not unexpected. It's january soon, get a new diary and make sure it has EVERY event / celebration you need to pay for. Family, friends, friends kids, weddings, they all cost money. The new organised you will make a budget looking ahead a couple of months to see what is coming up and budget for it. Also it's ok to say no to things! We often agnonise over this, however generally the organizer won't give it a second thought.

At the moment you are renting, so you only need to plan for relatively minor expenses (car being the biggest). However when you buy a house, you'll need to have money set aside for when the boiler breaks (they don't last forever, so again this is an expected expense about every 10 years or so), the fridge breaks etc etc.

I think Christmas is your first oppurtunity to put things into pratice. You need to keep a lid on your spending, can you agree to not buy for some people? People can often be releived by this. Maybe limit presents to £5, means you have to be creative but can easily be done. Amazon has really good second hand book under 'new and used' for £1-2 (They don't look used, think they are actually unsold stock). I've just bought 3 cookbooks for presents and they were £4 each including delivery. If you do this, you'll realise, that actually the world won't end if you don't go mad on Christmas presents, nobody will think less of you. Even better if you tell people why.

Good luck

DandelionPatrol

FireWyrm wrote: »

Lets try to address these issues as best we can. Remember, the SOA is really necessary in order to comment on actual spend, but frankly, I think the effort involved in compiling and thinking about as SOA is probably far more valuable than the results produced.

In this instance, I think sight of the SoA will be valuable. In particular, the structure of the debts is important for knowing whether OP is going into a debt black hole or whether some ducking and diving will make this recoverable. The SoA is about far more than saving money by changing your brand of baked beans. The level of spend is only a part of the SoA

Remember that OP's original question is 'should I get an IVA'. For something that serious, a professional would want to see the SoA. It would be useful for OP to post it here - and while the rest of what you post is fine, I think you are mistaken to dissuade OP from posting the SoA.

seanym007

Hi All,

Many thanks for the advice! You are of course right! If I'm honest with myself I know what sacrifices need to made, but making them is the real challenge, however I determined to become debt free, and hoping for a shortcut or miracle is pointless.

I will do the SOA, it will be a useful exercise for me..

Thanks again!

andyfromotley

DO NOT use a debt management company under any circumstances. If you decide to go down that route use stepchange,CAP or national debtline as your first port of call as they are charities/non profit and will not charge you.

I dont think you need debt relief, your debt is abut half of your income. Cutting back, hard work and determination can clear that probably. As everyone has said an SAO should be your start point.

seanym007

Hi All,

I just wanted to update. So I have done the SOA, and frankly I am a little embarrassed hence why I've not posted the detail on here. It appears the situation is not as dire as I first though, and in fact there are still savings that could be made. I've often dismissed a £10 savinf here and £3 saving there as it feels like this is not making a debt in the overall debt figure, but as i've reminded myself, every little helps, and the accumulations will work towards clearing this debt.

So, no i don;t need an IVA, which I'm happy with as I didn't really want to go down that route. Its an easy fix, and won;t solve my underlying problem, which as all you say, is the way I look at money. Looking at the debt figure, it looks like an unbelievable target, but the advice on here as taught me that it IS achievable, I just need to be prepared to work for it!

So a big thanks for the advice, it is appreciated!

andyfromotley

the £10 here and there off monthly bills are golden, because they are the savings that keep on giving, month in month out, year after year.

Savings on these will soon mount up to THOUSANDS!