DMP or Bankruptcy?

Tommyx

Hello,

Really need a bit of advice about our current situation.

My wife and I are both 35 and we have 2 kids aged 3 and 7. We have gotten ourselves into a lot of debt over the last 7 years due to bad spending choices and both being made redundant ( both back in full time work now).

We want to deal with our debts properly as we have been skirting around the issue for far too long. We owe loads of money on Loan and cards - in excess of 50K so we have a lot of work to do.

At the moment it feels insurmountable. My wife has just gone back into full time teaching which has given us an income boost, but I fear that we have let it go too far.

As a long time lurker, I have seen lots of references to bankriptcy and DMP's. What would be most appropriate for us? Bankruptcy terrifies me but if it;s the only way......

SOA below...

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 2950
Partners monthly income after tax....... 1980
Benefits................................ 130
Other income............................ 0
Total monthly income.................... 5060

Monthly Expense Details
Mortgage................................ 494
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 40
Gas..................................... 40
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 25
Mobile phone............................ 50
TV Licence.............................. 15
Satellite/Cable TV...................... 27
Internet Services....................... 15
Groceries etc. ......................... 300
Clothing................................ 100
Petrol/diesel........................... 160
Road tax................................ 20
Car Insurance........................... 65
Car maintenance (including MOT)......... 50
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 160
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 20
Contents insurance...................... 10
Life assurance ......................... 25
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 20
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 50
Total monthly expenses.................. 1986


Assets
Cash.................................... 0
House value (Gross)..................... 185000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 188000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 96000....(494)......1.5
Total secured & HP debts...... 96000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Tesco Loan.....................12500.....335.......7.9
barclarcad platinum............12500.....330.......0
Barclaycard cashback...........7500......175.......0
creation loan..................6000......165.......9.9
Tesco credit card..............4600......130.......19.9
Barclaycard ( wife)............8000......200.......6.9
creation (asda)................6000......175.......19.9
Total unsecured debts..........57100.....1510......-


Monthly Budget Summary
Total monthly income.................... 5,060
Expenses (including HP & secured debts). 1,986
Available for debt repayments........... 3,074
Monthly UNsecured debt repayments....... 1,510
Amount left after debt repayments....... 1,564

Personal Balance Sheet Summary
Total assets (things you own)........... 188,000
Total HP & Secured debt................. -96,000
Total Unsecured debt.................... -57,100
Net Assets.............................. 34,900

zippygeorgeandben

Hi.
Some lovely MSE experts will be around soon to advise. I'd just like to say it's refreshing to read a post where you have took 100% responsibility for the decisions you have made. It seems rarer and rarer on these boards currently.
I know the £100 on clothing should go. You can't afford to be splashing out on this each month.
Also, groceries seems far too high for me.

Dinah93

I wouldn't have thought bankruptcy was a good idea as you have equity in your house and as your only real asset they'd look to sell it to pay off the debts. That £34k cushion between assets and debt would go too if they took the house, a better option would be to sell the house and pay off what you owe and be left with that cushion yourself. Not saying that's the best idea but it's better than bankrupcy in your situation. You have a lot left after minimum debt repayments, where does this go? On paper you could overpay your debts without the need for a DMP or bankruptcy. How is your credit rating? Can you get a couple of 0% cards to balance transfer some of the interest bearing debts and start paying them off?

Jenniefour

OP, might feel insurmountable but if your are figures are about right you have three grand a month to throw at the debt. That's a hefty amount of money. I can't see any reason at all to go bankrupt, sell your house or go on a DMP. Looks manageable to me. Why not start by knocking off the high interest ones first - Asda (creation) and Tesco credit card.

Arleen

Jenniefour wrote: »

OP, might feel insurmountable but if your are figures are about right you have three grand a month to throw at the debt. That's a hefty amount of money. I can't see any reason at all to go bankrupt, sell your house or go on a DMP. Looks manageable to me. Why not start by knocking off the high interest ones first - Asda (creation) and Tesco credit card.

It likely will be less than a grand in reality, but unless they plan to get credit in near future (I hope not!) then DMP will at least stop the interest from accumulating on this hefty balance. So that may be worth considering, although the interest rates are not eye-watering so maybe better to try some 0% cards.

But OP, it's great to see you own it up, and with both of you in full time work I know that prospect of repaying such mountain of money seems daunting, once you take a cold look at it it's not as horrible as it looks.

Tommyx

Thanks guys,

In terms of the £1500 'spare' cash, this is something that is new to us. My wife has just gone back to full time teaching and this spare money is basically the money that she is now earning, over and above what she was earning in her previous part time post.

So could it actually be that we could sort this without having to go down a DMP route? Having done a bit of googling, I can now see that bankruptcy wouldn't be appropriate. I don't think that we would even be allowed to file bankruptcy as our assets exceed our debts.

It just seems like such a huge amount to pay back without help

Arleen

The only thing that DMP would do for you is freezing the interest but at the expense of very much tarnishing your credit file. And you may realistically now, or in few months of snowballing, be allowed a 0% transfer card(s) which will give the same result without impacting the file.

To see how long it will take you to repay have a wander into the snowballing calculator: http://www.stoozing.com/calculator/snowball-calculator.php and put your details in, it will show you month by month how your debts will look like .

ratrace

Op, Are you sure the soa is correct and not just hopefull, the reason i ask is that you have around £57,000 debt but dont have many assets such as expensive cars, you have 2 cars that are only worth £3k total, and no hp, pcp deals

Do you have an idea where all the money has been spent? it is critical you identify the reason as this will prevent you from going further into debt in the future.

Also you need to look into how you as a couple manage your money ie: does it go into one pot then bills are paid from there and then you have a personal allowence etc... you have to work on this

Do you have and items of value that you can sell on flebay to help pay the debt down much faster such as old phones, electronic gadgets, old clothes you as a family dont wear, bikes in shed that no longer get used etc... you will be amazed what people will buy

Sorry i dont want to come across as having a go, but all the above i myself did and dont have far off from paying off my debt, hope this helps

National_Debtline

Hi Tommyx


Welcome to the forum. You are quite right that bankruptcy is not a suitable option as now your wife is in full time work you can afford your debts. It also means you don't need to consider a DMP.


Make sure all the figures on your SOA are realistic and you can stick to them. Most people then use their spare money to target the debts charging them the highest rates of interest first. Once the most expensive debt is paid off you can move on to the next most expensive. Overpaying the debts is essential otherwise you won't see the balance of your credit cards come down.


As mentioned above, transferring to a 0% credit card may become an option but try the eligibility checks on MSE first. You may struggle to get credit right now due to your current high level of debt. Good luck with it all.


Susie
@natdebtline

jubilee14

Hi Tommy looking at the income while it might feel like your wifes salary is going straight out the door i agree that going down any route other than snowballing is unnecessary. If as interest rates rise you want to re-mortgage at the moment that would be great but with a DMP you'll have little to no chance. So firstly would look to see what cost you over the past 7 years as if you dont curb the spending habits it will all be pointless. If you can commit to your wifes monthly wage going on snowballing the debt that alone would clear nearly £18k a year ( not including interest of course) A teachers salary and with the job apart from childcare for the younger you will find at least in the short term you'll be entering the cheapest part of the kids lives ( post nappies/milk and pre teenagers consistently growing/demands for expensive footwear' One thing would say think is that your family complete for the time being as if materinty/paternity pay came into play then it might scupper well planned snowballing in the short term. Good luck

Tommyx

Thank you for all of the supportive comments. I feel like a fog has lifted. I have used the snowball calculator and it appears that...

I we dedicate £1600 per month towards our debts then we will be debt free in 41 months, based on our current interest rates

If can increase our payments to £2000 then it reduces to 32 months, or 2.5 years (ish),

We are stunned by how this is actually manageable. We also feel really daft that as two reasonably educated people we genuinely thought that we were done for!!!