Advice on high debt costs.

CollB

The monthly cost of my debt is so high that in a good month I have very little money left and in a bad month I struggle to pay my bills.

I own three properties, conservatively valued at £350k which return me about £2k a month. My mortgages on them add up to about £180k and cost me about £1k a month.

I also own a business that in a good month I can take £2k from, in a bad month I draw no wage.

I also have credit card debt of about £20k which costs my nearly £1k a month and a high interest loan with about £15k left to pay that costs me £500 a month. My bank charges add up to between £300 and £500 a month mostly fees for going over my overdraft limit and having payments returned.

With living costs on top you can probably work out I make a loss each month and I have no savings. In order to try and sort this I moved in with my parents again (I am 35 and separated from my wife 18 months ago). So my living costs are now almost zero so in a good month I can pay my bills.

The ideal would be to refinance to release some equity to pay off my debts but my banks won't lend because I have regularly gone over my overdraft limit and had payments returned, although I have always made the payments in time and so my credit score is almost perfect (just high % usage of available credit stops it being perfect). Mortgage companies require accounts but I draw so little that my accounts show insufficient income to allow them to lend.

I put my home for sale and accepted an offer but the sale fell through because my wife blocked the sale till the divorce completes so I am now renting it out. There will be no money changing hands on completion of the divorce as her family are wealthy and neither of us has claimed against each other.

I will try to sell my other properties, but could take many months or years.

In the mean time if I have a couple of bad months with my business I will not be able to pay my mortgages etc and risk losing everything.

So my question is this. Can I stop paying my unsecured debts such as credit cards without risking losing my property. This would allow me enough breathing room to be able to start paying off debt instead of interest. What are the consequences of such an action. Also some debts do not appear on my credit report, I think because they are in my business name rather than my own name, what happens if I don't pay these?

Your advice would be greatly appreciated. I realise that it would have been much better never to get myself into this situation in the first place but I don't have access to a time machine and it's been a very difficult time for me these last few years not that that is a valid excuse.

Cheers,
B

HappyMJ

You can stop paying your unsecured debts but you will be risking the creditors taking further action securing their debt against your property and then forcing a sale. This will be very very costly for you.

My advice. Stop incurring bank charges. You can reduce payments on your unsecured debts to a fair and reasonable level which will allow you to have enough money to pay your essential bills. You can't stop paying them at all you must pay something.

I would cancel all of your direct debits so you have to manually make all payments from your current account. Just doing this will avoid the returned payment fee.

Is your business a Ltd. company or are you a sole trader?

You may be able to get a BTL mortgage to release equity but really you'll only be able to borrow 60% of the value and with £180k outstanding on value of £350k this will only allow you to borrow a further £30k to clear the unsecured debt. I don't think it's worth doing.

I would reduce the payments to your credit cards and loans by 75%. Still make a payment but just not £1,500 per month.

CollB

The £1,000 is the minimum they suggest on the credit card statements. The interest is 30% so the card debts must be over £20k. If I reduce it much then i'll be paying less than the interest and soon reach the limit of the cards. Is this better than paying nothing?

As for the Loan if I have agreed to £500 and start paying £300 or so, what will they do? Again is it better to do this than pay nothing will it stop then taking action against me and prevent my credit rating drop?

The paying of the bills manually is good advice thanks, although I don't seem to get paper statements for some of the companies so I'll have to put it in the diary instead.

I'm a sole trader by the way.

DCFC79

Sell 1 of the properties and pay off the debts.

enthusiasticsaver

Prioritise your secured loans over credit cards and unsecured loans so you don't put properties at risk in the short term.

Contact any company you cannot afford to pay to try to come to a temporary arrangement until you either sell a property or your business picks up.

Post this in debt free wannabe forum

grumbler

DCFC79 wrote: »

Sell 1 of the properties and pay off the debts.

Absolutely.
Or remortgage if possible.
It makes no sense to pay 30% on your debts while making much much less from your investments.

Buffythedebtslayer

OK..... my first suggestion is work out a clear amount you owe each month, as in down to the last penny.

My gut tells me you need a more regular income, or to sell one of the houses, to be able to manage.

In any case although it doesn't seem like it right now, this can be solved. All debt problems are solvable. Ok. And you are in the right place XX

agrinnall

CollB wrote: »

I will try to sell my other properties, but could take many months or years.

Why do you think this? You've said that your estimates of the property values is conservative, so if you put one of them up for sale at an attractive price there should be no reason to think it can't be sold quickly (although to get the best price you would need to obtain vacant possession first, so that could take several months).

mgdavid

CollB wrote: »

..............I put my home for sale and accepted an offer but the sale fell through because my wife blocked the sale till the divorce completes so I am now renting it out. There will be no money changing hands on completion of the divorce as her family are wealthy and neither of us has claimed against each other.
..............

this doesn't add up; if you are both not claiming any money transfer on divorce, why would your wife (STBX) 'block' the sale?
Is there more to the back story that you haven't said?

PeacefulWaters

DCFC79 wrote: »

Sell 1 of the properties and pay off the debts.

Throw all your energy at this.

CollB

agrinnall wrote: »

Why do you think this? You've said that your estimates of the property values is conservative, so if you put one of them up for sale at an attractive price there should be no reason to think it can't be sold quickly (although to get the best price you would need to obtain vacant possession first, so that could take several months).

Just from experience, there is often a big difference between accepting an offer and selling a property. Often it takes months then falls through. There are a lot of time wasters out there.