Am I doing the right thing..??

Countdown_has_begun

Hi All,

I am new to this forum (and new to my DMP) but Stepchange advised me about it and said it was very helpful, so I am posting for the first time.

My debt currently stands at £32K (ouch!) and I am at the beginning of a DMP with Stepchange and my debt free date is currently September 2019. However, I hope to be able to shorten this to two years.

I had always managed my monthly payments well and never missed, but late last year, I started to miss payments and found myself living on my credit cards and basically living by the seat of my pants. At this point, I knew my debts had got out of hand (they probably had a long time ago without facing up to it) and I knew I couldn’t go on like it. I was paying the minimum payment on every account and I knew that if I continued to live like this it would take me my entire lifetime to pay it back.

I have suffered from depression for around 8 years now and recently diagnosed with Aspergers (a form of Autism). I am 33, hold down two jobs (one evening job that I originally started to help pay my debt) and have been in my main job for over 12 years. I have always had very low self-esteem and often when I got very low, I would spend money to cheer myself up.
I am very fortunate to have extremely supportive parents and I live in a granny annexe/studio flat, which is completely separate to my parent’s house. So, although I do live with parents, I still have my own independence and pay all my own bills etc. I used to pay them rent, but when I confessed about my debt (which was so hard to do) they allowed me to stop paying rent until I am debt free.

During a call to Barclaycard financial difficulties team, the advisor strongly recommended Stepchange and said that they work very closely with them, so I decided to stop burying my head in the sand and give them a call. I didn’t know what to expect, but they were so wonderful, didn’t judge and advised me to start a DMP. I have just made my first payment and the letters are flooding in from all my creditors. Most of the letters are accepting the DMP, apart from Nationwide have refused the offer on my overdraft, but strangely have accepted on my credit card and loan. So far (apart from Nationwide) my creditors have been very understanding and accepted reduced payments, but I am so worried about the future and if it will continue this way. My parents know I’m in debt and that I have taken out this DMP, but they do not know the extent of the debt and think that I have got it all under control (which I have to a certain extent), but I am worried that I will get people knocking on my door and then they will more ashamed of me then they already are.

I was feeling really confident that I had done the right thing, but I am 33 year old woman (34 in April and not getting younger) and I hope to get my own house before I’m 40 and that will involve getting a mortgage. My parents have very kindly said that when they downsize (in around 4-5 years) they will give me around £100k as a deposit on a house (which I am extremely grateful for and very lucky) but obviously I will need to get a mortgage for the other portion, which I don’t think will ever happen ☹ I was never under the illusion that my credit file would be good after finishing the DMP, but I am wondering whether I would have been better going for bankruptcy. Most of my creditors have put me on an arrangement plan and not defaulted me (which I guess they may do eventually) so my credit score could be rubbish for another 8 years. Whether as if I had filed for bankruptcy, my credit file would be clear in 6 years. However, I don’t know if it’s as simple as that and whether bankruptcy comes with more long term problems.

I hate myself so much for what I have done. I realise I made a mistake (big time) and I am trying my best to get out of it, but I am so worried that I have ruined the rest of my life.

Any advice would be greatly appreciated.

MrsTinks

Hi CHB - firstly welcome and well done for dealing with things.

It's absolutely possible that bankruptcy could be an option - it depends on your income as well as your total debt and whilst it's possible to get a mortgage after you are discharged then you may be limited in what availability there is. Something you might want to look into.

Don't make any rash decisions is what I am trying to say

Whilst it;s obviously kind of your parents to offer you £100k then I don't know what taxes you might need to pay on a gift like that, again you might want to look that up - I'm sure there is a limit to the annual amount they can gift tax free but that's definitely not my strong point (my parents definitely have no intention of gifting me that kind of money hahaha)

I will say that if you think you can pay this debt off in 2 1/2 years then in all fairness you should probably NOT go for bankruptcy... 2 1/2 years is really not that long in the grand scheme And who knows! You might find you can bring that date forward - if you post up your SOA we can have a look and see if there are areas you can cut back?

Countdown_has_begun

Hi MrsTinks


Thank you for your reply.


The money to help would be an advance on my inheritance, but I guess it is still a gift, so I'm not sure... If they didn't help me, then I don't stand a chance in getting a mortgage on my own and with my wage. I have friends who's parents have helped them with a deposit for a house (around £30k) and they certainly didn't pay taxes.


I just feel like everything is against me

EssexHebridean

I'm pretty certain a gifted deposit is free of tax. Your mortgage company have to agree to it, and usually demand a bit of paper signed by your parents confirming that they don't expect to have any claim on or share in the property as a result.

enthusiasticsaver

There will be no tax to pay on your parents gift unless they die within 7 years and their estate is liable to inheritance tax. It is called a potentially exempt transfer (pet) and my mum has done that with me from time to time and we have done it with our daughters to help them with buying houses. Sensible way of limiting inheritance tax and helping you get foothold on the ladder. A DMP will affect your credit record though so it will not be easy getting a mortgage.

You have had help from your parents with rent free living and working 2 jobs so I would have thought paying the debt off would be doable within two or three years.i would not recommend bankruptcy. Can you post an soa so we can give you better advice? That is a statement of affairs. If you have defaulted on all presumably the interest rate is now 0%?

More to the point though what are you spending your money to get to that extent of debt and have you now got a better grip on your spending? You need to find better ways of coping with your depression like exercise or maybe exploring cbt.

I would suggest that first you post an soa. Secondly you keep a spending diary. Good luck

Keezing

In most mortgage applications they ask a question along the lines of "have you ever been bankrupt/insolvent?".

So if you chose bakruptcy you would always have to answer yes, which would limit your access to mortgage funds.

I'm not saying it's not the right/wrong option for you, just addressing your question about bankruptcy.

If you did choose this option there are lenders that will accept discharged bankrupts and mortgage brokers that specialise in this area.

Countdown_has_begun

Thank you to everyone in taking the time to respond, I was really nervous about posting on here and being so honest, I've been told that I tell people too much, but I just feel that you can only give me the right advice if I'm totally honest about my situation.

I feel so ashamed of my situation and that I'm a complete failure. I know that a lot of people only get into that sort of debt when they have a mortgage to pay and a real reason for it and mine was just pure stupidity. I've had a succession of bad relationships and all I ever wanted was to get married and have a family of my own. I gradually saw most of my friends get married and start a family and I suppose I knew that not being 'normal' along with depression, that my chances of that happening to me were pretty much zero. I tried to make myself feel better about being single and never having a family by booking myself onto cookery courses and spending money on the flat to make it look lovely and convince myself that my life was just as good as theirs and that I was happy. It sounds so pathetic I know, but I was so miserable. I've found that many people do not understand mental illness and I have felt incredibly lonely many times and when I was st rock bottom I tried to commit suicide by taking an overdose.

Is it a SOA a list of my creditors and what I owe? If so, I can provide this info. I have only just entered into the DMP and made one payment on the 1st Feb and none of my creditors have issued a default against me (as yet). Most of my creditors have already written to me to say they have accepted my DMP and allow md to make reduced payments for 6,12 months. I thought this was a good thing but I have been doing research and it seems it's better for them to default (even though Stepchange disagree) as it's 6 years from the default date, rather than from when the AP finishes.

Im not somebody that spends loads on clothes, shoes, partying (never go out) alcohol and smoking and for the last 3 years I've been living very frugally because all of my money goes on my debt and I was left with just enough to feed myself and put fuel in my car (sometimes I would have to put that on my cc which I'd just paid the minimum payment on) I would rather do it this way than brankruptcy because I want to feel that I've worked hard to pay it back and not just wiped the slate. Also I truly feel that I've learnt a valuable lesson and not to be repeated ever again.

I know it will ruin my credit report/file and this is what I'm so worried about with regards to getting a mortgage. I guess the worse case is that I will have to wait the full 6 years (possibly 8) before my credit file is clear. Surely I will get another chance at some point to start a fresh and this debt won't live with me forever???

enthusiasticsaver

An soa is a statement of affairs which shows everything - your income, expenditure, assets and liabilities. It can be found here

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

Mental illness and overspending is closely connected so your story can be seen many times over this forum. The soa will help us to give tailored advice but I would say that if most of your money is going towards paying off debt and you are resorting to cards just to pay the very basic expenditure then you are at the point where you need to stop. A dmp is probably the best option for you and reduced payments need to be agreed with your creditors and interest frozen. You need to cut up the cards and no longer use them. Same goes with bank overdrafts. If you have an overdraft open up a new basic bank account and have your wages paid into there. This will affect your ability to get credit in the future though but that may be no bad thing if you struggle to manage finances. Forget about what everyone else is doing - you don't know how many of these so called people with perfect lives are balancing precariously on a pile of debt. All you can do is look after yourself and get yourself sorted and on the path of financial security. Budgeting is the key to that. Basically it means keeping track of every penny you spend and making sure that outgoings are always less than income.

Post the soa and people will give better advice as we will then be able to see what you are dealing with.

Lonire

hey there,

The SOA can be found at http://www.stoozing.com/calculator/soa.php if you format it for MSE you can copy it over to post in the forum. Essentially it helps the kind people on here look through and see if we can help you cut costs, budget and have more money to pay off your debt.

Don't be so hard on yourself, we have all made wrong decisions in the past and there are plenty of people in similar or worse situations. The best thing is that you are taking Positive steps to make a change. Now that you have had your lightbulb moment, you can turn it all around.

I was certainly hard on myself for the wrong decisions I made, but after coming on here and doing my Statement of affairs and getting some advice, I am much more positive about getting myself out of debt.

We can do this!

Good luck!

Countdown_has_begun

Thank you all for taking the time to respond and for your support.

Enthusiasticsaver - I have just started a DMP with Stepchange and one of the things they asked me to do was set up a basic account, which I have done with Natwest. I also set up a savings account with Natwest at the same time, so that I can put my monthly 'emergency fund' payment in there and any money that I can save on top of that, in the hope that I can overpay my DMP and finish it sooner.

I have completed my SOA, please see below:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2006
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2006

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 280
Rent.................................... 0 Currently living with parents and they have kindly allowed me to not pay rent until debt is repaid
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 39 I am planning to go onto Pay as you go once this contract finishes in December
TV Licence.............................. 0
Satellite/Cable TV...................... 34 Shopped around and got my Sky TV, Internet and Landline all through SKY for £34. Surprising what Sky will do when you say you're going to cancel!
Internet Services....................... 0
Groceries etc. ......................... 200
Clothing................................ 34
Petrol/diesel........................... 125
Road tax................................ 3
Car Insurance........................... 27
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 16
Pet insurance/vet bills................. 27
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 13
Entertainment........................... 40 I doubt I will spend this tbh, but Stepchange advised me to cover myself for friends inviting me out etc and I needed to have a life (which may help with my depression)
Holiday................................. 0
Emergency fund.......................... 45
Nails................................... 30 I know everybody will probably say this can go, but it is my one treat
Total monthly expenses.................. 928


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


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 0........(280)......0 This is a hire purchase which I cannot get out of just yet, but no MOT and under warranty/servicing for another 3 years.
Total secured & HP debts...... 0.........-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Aqua Credit Card...............480.......13.21.....0
Barclaycard....................3500......92.48.....0
Barclays Finance...............720.......31.71.....0
Very...........................3200......140.9.....0
Tesco CC.......................2850......75.74.....0
Secure Trust bank..............1476......36.11.....0
Next...........................2900......127.7.....0
Nationwide OD..................1000......44.04.....0
Nationwide CC..................4500......118.9.....0
Nationwide Loan................9400......278.3.....0
Littlewoods....................300.......13.2......0
Halifax CC.....................900.......23.78.....0
DFS (Creation Finance..........684.......16.73.....0
Barclays Finance...............972.......43.16.....0
Total unsecured debts..........32882.....1055.96...

Monthly Budget Summary
Total monthly income.................... 2,006
Expenses (including HP & secured debts). 928
Available for debt repayments........... 1,078
Monthly UNsecured debt repayments....... 1,055.96
Amount left after debt repayments....... 22.04

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -32,882
Net Assets.............................. -32,882

Created using the SOA calculator.

It's horrible to see this list of debts and I just hate myself for it. The worse thing is that it looks like I'll still be paying for it even after the DMP ends. I really don't want to be 45 (33 now) before I can get a mortgage as that's when most people have made some headway paying theirs back, not taking one out! That's why I really want to save as much within my budget to repay it quicker.

I know the car is a big expense, but unfortunately I can't get out of it and it is my one passion in life.

My debt has swallowed most of my wages for the last 2 years and been unable to get anymore credit (not that I really wanted to) because I'm already in enough debt, so I have learnt to live quite frugally anyway. I have booked to see a therapist about my depression at the end of this month and hopefully if I tackle the depression, it will prevent me from any emotional spending in the future.

enthusiasticsaver

Can you get the groceries bill down by using Aldi or Lidl? £200 is a lot for one person. I understand about the nails but can you get them done less regularly or do them yourself at home? The positives are that you have a fairly good salary and your living costs are low as your parents are subsidising your housing costs and bills. Less than 3 years to clear that level of debt is good. The main thing is to deal with your emotional overspending and learn to live within a budget. keep posting with your progress to stay on track. Good luck.