Next Steps

wiggy89

After reading the forum for several weeks for my best option, I have decided to delve in and start my own thread as I have come to learn there is no one-way answer for individual circumstances.

So here is my story in short,
After our second child me and partner decided to move out of her parents home into a council property. I Went from working full time to part time to study a degree in architectural technology (knowing full well of the short term financial benefits).

An accumaltion of buying things for our first home and living beyond our means with uni loans and grants, had led us into this situation as i have now left uni (now employed as junior CAD Technicain), and unable to meet all of our minimum payments.

This is due to an overall reduction of incomings as the salary I am now on is nowhere near what I was getting beforehand; plus a great reduction (rightly) in tax credits due to the increased work salary.

Have already been intouch with StepChange about our situation and they reccommend reducing our expenditure so we can enter a DMP and pay £50p/m whilst keeping both HP cars as we need them for our long commutes and childcare puropses.

Offloading them would'nt really make any sense as this would just put our jobs at risk and have nothing to purchase another 2 cheap runabouts. This would also no doubt raise repair costs due to unreliability and increase our disposable income which we would have to pay to creditors.

I just want to make sure we are making the correct decision before proceeding as all options will have an adverse affect on credit rating. With being in a council property we have the right to buy with 35% discount which makes financial sense as it would also reduce our rent payments.


We are currently not behind on any bills and have both been unsuccessful in balances transfers, obvioulsy due to affordabillity. Would you suggest to stop paying non-priority debts now and put this towards an emergency fund before proceeding with a DMP as many people suggest on this forum? How long should we do this for? As soon as the HP deals are paid off we intend using this to increase our DMP.


Any further guidance or advice will be greatly appeciated.


Below is our SOA:


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.................... 0

Monthly Income Details
Monthly income after tax................ 1200
Partners monthly income after tax....... 900
Benefits................................ 520
Other income............................ 0
Total monthly income.................... 2620

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 523
Rent.................................... 400
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 45
Gas..................................... 45
Oil..................................... 0
Water rates............................. 32
Telephone (land line)................... 20
Mobile phone............................ 35
TV Licence.............................. 13
Satellite/Cable TV...................... 10
Internet Services....................... 20
Groceries etc. ......................... 300
Clothing................................ 30
Petrol/diesel........................... 200
Road tax................................ 25
Car Insurance........................... 100
Car maintenance (including MOT)......... 25
Car parking............................. 40
Other travel............................ 0
Childcare/nursery....................... 400
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 40
Haircuts................................ 30
Entertainment........................... 50
Holiday................................. 30
Emergency fund.......................... 0
Total monthly expenses.................. 2533


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 ...... 12960....(354)......8.9<
Hire Puchace (HP)..............7500.....(169)......19
Total secured & HP debts...... 20460.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
newday.........................1500......40........29.9
creation.......................2000......80........29.9
hitachi........................2000......65........29.9
lloyds overdraft...............500.......0.........0
lloyds credit card.............3500......80........10
3G.............................45........0.........0
british gas ...................98........0.........0
v12............................812.......23........0
lloyds overdraft...............750.......0.........0
scottish power ................250.......0.........0
hitachi........................600.......15........0
Total unsecured debts..........12055.....303.......-


Monthly Budget Summary
Total monthly income.................... 2,620
Expenses (including HP & secured debts). 2,533
Available for debt repayments........... 87
Monthly UNsecured debt repayments....... 303
Amount short for making debt repayments. -216

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -20,460
Total Unsecured debt.................... -12,055
Net Assets.............................. -32,515

fatbelly

wiggy89 wrote: »

Have already been intouch with StepChange about our situation and they reccommend reducing our expenditure so we can enter a DMP and pay £50p/m whilst keeping both HP cars as we need them for our long commutes and childcare puropses.

I just want to make sure we are making the correct decision before proceeding as all options will have an adverse affect on credit rating. With being in a council property we have the right to buy with 35% discount which makes financial sense as it would also reduce our rent payments.


We are currently not behind on any bills and have both been unsuccessful in balances transfers, obvioulsy due to affordabillity. Would you suggest to stop paying non-priority debts now and put this towards an emergency fund before proceeding with a DMP as many people suggest on this forum? How long should we do this for? As soon as the HP deals are paid off we intend using this to increase our DMP.

Good first post!

To start with I disagree with stepchange. How can you consider a £50 per month plan when you are overspending £350 per month before paying non-priority creditors?

And where do you think you can find money to put into an emergency fund?

I'm just going to address some initial things.

1. You need to look at the detail of your figures. All your incomes look suspiciously rounded. And if these HP balances are correct you have a long time to go before you these are paid off.

2. You need to be banking where you do not have debts. So not Lloyds.

3. You need to stop paying the non-priority creditors. Stepchange will have a standard letter; if not, use the National Debtline one.

4. Your HP cars are the main problem here. You are paying £523 per month and it is leaving you £343 in the red. You do have options and need to read this factsheet

https://www.nationaldebtline.org/EW/factsheets/Pages/hire-purchase-debt/hire-purchase-and-conditional-sale.aspx

5. Your credit file will be shot for 6 years. The sooner you accept this the sooner you will be through it.

6. When your budget is under control we can look at options for dealing with the debt.

January2015

Whilst you think you cannot afford it, you seriously need to think about contents insurance and life insurance. Unfortunately bad things can happen and for the small amount insurance costs it is definitely worth having it.

[Deleted User]

One observation NO insurance for contents? My DD has just taken contents ins. out for £4.50 a month.
Your level of debt and lack of income to service it would lead me to suggest bankruptcy as an option.

enthusiasticsaver

You don't even have enough for essential expenditure so I am not sure a DMP is going to be any good for you. You start with a £343 deficit even before you take the debt repayments into account. Are you still using cards to get you through the month? Your partners whole income plus is used to run your two cars so it does look like losing one of the cars is at least needed and as your income is not that high the cars are not really essential for your income. Upping your partners working hours could be an option? Or one of you taking on a second evening job or weekend job depending on childcare.

ratrace

wiggy89 wrote: »

keeping both HP cars as we need them for our long commutes and childcare puropses.

Offloading them would'nt really make any sense as this would just put our jobs at risk and have nothing to purchase another 2 cheap runabouts. This would also no doubt raise repair costs due to unreliability and increase our disposable income which we would have to pay to cred

Total monthly expenses...........
Hire Purchase (HP) debt ...... 12960....(354)......8.9<
Hire Puchace (HP)..............7500.....(169)......19 Total secured & HP debts...... 20460.....-.........-


Hi welcome to the board, dude im going to be straight with you

your cars are killing you £20,500 worth of cars is nearly 90% of your annual salary

your monthly payments just on them alone and thats not including insurance, fuel etc... is £523 a month (x12 = £6,276 per year just in carpayments)

Your logic for not havings 2 old run around cars is that they will require money maintaining them yet your cars are costing you £6,000+ per year, i have had lots of old cars and never have i spent that much money per year to keep them going, so your reason for now down grading is crazy

you could buy 2 nissan micras or 2 toyota yaris for £1,000 each and save yourself a lot of money plus they are very reliable and when they do go wrong the parts are very very cheap to buy, i have just sold our yaris 1.4 diesel for £1200 and in the 2 years we had it i must have spent about £400 on it

i dont mean to be harsh but you CANNOT afford the ones you have at this moment in time and it makes no sense having such high value cars compared to the money currently coming in its not for ever but for now sacrifices have to be made

i hope you can understand where im coming from i know it may seem harsh but i promise you i actually do care and wish if i only knew what i know now them i would not have been in so much debt also

sourcrates

Agree with the theory on the cars, they are killing you, the credit will eventually run out you know, it always does, you should pre-empt this by getting rid of the cars, buy something cheap, modern older cars are still super reliable these days.

I run a 14 year old Picasso, aside from tax, insurance and fuel, it’s cost me nothing in spares for the last two years, and that’s doing 550 miles a month.

Your situation won’t improve until you take the nessessary action.

wiggy89

Thanks for everyone's honest comments so far.

I am under no illusion that our biggest expense is the cars, insurance and fuel/parking; which is crippling us.


An option could be to end our agreements so the cars get sold and we have to make up the difference. I beleive this would leave us a burden of around £6,000. If we was to do this then both me and partner would have to get public transport passes at £100 each a month. Kids would also have to attend breakfast and after school clubs 3 days a week,costing an additonal £90p/w due to extended travel times. Tax credits likely to slighty incease due to childcare costs. Not sure how long it would take to save for 2 cars.


Partner is looking at increasing work hours, currently 24p/w, howevwer is a balancing act again with childcare for the time being. Youngest being 2 will get 30hrs free from next easter onwards which will help tremendously. Partners stated income was the absolute minimum per month. Recieves commision bonus so would say an average of £1,100.

My salary is likely to improve over the coming years as more experience etc as will partners when she can work more hours.

Would find it possible to cut back on other expenses in the short term. Likely to overstated on some. Will consider taking out contents insurance.

In the process of opening a joint foundation account with Natwest. As soon as this is done wages will be transfered into this and will notify lloyds of our problem. Unwilling to inform them before due the fear of freezing our accounts.


Sent a sample letter to all other creditors apart from HP up to this point, still waiting for responses.

Just so many options going through our heads its hard to know which is the right one. Its nice to hear unbiased advice from people on the outside looking in to ensure our situation doesnt become worse than what it already is.





.

fatbelly

So you are going to try to continue to make the HP payments by cutting out other items of expenditure?

You need to cut out £343. The miscellaneous things (which you will in practice still spend) are only £150 and nothing there is badly excessive. I don't think you can do it

I think your options are:

• to deliberately postpone entering a debt solution and fund your arrangements with more credit
  
• to do a voluntary termination on the large HP agreement. That will produce another non-priority debt as you are less than half way into the agreement but will allow you to find a cheaper way into car ownership.

ratrace

wiggy89 wrote: »

Thanks for everyone's honest comments so far.

I am under no illusion that our biggest expense is the cars, insurance and fuel/parking; which is crippling us.

An option could be to end our agreements so the cars get sold and we have to make up the difference. I beleive this would leave us a burden of around £6,000. If we was to do this then both me and partner would have to get public transport passes at £100 each a month. Kids would also have to attend breakfast and after school clubs 3 days a week,costing an additonal £90p/w due to extended travel times. Tax credits likely to slighty incease due to childcare costs. Not sure how long it would take to save for 2 cars.

Partner is looking at increasing work hours, currently 24p/w, howevwer is a balancing act again with childcare for the time being. Youngest being 2 will get 30hrs free from next easter onwards which will help tremendously. Partners stated income was the absolute minimum per month. Recieves commision bonus so would say an average of £1,100.

My salary is likely to improve over the coming years as more experience etc as will partners when she can work more hours.

Would find it possible to cut back on other expenses in the short term. Likely to overstated on some. Will consider taking out contents insurance.

In the process of opening a joint foundation account with Natwest. As soon as this is done wages will be transfered into this and will notify lloyds of our problem. Unwilling to inform them before due the fear of freezing our accounts.

Sent a sample letter to all other creditors apart from HP up to this point, still waiting for responses.

Just so many options going through our heads its hard to know which is the right one. Its nice to hear unbiased advice from people on the outside looking in to ensure our situation doesnt become worse than what it already is.

.

The best thing in my opinion is to sell the cars, and buy 2 cheaper ones, yes you may have £6k shortfall but its better than £20k, are the cars on a deal where you have to give them back at the end of the term or do you have the option to buy out



another alternative is that you or your partner get some part time/weekend work to bring in some more cash, there are a lot delivery driving jobs out there that you could do on an evening or weekend this will take a lot of pressure off and again its not forever



i did this for 6 months worked at a pizza place and it helped out a lot got my debt down and in a better place

fatbelly

ratrace wrote: »

The best thing in my opinion is to sell the cars, and buy 2 cheaper ones, yes you may have £6k shortfall but its better than £20k, are the cars on a deal where you have to give them back at the end of the term or do you have the option to buy out

They're on HP according to wiggy. They don't own them until the final payment and can't sell them before that. But they can do a voluntary termination at any time, even though you often read that you have to be at the 50% point.

They would basically be liable for the difference between the payments already made and the 50% figure. It would just become another non-priority debt to bung into the mix.

It is worth checking precisely what you signed up to as I have known people think it's HP when it was just a loan, and n that case the car is yours to sell.