Arrears, some advice before they get completely out of control.

Optimus_2

Hi folks,

Over the last few months, somehow and rather stupidly, I've allowed certain accounts to accrew arrears, and now I don't know where to begin with regards to paying them off.

In total, over five seperate accounts, I owe £1,680. I earn just under £1000 per month after tax and national insurance, and I live with my girlfriend who brings in a great wage and bonus on a monthly basis. Technically, I could pay off all those arrears over two months, but that would involve ignoring committments to other accounts and just "picking" some accounts to pay off arrears on, but I am aware it would create further arrears on other accounts.

I then think about the possibility of paying £50 a month to each of the accounts in question, but then I worry about how long the arrears will take to clear and if the companies in question would accept such a payment to the arrears. My partner is brilliant in that we do our best to combine the money each month, but it seems no matter what we bring into the house financially, we struggle nearer the end of the month in the final week or so to next payday. I just find myself worrying about money at some point of every day, regardless of whether I'm out with my girlfriend or sitting at home relaxing in front of the TV ... money and bills just creep into my head.

Can someone possibly advise one what the best way to tackle these arrears are? Would it be worth taking a hit for three months to just clear these arrears, or should I be more "sensible" and be more patient with regards to the time it takes to clear them off. I am also aware of the problems this is causing my Credit Rating, which is an entirely different discussion, but it does worry me.

Thanks to those who read this.

RAS

Hi

Well done for recognisng the problem and welcome.

Your starting point is to put an an SOA listing all you income and expenditure, for both of you.

Then people can help you find the savings or suggest alternative plans

See this thread http://forums.moneysavingexpert.com/showthread.html?t=107280

for an explanation of what to do.

Optimus_2

Thanks for the quick reply RAS.

Ok, I have written down a SOA, so I assume you wanted me to post it in this thread and lets others advise from there?

My income is £974 after Tax & National Insurance.
My partner's income is £1003 after Tax & National Insurance.

My partner's monthly bonus is £300, but it can vary and is performance related, thus not guaranteed, so I don't really want it included in any "plans". Besides, she works hard for her bonus, and having helped me in recent months I'd prefer her to have her bonus to herself to enjoy.

Total income: £1,977 or £2,277 with a £300 bonus.

Our outgoings are listed below and, to clarify, those are both of our monthly committments, but the ones to be "dealt with" are commented on after the listing. My committments have an "*" beside them. Our arrangement is that the Mortgage comes from my girlfriends' account, while the Council Tax and all household bills come from mine ... it's an arrangement which is struggling to be adhered to because we seem to be down money each month before we begin.

Mortgage £400
Car £173
Car Insurance £42
Loan £81
Dad £90
New Look £5
Simply Be £10
Council Tax £170 *
Scottish Power £50
Halifax Staff Loan £180 *
Egg Loan £68 *
Barclaycard £40 *
Mum £180 (Repayment on Credit Card I used with her permission) *
DFS £80 (Sofa with two years to run) *
Clydesdale £10 (Higher Purchase) *
HFC Bank £33 (Higher Purchase) *
Virgin Media £50 *
Cheque Centre £62 *

Total: £1724

That should, by my calculator anyway, leave an amount of £253 with food and petrol to take into consideration. If my partner receives a monthly bonus of £300, we're up to £553 per month, and there in lies the dilemma. Where does it all go? I've gone over the list again and I cannot see anything missed out, and we've admitted we need to shop in cheaper stores and cut out treats every weekend, ie: Pizza Hut!

However, I feel it's quite unfair to include my partner in this. I mean, should her outgoings and income come into it? I earn £974 a month, which is hardly brilliant but I am looking for alternative employment. My outgoings, with no arrears are £923, leaving me just £51 a month spare.

Now, my arrears are:

£480 to my Halifax Loan.
£160 to my Overdraft on a Bank Account I barely use.
£300 to Barclaycard.
£440 to BT via Moorcroft Finance.
£300 to Virgin Media.

Basically, I am pretty ashamed of having let these accounts go the way they have and my partner has been very understanding about it all. Part of the problem, which we have both agreed must stop, is that we go to Tesco two days before my Payday (which comes first) and buy food. However, in Tesco you walk in and it's clothes, then it's DVD's, then it's CD's, then it's Electrical, and then finally it's Food!

This stems back to when we spent near £350 on food from Tesco through writing various cheques on my account. When my wages came in, they were zapped the following day and suddenly I didn't have enough to go round, so some things got missed. Direct Debits bounced, and before I knew it I was over £100 overdrawn which I would need to wait until my next wage came in to clear, knocking £100 off my wages instantly. And so the circle continued.

I'll worry about my debt such as loans, cheque centre, and higher purchase at a later point. Right now, my focus is on getting all my accounts bang up to date and paid regularly and on time so I can a) build up my credit rating, b) get some better sleep at night, c) not come home from work fearing the mail behind the door, and d) enable my girlfriend and I a more solid financial situation to live in. Before my girlfriend and I moved in, she had a good lifestyle in that she had money to go out with her friends and enjoy the odd night out. I am beginning to feel like I'm holding her back from enjoying herself because of my debt.

Sorry for the long rant, but hopefully some of you can give me some suggestions that I cannot think of right now.

Thanks to all who read this.

RAS

Thanks for thaT

I have to go in 2 mins but

Can you pay the CC over 12 months rather than 10, to help you budget.

Can you e-bay anything to avoid the cheque centres?

Can you go Interest only for 6 months on the mortgage.

Any chance of extra work?

And both keep spending diaires

Fianlly, head over to the Monet Saving old Style Board and do a store cupboard challenge to hep reduce thios months spends, then you might get moving the right way.

Others will be along

hypno06

Hi there! First off you need to get on top of the current spending - get a "spending diary" started and write down every single penny that you spend - even the odd pack of chewing gum etc. It really will focus your mind to keep spending down to a minimum meaning not only that you can throw a bit extra at those debts to get them clear, but you can stay debt free too, once you have got there!

Now, go to www.whatsthecost.com and put all the details of your debts in the snowball calculator - this will tell you how long it will take to pay them off and in what order you should pay them to pay the least in interest, and get rid of them quicker.

Good luck, and welcome to DFW!

Optimus_2

hypno06 wrote: »

Hi there! First off you need to get on top of the current spending - get a "spending diary" started and write down every single penny that you spend - even the odd pack of chewing gum etc. It really will focus your mind to keep spending down to a minimum meaning not only that you can throw a bit extra at those debts to get them clear, but you can stay debt free too, once you have got there!

Now, go to www.whatsthecost.com and put all the details of your debts in the snowball calculator - this will tell you how long it will take to pay them off and in what order you should pay them to pay the least in interest, and get rid of them quicker.

Good luck, and welcome to DFW!

Hi, and thanks for the link to whatsthecost.com! I used the snowballing link, and I entered £150 as the extra money (on top of my existing minimum payments) I would use to service my entire debt, not just arrears I currently owe.

It worked out that I could be debt free in just 39 months! :eek: :eek: :eek:

Seeing that snowball plan has REALLY motivated me to pay off my arrears so I can begin eating into my real debt.

Thank you so much once again for the link! :T

hypno06

You're welcome - it really does motivate you to find that extra few quid a month!

I love my snowball calculator!!

RAS

hi

few more thoughts

Far from doing your GF down, at the moment you have a slightly lower salary and no bonus, but your commitements are higher than hers, £811 without the cheque centre, as opposed to £770 for her. You need to think jointly about this, particularly as you get paid earlier so you are running up bills on your account, when she has more money but later in the month.

And can I remind you that whatever she used to have, she seems to prefer being with you now? maybe money is not everything?

Part of the problem, which we have both agreed must stop, is that we go to Tesco two days before my Payday (which comes first) and buy food. However, in Tesco you walk in and it's clothes, then it's DVD's, then it's CD's, then it's Electrical, and then finally it's Food!

Well recognised. Your starting point will be to make a menu plan (Money Saving Old Style), decide what you need to buy and then only buy that.

Either get a voucher for home delivery, or go onto the Tesco web-site, make up a mock order, which you fail to complete, so you know how much it will cost. Then only take that much cash, go round LIDL or Netto for stuff you can substitute on the shopping list and buy the rest from Tesco. If you have no cards, you cannot get tempted.

Given your other financial commitments, you should be keeping the spends on your account as low as possible.

Also you are living famine and feast. becasue things were so difficult at the end of the month, you go a bit mad when the money comes in. One thing I learnt when I was on a very low income was never ever to go shopping when I was hungry (which I always was by the time the cheque arrived). I went out and bought just enough for lunch. Then, when I was feeling full, I could go and look at the shops. it is not quite the same but you need to restrict your spends immediately after your salary arrives to the minimum needed. Then when the euphoria has worn off and you have sorted the debts, you will be able to spend more effectively.

having re-read your plan, I think you do need to know the APR on the cheque centre money. This sort of borrowing is often horrificly expensive and it may be that has to be a priority as it will then free up lots more money to pay off the other debts; always pay off the debt with the highest APR first.

Optimus_2

RAS,

Thanks again for another brilliant reply.

With regards to shopping, we've already agreed to stop shopping at the likes of Tesco and Asda and go to the likes of Iceland instead.

Some of the deals on frozen foods and even every day groceries like milk, bread, soft drinks, are a lot cheaper than the major supermarkets and many things, like cold meat for example, are on offers like "1 pack for £1.50 or 2 packs for £2" ... and this is Bernard Matthew cold meat, which is ideal of making up lunches for work, which should hopefully mean we spend less on buying lunch from outlets near our places of work.

With regards to the Cheque Centre, I used their Payday Advance facility and took £450 (the maximum they allow for my Salary) a good few months ago now. For them to give me £450 cash, I need to write a cheque for £512.80, which is how I am effectively £62.80 down a month. Their cheque comes off, I need that money to pay my bills, so I go in and do another advance for the £450. Last month, to save me the hassle of having the money come out my account then have to go in and get the money back, I used their Rollover facility, but it still costs £62.80, the difference in the £450 cash they give you and the £512.80 they charge. I thought about bringing it down £50 or £100 a month, but right now I cannot afford to lose an extra £50 or £100 on top of the existing £62.80.

I am paid my annual bonus in March, which is £1000 guaranteed after tax on top of my salary, and I have an annual employee share scheme maturing in August next year, which should net me another £800 after tax (you must keep them for 5 years to get them tax free, they are taxed if you cash them in after 3 years). My Mum is also selling her home soon (council property she got at a low, low price) and moving on and will be paying off the credit card I pay her £180 a month for, but that won't be until September/October next year.

Right now though, before I can begin to think about Debt itself, I need to focus on these arrears and the Cheque Centre. What order would you recommend tackling the arrears? Should I pay a little to each, or try to pay in bulk to one per month? Only after these arrears are cleared and my accounts back on track, can I think about using the Snowball Calculator plan I came up with to pay additional money to my debts and clear them completely.

Thanks to all who read this.

RAS

hi

you need to know the APRs on all the accounts listed below before you can put them into the snowball on www.whatsthecost.com and work out the most effective payment strategy.

Halifax Staff Loan £180 *
Egg Loan £68 *
Barclaycard £40 *
Mum £180 (Repayment on Credit Card I used with her permission) *
Virgin Media £50 *
Cheque Centre £62 *
£160 to my Overdraft on a Bank Account I barely use.
£440 to BT via Moorcroft Finance.

Optimus_2

Well, I got a phonecall from Moorcroft last night saying that I had to pay them £42 over the phone immediately and two monthly installments of £200 to clear the BT arrears or I'd be looking at an "agent" coming to my home to price goods to the value of the debt ... not pleasent at all.

I remained calm and polite however, and explained that I would happily pay £50 or £100 to the debt on the 21st of this month when I get paid, and would make regular monthly payments within my limts. I also explained that, as far as I am aware, under Scottish Law if you are seen to be making payment to your debt you cannot be issued a CCJ. Someone can correct me on this if it's wrong, it was just something a friend told me.

So, at least now I have a starting point for arrears, thanks to Moorcroft phoning. I appreciate RAS commenting on the need for APR's and I have found these and used the snowball calculator, but it is utterly fruitless until I clear these arrears and have my accounts in full, proper, working order month in, month out.

This month I will have £911 after the Cheque Centre does it's damage. Accounts that must be paid without fail come to £628, leaving me £283 to "do some damage" to those arrears.

I've also been applying for weekend work, and have six or seven feelers out there already, one of which is calling me today for a chat, so fingers crossed I can get some weekend work asap. It only has to be for 4 months and an extra £200 per month would work wonders. I don't want to work 7 days a week, but even if I need to work Saturday/Sunday nights in Asda doing nightshift, I'll do so if it means being back on track for New Year.

Thanks to all who read this.