Advice for an Idiot!

BA1985

Hello,
I am writing to try and get some further advice. My situation now has become quite desperate and i feel i am running out of any viable options. I will try my best to keep this short.

Background:
Me & my partner bought our house in 2013 with the assistance of Help to Buy. It cost 245k, we put down a 12k deposit, the Government put down 20% (49k) which left us needing a mortgage of 184k. This is all went through fine, 3 bedroom house in a great area.
We then stupidly ran up a considerable amount of debt, totaling roughly 35k. Mix of CC's & car loan, store cards. Our credit scores were hit & we were unable to keep up with payments. Fortunately my mum stepped in (September 2016) and lent us the money, and we ended up in a position having to pay her back £850.00 for 3 and a half years, it also meant with no debt to pay every month, we had just under £1000.00 spare a month whilst paying all the other normal outgoings (utilities, council tax etc.)

Fast forward a year and a half, and surprise, surprise, we have done it again, this time 19k's worth of CC debt, which now sits on top of my family loan, which currently stands around 23k to repay.

I am fully aware of what a complete and utter idiot we have been, and how seriously immature we are at handling money. The ONLY thing i can try and reason with it, is that my partner was in full time work before we had children (4 years ago, roughly when we bought the house) & since then whilst having our two children she has either been part time (1k a month) or on Statutory (£500pm) & i don't think we have ever adjusted or attempted to change our lifestyle to be in line with this reduction in wage.

I would like to say we have had some fantastic holidays, got numerous 60 inch TV's, kitted out of house with all the mod cons, but the reality is, i was a smoker, so £11 a day used to go on the credit card, weekly shops were never done so £20/30 evening meals used to go on the cards, and then it quickly became day to day living on them.

So here we are today....a total of 43k debt, and around £600 short a month of paying it back.
My partner has obtained a default from her Barclays credit card.
I have also obtained a default from my MBNA credit card.
My Vanquis Credit card is with a debt collector who has agreed to £50.00 a month.
However, my Halifax is about a month away from being a default as well. They're requesting £196 a month minimum, i have been paying £50-120 a month to them, but this is obviously still registering as a missed payment as it doesn't meet the minimum.

I am aware after getting to this point that i can do a re haul of our outgoings but my hands are tied in respect to the TV (Sky) & Phone contracts (EE) as these are still within the 12 month contracts.
Our shopping is £100 a week for 4 of us, and is done at Aldi, it includes £10 formula & Nappies for our 4 month year old. My utilities are paid quarterly, so i put by roughly £50 a month for each to cover the quarterly bill when it comes in.
Our car which is required, is a bit thirsty on petrol with two full tanks required a month costing roughly £70 each. But the car itself is fairly cheap at 2.5k.

I have looked at the following options:
- Remortgage (borrow more) - No lender would approve a mortgage based on current credit score
- Balance transfers - No lender would would approve a new CC
- Secured loan - No lender would approve a loan or be the 3rd charge on the property
- Porting the mortgage: Downsizing, and carry our existing mortgage across to the new property (Nationwide in essence treat this as a new mortgage and a credit check would be run upon application)
Lodger - No available space as my 4 month old daughter will shortly be going into our 3rd bedroom
- 2nd jobs: this is an option, my partner is currently looking at waitress jobs & i am looking at parcel delivery jobs on a weekend, however, with myself being in the higher tax rate i am not sure how profitable this would be.

I feel our only option left is to sell the house, we would both feel gutted to lose our property and go into rented but for our mental health, and our family life it seems like a real option.

The plan would be as follows:
- Sell house £340,000 (houses in our road sell between £330-350,000)
- Pay back the following from the proceeds:
Mortgage: £159,155
Help to Buy (20%) on the sale price of 340k = £68,000

This leaves us: £112,845 - from this we would need to clear all our debt: 19k of CC's & family loan = 43k - leaving: £69,845

For arguments sake, i will round this down to 60k left to account for estate agent (Purple Bricks) fee's, solicitors costs for selling, rental deposit & letting agents fee's.

We would then look to rent a larger family home in the region of £1200-1500pm, which would leave us with around £700-800 a month spare, no debt. We would also have £60,000 sat in an account, which we could add too, and in 2/3 years time when our defaults are perhaps seen as less damaging be able to proceed with getting a mortgage, this probably wouldnt be through a high street lender, but with 2 or 3 years of clean records, and a large deposit (300k house, 60k deposit / 20% ) & who knows, we may have had a property crash by then.

I know the concerns would be a) we would run up more debt in the meantime b) we would touch the 60k and flutter it away c) we would just never get back on the property ladder again d) renting is a minefield.

I guess actions speak louder than words, but i know in no possible way do i want to ever be in this position again. We should have learnt the first time around granted. But what debt does to your mental health, and the fear you have everyday, it just isnt worth it, and i will genuinely never own a CC again. Likewise if my partner goes near a CC or storecard again i will cut her hands off. We then obviously need to address our handling of money, set correct budgets, start saving money, and live within our means.

Just to note: My family loan is unable to be reduced (my mother doesn't know we have racked up 19k in debt, and still believes we have 1k free a month) I don't wish to reduce the payments, she needs the money back in the agreed time and it wouldn't be fair for our stupidity to effect her plans with her money.

So......I really do apologise for the length of post. Any suggestions or advice or just telling me what a complete an utter c*ck i have been are welcome. I know the majority of people would say do anything else but give up your home, but it seems like the only option left.

Thanks for your time.

BA1985

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2 (3 year old & 4 month year old)
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 3180
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 3180

Monthly Expense Details[/b]
Mortgage................................ 795.3
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 32
Council tax............................. 200
Electricity............................. 50
Gas..................................... 50
Oil..................................... 0
Water rates............................. 50
Telephone (land line)................... 0
Mobile phone............................ 140
TV Licence.............................. 11
Satellite/Cable TV...................... 88
Internet Services....................... 0
Groceries etc. ......................... 400
Clothing................................ 0
Petrol/diesel........................... 150
Road tax................................ 15
Car Insurance........................... 37
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 100
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 40
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 15
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 25
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2218.3


Assets
Cash.................................... 0
House value (Gross)..................... 340000
Shares and bonds........................ 0
Car(s).................................. 2500
Other assets............................ 0
Total Assets............................ 342500


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 159155...(795.3)....2.09
Total secured & HP debts...... 159155....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Barclays CC....................800.......20........17.43
MBNA CC........................6226.63...250.......18.2
Vanquis CC.....................3000......50........22.2
Family Loan....................23500.....850.......0
Next Account...................1526......75........18.2
Halifax........................1950......193.......28.2
Barclays CC....................1500......100.......17.43
Capital One CC.................200.......10........26.4
Halifax CC.....................3000......100.......17.2
Total unsecured debts..........41702.63..1648......


Monthly Budget Summary
Total monthly income.................... 3,180
Expenses (including HP & secured debts). 2,218.3
Available for debt repayments........... 961.7
Monthly UNsecured debt repayments....... 1,648
Amount short for making debt repayments. -686.3

Personal Balance Sheet Summary
Total assets (things you own)........... 342,500
Total HP & Secured debt................. -159,155
Total Unsecured debt.................... -41,702.63
Net Assets.............................. 141,642.37

CapricornLass

Oh dear! I'm not going to call you names, because I've no right to do that. You've made the biggest step of all though, which is to finally wake up to the fact that you have a problem.

I'm afraid I'm a bit woollybrained today due to gastric flu, and I'm sure there will be others along who will be also able to offer advice. However, I think we should see what else can be done before you sell the house. (Incidently, just how are you going to explain that to your mum?)

Lets start with some basics and some potential quick wins
1) have you got the cheapest deal you can on your gas and electric?
2)£444 is your annual car insurance? It seems rather high to me?
3) is your council tax paid over 12 months, or 10? If its currently at 10 months, then you can ask for it to be spread over the 12 months, which will mean a little more money to spend on debts.
4) When is the 12 mth contacts up on the Sky and the mobiles? I'm wondering if its worth phoning them to see whether something can be negotiated on the price you are paying?

Secondly, I think there are some gaps in your budget. Nothing spent on Buildings insurance (absolutely critical expense, because you will still be liable for the mortgage even if the house burns down and you can't live there any more. Use Compare the Market and Confused.com and their ilk to track down a suitable product at the best price). Nothing on car maintenance? Nothing on presents? I know your kids are very young and at the age where one at least is going to be content with the cardboard box and a handful of dolly pegs, and you and your wife can agree not to exchange presents - but nobody else? Prescriptions for you? And I notice that you have a pet - does your food bill also include its food? What is the other insurance for?

RE second jobs, I'm not certain whether it would be worth it for you either. However, if your wife ends up with a second job, she is going to become really tired. It would probably be a much better use of your time if you took over doing some of the household chores and maybe some of the cooking too, while she is working. (My son taught himself to cook using You Tube, if that's any help?)

Lastly, I was going to recommend that you contact either StepChange or Christians Against Poverty. Neither will charge you (there are companies that do, so you must avoid them), and I don't think they will be in the least bit shocked by your story - they will have seen worse, and they will be able to ffer you more tailored advice.

Good luck.

Kitten868

I don't agree with your plan. In your position I would stay put and contact step change. Then you HAVE to live by a budget.
You will be credit scored to rent too. Read some of the threads on starting a DMP. You've got defaults already so it might be better to get together an emergency fund. Repaying your debts £1 a month but staying in your home is a much better plan. You can even manage your own DMP if you've got the stones. You can do this but I don't think a quick fix will work - it didn't last time.

BA1985

Thank you for the reply and advice.

In response:
Lets start with some basics and some potential quick wins
1) have you got the cheapest deal you can on your gas and electric? - Possibly not, i will look into switching to find a better deal
2)£444 is your annual car insurance? It seems rather high to me? That is the annual price yes, i thought this was fairly cheap. I am 30 and my partner 32, its for a 3.0 litre petrol?
3) is your council tax paid over 12 months, or 10? If its currently at 10 months, then you can ask for it to be spread over the 12 months, which will mean a little more money to spend on debts.- I believe it is over 12 months, we missed payments on this last year, so they carried it over 2018, hence the amount is slightly higher.
4) When is the 12 mth contacts up on the Sky and the mobiles? I'm wondering if its worth phoning them to see whether something can be negotiated on the price you are paying? They are up around November/December i believe. I may contact them and see if there is a cancellation fee or somehow downgrade to minimum.

- Building insurance: we don't have any. It has been an extra monthly cost that i just couldnt afford, but realise it is of upmost importance.

In respect to presents, car maintenance, unsuspected bills etc. it is purely a month by month basis. It has meant a bill may not get paid instead of the emergency bill, and i pay double the next month. An endless carousel.

Thank you for your response and advice, and i hope you feel better soon.

a_silver_lining

Didn't want to read and ignore. In no way a judgement as we have all been there with consolidating debt and building it up again. I think with your past history of borrowing from a family member and then continuing to rack up debt I would be very wary of selling to free up money incase you risked doing it again? Of cause that may not happen, but I think if risking not being able to repay your mum and the upset that would cause her wasn't motive enough to not build up debt, then the thought of not being able to buy again certainly won't be motivation enough.

I would suggest a small job for the wife, with her perhaps making money from home from surveys or hunting down best shopping deals, and all this money going to debt.

Worst case in November you can put all the sky etc money towards the debt.

Could you rent out a room in the house for a little more income?

BA1985

Thank you for your response.

I absolutely agree, i cant say we wouldn't build debt up again. Especially as you state the reasons not too the first time around. I just hope we would have learnt, and the drive to get back onto the property ladder would in some way help.

My wife is in agreement, she is looking for a job which will help.
Unfortunately we cant rent a room, with 2 adults, 2 screaming energetic kids, and a dog, i wouldnt wish it upon anyone to pay money to live here.

That certainly will free up money towards paying the debt. My only worry is the immediate future, and the defaults, further accounts going into defaults, what happens with them. Do they turn into CCJ's because we cant afford to clear the full balance owed?

Jox

Hi,

have you looked at the snowball method to pay the credit card debts?

http://www.whatsthecost.com/snowball.aspx

Could you talk to the family member to see if you can reduce the amount you are paying them and pay that to the debts?

Maybe if you have a spare bedroom (I know you said your youngest child would be going there) could you advertise it on airbnb or another similar site?

I went on the snowball website and inputted your details and if you can pay £1000 to your credit card debts a month you can pay these off in 22 months.





Can you sell anything, buy reduced food, take sandwiches to work, bicycle to work etc?

You spend £20 a month on haircuts and £25 a month on entertainment, you may need to cut your own hair and find free entertainment for a while

AlanP_2

I'm no expert and my kids are all grown up now but is there no Child Benefit / Child Tax Credit funds available to you?

Jox

AlanP wrote: »

I'm no expert and my kids are all grown up now but is there no Child Benefit / Child Tax Credit funds available to you?

Child Benefit is £82.80 a month for the first child, not sure for a second and I think he earns too much for credits but could possibly get 15 or 30 hours funded child care depending on age of oldest child.

DCFC79

Are you making good use of your grocery shopping ?

Do you find your throwing food away ?

Are you buying food when you have some of the same item at the back of the cupboard ?

Its good you are willing to do something about it.

Take cash hard cash when you do your shopping ?

Have you looked if Aldi is the cheapest ? Use mysupermarket for this.

If you go in at the right time you can get yellow stickered items that you could use to make 2 meals for example.