Advice what to do first?

steveh68

Please allow me to give you some background. I have posted this in another section but a far shorter narrative. My current employment hasn’t proved successful in terms of my health and mental wellbeing so I have taken the rather drastic solution of leaving permanent employment on 31/01/20. To pursue other alternative roles initially in a temporary role until I can be sure of next permanent step.

So from next Monday I will be looking full time for temporary posts. Which leads me onto my financial situation and what advise anyone can offer and options I may have?

My total debt is £33,300 across a small overdraft, credit card, store card and paypal. I have never missed any payments and everything is upto date until March when without any income I will miss the next payments. Stepchange are happy to help once I have an income to model with which at the moment I don’t. I am expecting to come down in the short term to £25,000pa and that will mean I cant pay everything. However my budget currently only includes what I need to pay for and not saving for things like car, dentist and glasses etc. So this will make the overall position far worse albeit more accurate and so my options seem to be bankruptcy or IVA. As a qualified by experience accountant I can still work under bankruptcy but for me as an individual I would prefer the IVA route as I think I can then repay 84% of my overall debt over 5 years.

I live with my partner in a council tenanted bungalow so no property to speak of. My car is 12 years old and worth little albeit well maintained and expected to last a bit longer. The clock is ticking if I want to get ahead of this and prepared. I am intending to pay all debts in full this month February is that the right thing to do or stop all payments until IVA can be agreed?

fatbelly

You need to be 100% sure what the effect of insolvency would be on you in your profession. I would have thought that being on a public register would cause problems for an accountant but I guess the devil's in the detail of what kind you are and what your professional body does.

I can be more definite on a couple of things.

If you choose not to pay your creditors next month, nothing will happen apart from a standard letter and a late paymet marker. It will actually take 3-6 missed payments before a default. This may allow you to build up an emergency fund.

Whatever strategy you choose it would make sense now to open a new bank account where you do not have debts and that overdraft will go into the strategy.

Edit: if you can pay 84% of your debt over 5 years why not go for a debt management plan and avoid insolvency altogether. In theory you would pay 100% under a debt management plan but a lot of people use their basic salary for the monthly payment, save bonuses etc on the side and try to bring the plan to a close using full & final settlement.

steveh68

Thanks for your comments. Insolvency isnt ideal but i didnt think a DMP was enforceable hence the IVA option yes even on worse case scenario i could repay 84% so will speak to one of the debt charities and see what they think .I appreciate I can re-structure my SOA to take advantage of full grocery car dentist etc etc fund and was hoping no missed payments long customer would help. I have already opened an account unlinked to my debts and moved salary across. I just wonder if stopping payments now and then starting to discuss DMP/IVA would make situation worse rather than continue paying this month. Albeit that would be my emergency fund in one month.

[Deleted User]

steveh68 wrote: »

Thanks for your comments. Insolvency isnt ideal but i didnt think a DMP was enforceable hence the IVA option yes even on worse case scenario i could repay 84% so will speak to one of the debt charities and see what they think .I appreciate I can re-structure my SOA to take advantage of full grocery car dentist etc etc fund and was hoping no missed payments long customer would help. I have already opened an account unlinked to my debts and moved salary across. I just wonder if stopping payments now and then starting to discuss DMP/IVA would make situation worse rather than continue paying this month. Albeit that would be my emergency fund in one month.

As your background is accountancy and finance I don't think any form of insolvency would be a good move for you at the moment.

In your shoes the first thing I would do is put together an accurate SOA and then use a snowball calculator to work out how long it would take to repay your debts without using any kind of debt remedy such as a DMP. If that came out near the 6 year mark that's what i would do.

If the snowball calculator comes out at 10+ years I'd then look at a DMP. Yes it's an informal agreement between you and your creditors but most if not all will freeze the interest and a DMP won't scupper your chances of working in finance/accounting like insolvency would.

I just don't think that insolvency is something you need to rush into just now or even need based on the little information you've provided so far.

steveh68

Many thanks for your response. The only problem is not knowing what income will be in the future at the moment. DMP does seem something i never considered. Well direct debit due next week so need to think about next steps but dont think i can do DMP until i know future income. Focus on next job then salary then DMP in the menatime stop all debt payments to create emergency fund?

[Deleted User]

steveh68 wrote: »

Many thanks for your response. The only problem is not knowing what income will be in the future at the moment. DMP does seem something i never considered. Well direct debit due next week so need to think about next steps but dont think i can do DMP until i know future income. Focus on next job then salary then DMP in the menatime stop all debt payments to create emergency fund?

If you're expecting your income to drop substantially then it wouldn't really matter with a DMP. As it is an informal arrangement between you and your creditors you could simply reduce your monthly payments to your creditors if necessary. You could even start a DMP and then go for bankruptcy at a later date if you find that it's a better solution for you and that you have no intention of working in finance or accountancy again.

If you're really struggling at the moment you could always write to your creditors and ask for some breathing space whilst you work out what it is you're going to do.

steveh68

Many thanks for your advise. As an update a separate bank account has been opened for final pay. I have cancelled all debt payments this month. No point paying if going to go down DMP route. Will draft a new SOA albeit with no income at moment. Focus now on getting some work and then have a better idea of next option. Very scary for someone who has never defaulted but hopefully worth it in the longer run. Will contact creditors next week with a holding email. Thank you all so much for your help.

[Deleted User]

You aren't the first to run into trouble with debt and you won't be the last. It might seem scary now but the defaults won't be as bad as scrambling round to find money you don't have to pay unsecured debts. The new bank account is a great idea and remember that everything will be ok. Good luck with the job hunting.

steveh68

By way of an update. After 5 weeks secured a permanent position in role i wanted albeit £6k pa less. Been in touch with stepchange and wheels of DMP in motion. Just phoning to let creditors know and so far very supportive. According to my budget could pay all debts and have £300 left a month but of course that doesnt allow for all the incidental costs each month that went on plastic so according to stephange £300 a month short after those costs factored in. Once got first full month pay (April) will make the necessary payments to stephange and 3 year and 9 months later be sorted. Fingers crossed. The advise here was invaluable and hopefully things are on the mend, A thousand thank yous.

Willing2Learn

steveh68 said:

... According to my budget could pay all debts and have £300 left a month but of course that doesnt allow for all the incidental costs each month that went on plastic so according to stephange £300 a month short after those costs factored in. Once got first full month pay (April) will make the necessary payments to stephange and 3 year and 9 months later be sorted....

If a 4-year DMP will cost you £300/month, then I recommend you delay the start date of your DMP by a few months.  This would allow you time to build an Emergency Fund (EF), to cover against the unexpected cost that will crop up, without having to resort to lines of credit.  In other words, if you were to delay the DMP start date by three months, then you would have a build a handy £900 EF.  I only suggest this because an EF is an essential component of all successful monthly budgets.  (If you delay things for six months, then you would have an EF @ £1,800 saved up.)