Husband has got us into unmanageable debt

Scotslass1974

Hi everyone

I'm Sam, I'm new here but looking for support and advice on our situation.

Hubby and I had a planned and manageable amount of debt - we agreed to increase it last year to cover my (current) maternity leave and owed around £15k total, all on 0% balance transfers. Around £10k was in my name and £5k in his, and the repayments were around £150 per month though I paid the one with the shortest 0% an extra £50 or more when we could afford it. I do a careful budget each month and the plan was that when my maternity leave ended in September we would pay the debt off within 3 years. Then we were going to work on reducing our mortgage quicker.

Anyway, to get to the point, I've recently found out that in the last 10 months or so he has almost doubled our borrowing - 3 more credit cards, a store card and 2 short-term, high-interest loans. There doesn't seem to be anything to sell left from the spending. At first he only told me about the credit cards so we sat down, looked at the budget and managed to reduce our outgoings so we could pay the minimum payments. I also managed to get another 0% card but only for £2,300 so I transferred as much as I could to that as interest was being charged. However, I then found out about the rest of it and realised that whilst I'm on maternity leave we've no chance of covering even min. payments and when I go back we'll be unlikely to be in a position to pay much more than minimum. We made the decision after having our first child that time with family was most important to us and we both reduced our hours at work and resigned ourselves to a tight budget in order to get the amount of time with kids that we wanted.

We've both worked as trained debt advisors so have knowledge of debt solutions etc.

Having looked into our options I think our best bet is for hubby to do an IVA - there's a possibility of being able to receive a small lump sum from family in the next couple of years to help with this. We owe £45k on our mortgage and have 2 years (of 10) on a fixed rate, house is worth around £60-70k I think.

My main concern at the moment is whether I should just bite the bullet and do the IVA with him? I'd like to keep one of us out of formal insolvency, but it's going to affect me no matter what. I spoke to a friend who's an insolvency practitioner and he said that he would advise a joint IVA for a clean slate.

Thank you so much if you've got this far. I would appreciate any thoughts/comments.

andyfromotley

Hi Scots lass,

a couple of things jump out at me. Where has all of the money gone? I'd want a very detailed explanation. Due to my past history i would automatically suspect gambling. But whatever, 15 grand has been spent on something, what??

Secondly your post is full of barely disguised anger with your husband. The fact that he did this without either wanting to tell upii or being unable to tell you is a really bad sign for the two of you. I'd be tempted to get a little relationship counselling to get to the bottom of this or it may end up being a festering sore.

As for the advice try national debtline or stepchange and see what they recommend in your specific circumstances.

Good luck.

Scotslass1974

Hi Andy and thanks for your reply

I should probably have said in my original post, hubby has issues with depression. These have come up many times before. I didn't realise my post sounded angry; I don't feel that angry to be honest, more a resigned weariness!! However, we are looking to do some relationship counselling as because of his illness I do find my feelings difficult to communicate. The depression has caused all the spending - he explained it as an invisible way to self-harm (previously he didn't have children to hide it from). There hasn't been any gambling, it's mainly been spent on digital media (many many graphic novels have been downloaded).

I think that answers everything, I can't see your reply from this screen!

Scotslass1974

Oh and we've done StepChange's online solutions, for us as a couple it suggests IVA and for him alone token payments.

chevalier

Oh Dear I am very sad for both of you.

I am sure you are feeling very shocked and angry at the moment. The issue perhaps isn't just the debt, but the terrible breach of your trust that has happened here. However at least your OH has come clean now even if it seems because they had no other choice.

I would want to know what the money had been spent on before I decided about IVAs (which would trash your credit score if you have linked financial products), and because this is such a large breach of trust I wouldn't be doing anything to help until I had seen the credit card statements for those accounts.

I can see that this new debt could be part of a bigger problem. Ie a gambling or other addiction, or even a sign of depression. So that needs to be got to the bottom of too. Because if it is some form of addiction, then they need to want to address the cause of the debt as well as figuring out how to pay it off.

And they would be on their own if they had spent it on someone else shall we say.

Finally it doesn't have to be an IVA. You could do a Debt Management Plan (either just your OH or you both), where generally intersest is frozen but you do pay all of the debt back, but at a longer time frame.

Perhaps an SOA to see what the current situation is might help? Here is the link. If you want to post it on here, then format it for MSE at the bottom.

http://www.stoozing.com/calculator/soa.php

good luck
chev

Scotslass1974

Hi chev, thanks for your reply. I think I've covered most of your questions in my previous replies? Thanks.

Does anyone have any thoughts about whether or not I should deal with our debts jointly? It's impossible to separate our finances at the moment because I'm on maternity pay and can't remortgage the house on my own.

Scotslass1974

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned....................

Monthly Income Details
Monthly income after tax................ 430
Partners monthly income after tax....... 1358
Benefits................................ 149
Other income............................ 0
Total monthly income.................... 1937

Monthly Expense Details
Mortgage................................ 447
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 102
Electricity............................. 39.7
Gas..................................... 40
Oil..................................... 0
Water rates............................. 44.4
Telephone (land line)................... 20
Mobile phone............................ 25
TV Licence.............................. 12.12
Satellite/Cable TV...................... 25
Internet Services....................... 20
Groceries etc. ......................... 400
Clothing................................ 75
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 20
Childcare/nursery....................... 20
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 31
Pet insurance/vet bills................. 0
Buildings insurance..................... 15
Contents insurance...................... 15
Life assurance ......................... 28.75
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 35
Entertainment........................... 40
Holiday................................. 50
Emergency fund.......................... 40
Total monthly expenses.................. 1574.97


Assets
Cash.................................... 400
House value (Gross)..................... 60000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 60400


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 45000....(447)......4.99
Total secured & HP debts...... 45000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Virgin cc - me.................5500......55........0
BOS cc - me....................4550......46........0
Santander cc - me..............2200......22........0
Pounds 2 pocket - him..........1300......164.......NaN
Sunny loan - him...............1100......147.......NaN
Argos card - him...............702.......19........NaN
Clydesdale cc - him............2340......54........27.9
Virgin cc - him................3848......52........17.48
MBNA cc - him..................4142......50........NaN
MBNA Fluid cc - him............2400......80........20.9
Total unsecured debts..........28082.....689.......-


Monthly Budget Summary
Total monthly income.................... 1,937
Expenses (including HP & secured debts). 1,574.97
Available for debt repayments........... 362.03
Monthly UNsecured debt repayments....... 689
Amount short for making debt repayments. -326.97

Personal Balance Sheet Summary
Total assets (things you own)........... 60,400
Total HP & Secured debt................. -45,000
Total Unsecured debt.................... -28,082
Net Assets.............................. -12,682

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HappyMJ

Ouch....A £327 shortfall with only a few bits you could cut back on.

Do you want to keep the house?

If you sold it you could clear the mortgage and half the unsecured debt and then declare yourself bankrupt which will enable you to start again. A bankruptcy would enable you to spend fair and reasonable amounts. You wouldn't need to cut back on anything.

If you did it the long way via a DMP you would need to make an offer of £234 per month to clear the debt in 10 years assuming nor interest or charges are added which is very unlikely. During which time you will be living as frugally as possible.

Can you increase your income? Maybe not now but do you foresee a time when your income will be much higher?

Can you realistically cut all of your expenses....for the next 10 years? That would mean no holidays, no entertainment, no presents...no paid for TV. A bankruptcy allows those expenses and limits the expenditure on them for just 1 year.

I'm with your friend I would advise formal insolvency as well.

National_Debtline

Hi Scotslass,


You have given some really clear information here so far and there are a few things I would like to mention based on what you have said. Firstly, your current SOA looks goods, but perhaps a little bit low in some areas (especially travel) - it is important to make sure that these things are sustainable.


An IVA will typically run for 6 years. IVA's are known for being quite restrictive so that is something to bear in mind. In an IVA the payments are reviewed every 12months, and if you are going to return to work in the next 6 years then the monthly payments to the IVA will increase (but the term will not change). If you have a windfall, such as money from family that you mentioned, this could also get swallowed up in the IVA without reducing the term. You must maintain the IVA payments otherwise risk bankruptcy - which is not going to be an ideal solution with equity in your home.


The alternative could be a DMP (which other posters have mentioned). Whilst you won't get any debt written off (like you will at the end of an IVA) it is generally more flexible. A DMP will run for as long as it needs to in order to clear the debt in full (at £362pcm that would be approx. 6.5years). If family were to help with contributions too this term could decrease even further. A DMP is not legally binding but generally creditors are happy to cooperate with free DMP companies.


Now, you probably need more personal and detailed debt advice before making any final decision but the big thing I noticed for you is - if an IVA will run for 6 years and has a high risk factor (because it is a form of insolvency) is it worth going down that road when a DMP won't cost you any more per month, is more flexible and will run for potentially just 6months more.


Laura
@natdebtline

mumtoomany

Am I right in thinking your income will increase in September when you return to work? If so, hopefully, things will improve a bit then. So for the next four months see if you can cut your expenditure to the bone to find the extra £327. Is your council tax over 10 months or 12? Could maybe save a few pounds there. Cut your food etc by half, join the grocery challenge on OS board. Cut holidays, clothes, presents, entertainment etc. This is all only for the short term. I'm sure people on here can help in other ways too. Good luck, M2m.

SPELLKASTER

I certainly would advise against doing an IVA.

This would damage your credit file.

Also IVA's are expensive, I paid into one for 3 years, and having paid £2790 into it, only £158 was sent across to my debts.

Are any of your debts before April 2007!?

The reason I ask is a lot of credit agreements before that date might be missing prescribed terms and would be deemed unenforceable.

I have 2 debts which are unenforceable due to this and both lenders are aware.