Reality is hitting hard

[Deleted User]

Hi folks, new around here, sorry for the obscure username, trying to remain anonymous as possible as may be people we know who frequent these forums and put 2 & 2 together.

I'll be doing the posting but my wife is also here and reading all and occasionally be putting her comments in.

We're rapidly approaching a point whereby we won't be able to pay our debts if my wife can't find work in next 2 months. Well, we may be able to pay the debts but it means dipping into my overdraft each month to maintain the payments. So essentially paying all we need to but going more into debt to do it collectively.

We had a talk with a close friend who suggesting we look into a DRO if we're still in a bad position in the next few months. I'm in work and have debts of around £15k (collectively across various 0% credit cards), my wife has a loan with around £19.5k remaining and has been in and out of work since our son was born 4 years ago. She was working 11 years solid prior to that. She lost her most recent job after a 6 month temporary contract at the end of March. At the moment, we're not in arrears and we've never missed a single payment on anything, ever in at least 10 years.

I will be posting a number of questions in the next few days, just wanted to introduce ourselves. It took me over a week to get the willpower to make this post after registering, feel quite embarrassed at the situation we've found ourselves in.

[Deleted User]

To expand on what i've already posted, wife is currently in recent of JSA, circa £74 a week, her loan payment is close to £600/month, I cover the remainder of the loan and everything else right now. We're transparent with each other about money and always cover each others shortfalls.

fatbelly

Well there are a few good things there - you've explained your situation clearly, you've asked for help early and the two of you are in it together.

A DRO is quite a way down the line I think, which is no problem, as the criteria will be relaxed from 29 June:

• the value of assets allowed to be owned by the debtor from £1,000 to £2,000 as proposed in the consultation;

 

• the value of a single motor vehicle that can be disregarded from the total value of assets from £1,000 to £2,000;

 

• the level of surplus income received by the debtor before payments should be made to creditors from £50 to £75 per month and

 

• the total debt allowable for a DRO from £20,000 to £30,000 as proposed in the consultation. 

If you are not overdrawn at the moment then keep it that way. Cancel the payments to the non-priority debts if you need to and if your current account is where your debts are then you need a new  account that is not connected to your debts in order to protect your income.

The apr on the overdraft is going to be high so going there would just accelerate your debts

The detail is going to be important: could you post a statement of affairs and indicate whose debts are whose?

https://www.lemonfool.co.uk/financecalculators/soa.php

1977dave

Hi Deleted_User, welcome and you've taken the first step on the road to sorting things out, please try not to feel embarassed, these things can happen to any of us at any time, you never know what's round the corner.

I'm no expert on DRO's but I've been discharged from my DRO for 4 months now, so can only speak from my experience, but honestly I wish I'd done it sooner, it was such a relief once I entered into it, and an even bigger relief now that everything has been written off.

There's quite a few of us on here who have been in DRO and have had fantastic advice from fatbelly and sourcrates, they're really helpful and you'll be in good hands

Best wishes to you

[Deleted User]

@1977dave appreciate the kind words.

@fatbelly SOA is below, some things I was unsure about, clothes, presents, some bits are a little higher as they are combined for both my wife and myself, mobile for example. We have gas and electric, have put total DD for both under electric.
We're tied in with BT for Internet/phone on contract for another 12 months (of 24), already contacted them about a downgrade but they want a payment to do this.

The SOA is a bit more sobering than i'd realised, the situation is worse than I thought. We've been perpetually in debt for years but it's always been manageable and we've always both worked.

Statement of Affairs and Personal Balance Sheet

Household Information

Number of adults in household........... 2

Number of children in household......... 1

Number of cars owned.................... 1

Monthly Income Details

Monthly income after tax................ 2023

Partners monthly income after tax....... 323.7

Benefits................................ 91.65

Other income............................ 0

Total monthly income.................... 2438.35

Monthly Expense Details

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 695

Management charge (leasehold property).. 0

Council tax............................. 179

Electricity............................. 120

Gas..................................... 0

Oil..................................... 0

Water rates............................. 30

Telephone (land line)................... 0

Mobile phone............................ 62.54

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 65.19

Groceries etc. ......................... 400

Clothing................................ 15

Petrol/diesel........................... 50

Road tax................................ 28.87

Car Insurance........................... 47.75

Car maintenance (including MOT)......... 20

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 28.7

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 20

Haircuts................................ 65

Entertainment........................... 44.46

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2071.51

Assets

Cash.................................... 0

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 5000

Other assets............................ 0

Total Assets............................ 5000

No Secured nor Hire Purchase Debts

Unsecured Debts

Description....................Debt......Monthly...APR

Wifes Loan.....................19683.....596.4.....3.9

Husband MBNA #1................870.......25........0

Husband MBNA #2................2768......73........0

Husband Barclaycard ...........6501......168.......0

Husband Virgin CC..............2537......26........0

Husband Tesco CC...............1523......25........0

Total unsecured debts..........33882.....913.4.....-  

Monthly Budget Summary

Total monthly income.................... 2,438.35

Expenses (including HP & secured debts). 1,871.51

Available for debt repayments........... 566.84

Monthly Unsecured debt repayments....... 913.4

Amount short for making debt repayments. -346.56

Personal Balance Sheet Summary

Total assets (things you own)........... 5,000

Total HP & Secured debt................. -0

Total Unsecured debt.................... -33,882[b]

Net Assets.............................. -28,882[/b]

Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.

fatbelly

That looks good. Well not good in one sense.

There will be suggestions for cost cutting. Whether you can cost-cut to the tune of £546 month in, month out is another matter. I think your wife does need to keep looking for some work.

As things stand you may be able to get a little more from the benefits system than just the Child Benefit, and I'll run you through a checker later on - maybe after the football's finished.

If you were looking at insolvency, it would be bankruptcy (with a 3-year income payment arrangement) for you, a possible DRO for her. But I wouldn't be rushing into that. A debt management plan might be as effective if the numbers change a bit.

For now it's a case of 'when in a hole, stop digging'. I think you need to bite the bullet and put at least the wife's loan on hold while you get to grips with this. This may be a suitable template

https://www.nationaldebtline.org/sample-letters/hold-action-your-account-coronavirus/

[Deleted User]

@fatbelly thanks for the quick reply.

Happy to elaborate on any of the above for cost cutting suggestions. 

My wife is still looking for work, sadly, we're all in the same boat with Covid impact, I do staffing planning as part of my job and our requirements have gone through the floor.

I've done some checks online with regards benefits, we're only eligible for CB, due to my salary, which is fair.

I personally wouldn't want to go through a bankruptcy, the debts in my name are what I consider non-toxic or maybe less-toxic, on long term 0% balance deals and having a fairly good credit history, I don't see this changing with regards to getting new deals as they expire, we can chip away at those. We're fairly certain we can get these paid without a DMP if we can do something about the loan.

The more i've read into DRO's the last few weeks, the more I think our friend advised this more for my wife due to the loan being just about £20k and the limits on DRO. 

sambaird

Sorry… £600 a month for groceries?
Even with a kid this is huge.

[Deleted User]

sambaird said:

Sorry… £600 a month for groceries?
Even with a kid this is huge.

You're right, big typo on my side. That should be £400'ish which I know is still on the higher side, it's just an honest SOA though. It is inclusive of household cleaning products, bathroom toiletries, it's not just food.

I've manually updated the SOA to £400.

sambaird

Well there you go… just instantly saved 200pm.
It’s clear that the only millstone around both your necks is your wife’s loan.
Any chance you could provide more details on this?
Who is it with? Is it secured or unsecured. Is the debt in her name only?

fatbelly

Yeah - I think you can probably avoid insolvency too.

I did a benefit check and it depends a bit on your  2-bed Local Housing Allowance where you live. You can check at
https://lha-direct.voa.gov.uk/search.aspx
I put in the figure for my area and got the following calculation:

Universal Credit calculated on a monthly basis.

Rent (capped to LHA) 625.02

Rent for housing element 625.02

Work allowance 293.00

Earnings:-

Net Earnings 2346.72

Total earnings 2346.72

Less work allowance 293.00

Excess earnings 2053.72

Earnings tapered at 63% 1293.84

Universal Credit:-

Standard Allowance 596.58

Child Responsibility Element 282.50

Housing Element (rent) 625.02

Maximum Credit 1504.10

Less tapered earnings 1293.84

Universal Credit Payable 210.26