DMP or Bankruptcy new daily overdraft fee

Ebonydeluxe

Right- I see your point. I have now included it.

StopIt

Ebonydeluxe wrote: »

Evening all,

The new daily bank overdraft charges have just pushed me over the edge that I was precarious hanging on to. What once cost around £60 a month is going to now cost £144+. And due to the daily charges is causing me an even bigger cash flow problem.

I called StepChange today and the debt remedy tool recommended a DMP, with the alternative of bankruptcy. My situation is so dire I cannot afford to pay my children’s school meals on time and I’m not entitled to free school meals. I use my credit cards once I have made the minimum payment. This means I am never clearing the debt and just creating more debt.

I think I am at risk of redundancy and have recently been diagnosed with a heart condition. The relevance of the heart condition is that it means it will be highly unlikely I will be able to get a mortgage as it will be hard and costly to obtain life insurance. Getting a mortgage would be my main reason for wanting to preserve a good credit rating, but since that is unlikely, I am questioning whether bankruptcy is the better option.

SOA - Now included showing I have even less available because some of the minimum payment assumptions were wrong. I know people will look at the two cars, but without going into too much detail, it involves my ex and my misjudgement. All debts are in my name and there is nothing I can do about it. Debt on HP cars is more than their worth.

Statement of Affairs and Personal Balance Sheet[/b]
Household Information
Number of adults in household........... 1
Number of children in household......... 5
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 1268
Partners monthly income after tax....... 0
Benefits................................ 1364
Other income............................ 0
Total monthly income.................... 2632
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 456
Rent.................................... 22 Living rent free? Or Partner covers this?
Management charge (leasehold property).. 0
Council tax............................. 18 Surely an error. if not could you tell me where you live so I can save £140 a month! Or as above.
Electricity............................. 44
Gas..................................... 40
Oil..................................... 0
Water rates............................. 40
Telephone (land line)................... 0
Mobile phone............................ 46
TV Licence.............................. 13
Satellite/Cable TV...................... 0
Internet Services....................... 27
Groceries etc. ......................... 370 From a budgeting POV, far too low. You can budget £3 a person a day, that's £540 a month.
Clothing................................ 50 Normally I advise of high spending here, but for 5 kids? Probably low.
Petrol/diesel........................... 120
Road tax................................ 56
Car Insurance........................... 188
Car maintenance (including MOT)......... 45
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 429
Other child related expenses............ 116
Medical (prescriptions, dentist etc).... 8.6
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0 You really need this.
Life assurance ......................... 0
Other insurance......................... 188
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 70
Holiday................................. 0
Emergency fund.......................... 40 Where does this go? You have no cash stated.
Total monthly expenses.................. 2396.6

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 ...... 8633.....(176)......19.9<
HP.............................11242....(280)......20
Total secured & HP debts...... 19875.....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Aqua...........................450.......15.63.....29
Argos..........................1900......95........29
Argos..........................743.......38........29
Very...........................1430......72........39.99
Very...........................3301......150.......39.99
Vanquis........................250.......16........29
Tesco..........................223.......25........29
Next ..........................2872......144.......0
M&S loan.......................3547......322.......0
M&S............................2150......65........26
Lloyds overdraft...............3200......144.......0
Lloyds cc......................4250......140.......24
DWP............................2000......30........0
Debenhams......................651.......27........29
Barclays oveirdraft............1600......60........0
Barclaycard....................6798......170.......27
Total unsecured debts..........35365.....1513.63...-

Monthly Budget Summary
Total monthly income.................... 2,632
Expenses (including HP & secured debts). 2,396.6
Available for debt repayments........... 235.4
Monthly UNsecured debt repayments....... 1,513.63
Amount short for making debt repayments. -1,278.23
Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -19,875
Total Unsecured debt.................... -35,365
Net Assets.............................. -55,240

There is nothing in the SOA which can be re-budgeted. I have compared my energy supply, broadband, etc. The mobile phone cost is for three phone contracts, my two daughters and mine. I will be able to reduce my mobile bill in Feb next year by about £10 or so.


DMP would allow me to keep car, required for work and getting around with five children. Plan says it will last around 6 years, providing creditors freeze interest. My concern is if they don’t.
Bankruptcy would allow fresh start, restrict me from being stupid with credit, but I understand I could be asked to pay any surplus for 36 months.
Either way I need to act sooner rather than later.
I haven’t missed any payments yet but that is because I am servicing the debt with debt.
Thanks in advance.

Replies in red.


Assuming you pay everything you have into a DMP thus keeping the Secured assets, it'll take 12 years to pay these debts off. That's if the interest is frozen today.


Your SOA isn't realistic for a few reasons also, so I would say that you don't even have this £200 for a DMP most of the time.


The only thing with BR is that you will lose anything secured, so would need alternatives for your cars. However, I don't think a DMP is really suitable here without dumping the cars, so either way, those are pretty much gone.

Ebonydeluxe

Thanks for your reply.
Rent is low as housing benefit covers most of the cost.
Same goes for council tax. My income is very low.
Food budget is low because I generally don’t buy junk, ready made meals or other prepared food. I don’t buy lots of fizzy drinks, snacks, biscuits or juice because I noticed my children’s teeth rooted. On most days we have a home cooked meal. Frozen meat and veg also helps with cutting down costs quite substantially. When cash flow is really bad I can do a lot with a can of kidney beans, rice and mixed veg. I am open to upping the budget though, but at present I tend to use a few credit cards to pay for food shopping, so in reality it is costing me more in the long run.

The £40 emergency fund does not exist as such, but reflects unexpected emergency costs which may arise in a month and stupid spending decisions/going over budget. Which in reality is probably more.

I see your point. My worry with bankruptcy is what you mentioned of the payments I would still have to make if it was deemed I had lots of residual income. I guess what you are saying though, is that my budget is too low and an insolvency practitioner may deem that there is nothing to pay for 36 months? Where as the StepChange debt remedy reckons I will have to pay £800+ a month as I will not have the secured debt.

StopIt

Just FYI, on a normal SOA, you put the full rent and CT figure, then add the HB and CTB in the benefits column, so they match up.


The reason why I mentioned the grocery budget in red as that is what I think is the accepted figure by an OR in BR.


Certainly speak to Stepchange however about both options. Yes, if you went BR, you would free up some money for an IPA by getting rid of the secured agreements, however, I think that can be managed and remember some benefits do not count towards an IPA surplus.

obay

A lot of people will suggest paying the highest interest rates possible, I do this the other way, I pay the smallest amount possible to free up the money to start paying off the bigger amounts. (I have done this with my DFS sofa agreement, even though it was 0% interest, I made £25 ready to churn to pay more to my boiler agreement (which I am doing now..) I also paid off a £55 debt that was causing me a lot of agro which I didn't need, both 0% I saved £80 and are now ready to blow on my own debts and they have made a dent.

On this, I'd consider pay either of these;

Vanquis........................250.......16....... .29
Tesco..........................223.......25....... .29

They have the lowest balance, however quite a high-interest rate.

Paying off the tesco loan will give you an additional 'smaller' £25 pot to repay the debt quicker. The same with the Vanquis loan which will take you to £41 to debt.

Now; it's not going to be easy, but you need to communicate to these creditors and see if they can freeze the interest for a month or so while you are working out your plan of attack.

This will clear you of £500 worth of debt + Give you an extra £41 per month to make to your creditors.

I understand you have 5 children, that it might be hard to overcome and will initially be a shock to the system - Let's get your budget under control and in a safe manner.

Once you have these two paid off, then target this one
Aqua...........................450.......15.63.... .29

Slowly but surely, you're getting more money into your pocket, I am wondering, without falling into a bigger trap of borrowing if you can ask your partner (if you have one) or mum and dad for £500 initally to be paid back within 12 months just to give you a good start on getting this bit under control..

I am almost certain that a lot of people will tell you otherwise purely because they're more experienced then what I am - Take with a pinch of salt my advise, but it would save a lot of hassle and you'll start noticing a different shortly.

Also another thing that I have learnt recently -- How long have you had your HP car for? I believe you can give it back once you reach 50%.

-taff

Sorry to add another post, but you need to explore your options with Stepchange, and also you could head over to the bankruptcy board for thir input.

Ultimately, you will have to make your own choice but make them armed with knowledge about potential sticking points of both.

A DMP will see you defaulting on your debts and trash your credit file for six months, with a potential pay back time of years. Banruptcy will be over quicker, and leave you in a position where you don't have any new debts, but again, credit or a mortgage will be difficult to get for a few years afterwards.

I read some of your post history and noticed that you went for a consolidation loan a few years ago, did that contribute to your current status? If it did, you really need to look at what your budget is, and how you are managing it, because everyone here will help with that, there's also the old style board for help with meal planning and cheap food purchase.
Look at things like Quidco and topcashback for things you have to buy in case there's a discount or cashback available for that.

I know it's easy for people on the other side of the computer to judge away, but don't let that frighten you off asking for help.

Most will help, ignore the ones who want to shout at you.
And good luck.

Ebonydeluxe

Yes, I got the consolidation loan, closed some of my credit cards, but kept the main players for emergencies. Because I had cleared the balances the credit card companies increased the credit limits. I spent about 6 months not getting back into debt. Then I started spending on one of the cards, maxed it out then did a 0% balance transfer and just continued on a journey of more debt. If I had closed all the credit card accounts I would not be in so much debt.

The suggestion above your post regarding paying off the two smaller credit card amounts was something I considered. This could probably work if I was to arrange my own tailored DMP where I offer lower amounts to the larger debts to free up cash to pay off the smaller debts, with the aim of having more cash to put towards a smaller amount of creditors. However, I think this has the potential to be very messy and not give me the breathing space I need to just be able to pay for my basics and not feel as stressed out as I am.

I managed to open a new bank account with NatWest. Please let me know if you see any potential problems with having a Natwest account and any of the creditors I have listed. From what I have read, there is no group link, but you just never know.

Not sure how much of a difference it makes, but I am expecting another baby next year, so will definitely have less income as I will be on maternity leave. Yeah-I know it’s a mess. Does it change the advice you would give about my options?

enthusiasticsaver

I think when almost £2k of a £2396 income is going on debt repayments budget tinkering is pretty much a waste of time. You should put the full amount of rent and council tax there and put the benefits you get at present in the benefits column. As stopit says your soa is too low in places and for both a DMP and bankruptcy you should not be trying to keep the figures low or you will be asked for the surplus to repay debts.

Why are there no cars showing in the assets column given you are paying for 2. I am not sure why you are paying for your exes but I would have let that default long ago unless you were trying to protect your credit record? I think in your situation I would be looking to keep the car and get an affordable DMP set up as I think once you have got the debts sorted with no interest accumulated you could have around £500 free each month to pay off the £55,240. I think £800 is optimistic from payplan even without the secured loan repayments as that plus the £253 surplus before unsecured debt only comes to £700 approx and there are gaps in your soa. I would be pushing for closer to £500 or £600 but it will still take a lot longer to be clear than with bankruptcy.

If your income is due to reduce then bankruptcy may be a better option as reduced income means less surplus. I am not sure if they will let you keep the car though.

I think Nat West should be ok for a new basic bank account as I cannot see that any of the creditors are part of that banking group.

-taff

Ebonydeluxe wrote: »

Does it change the advice you would give about my options?

Honestly? No. You'll be on even less money when you're on maternirty leave so not much to say about that.

Ring up Stepvhange, ring up the National Debtline and have a good chat with them, you can ask them al the questions about car/income/DMP/bankruptcy and they should have clear answers for you.

Ultimately, it's your decision....

P.S When I said trash your file for six months, it should have read 6 years....

Ebonydeluxe

I think I have approached the SOA in the wrong way. I have based my outgoings on the bare minimum to be cautious not to be told I have budgeted too much for things, mainly with car costs and groceries etc. Once I put in the suggested grocery bill recommended by StepChange and Stopit, the debt remedy says I have £250 left a month to put towards the £1600 debts a month and is recommending bankruptcy.
One car I have had for nearly two years, the other I have had for a year this month. Neither would have half the finance paid on them. If I am honest the car has cost me over £1000 in repairs this year and is likely to cost me more for the same faults. Maybe having it repossessed is not such a bad thing.

I think I am closer to deciding on bankruptcy. Mainly because the DMP could last for years and my financial circumstances will change for the worse next year. I may also be made redundant and I will probably not be able to get a mortgage with my heart condition anyway. I am done with credit. It has brought me nothing but trouble and I obviously cannot control my spending.

I remember getting the consolidation loan and thinking that it was the end to all my problems and being happy again. I did nothing to address my out of control spending.

Before I make my final decision I just need to read a few more threads on IPO or IPA I think and what income is taken into account. I have also read that they can suspend the payments until you have more income, so it may not just be a case of earning less for the 36 months.