Where to go? What to do?
Churchy8019
Forumite 12 Posts
Hi,
My wife and I have raked up a debt of over £40K.
It is a combination of credit cards, store cards and loans. We originally owed £65K, which we reduced to just over £40k.
The result is caused by sickness, changing jobs, poor decision making and the cost of living. We are now £350-£400 monthly in the red for our cash flow.
We have reduced groceries budgets with no takeaways or eating out and lowered the monthly bill with some intelligent shopping. Mobile phones are all on sim only. All Sky, Netflix and other streaming services have been cancelled. We are considering reducing the number of cars from 2 to 1 but would leave £100 in the red—everything else has been reduced but can't reduce any further.
I've considered the Debt management plan and IVA, but I'm worried about when we re-mortgage in a few years. I am embarrassed and ashamed of my finances and believe if we got into this debt, we got to get ourselves out. The problem is I am 42 and have been in debt for 20 years. I have to admit I need help.
Is IVA or a Debt management plan an option? I am currently off sick and was ill for six months last year. In January, I had a relapse and back off ill again. I'm stuck in a catch-22 as this debt and finance are not helping. I am worried I'm not getting full pay next month or the month after.
Speaking to the family, they have suggested selling and downsizing the property to pay off debt. But this is causing distress to my wife and two teenage children.
Your advice would be appreciated.
Thank you.
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Well done on getting a 3rd paid off. I didn't want to read and run, there will be others along shortly with more experience but the starting point is usually a SOA (links in the stickies). I believe you can remortgage with your existing lender if you are on a DMP (others will know more)
Have you defaulted on any of the debts yet? most creditors stop interest and charges once your debt has defaulted, or has been passed to a debt collection agency which is what people tend to advice, this will give you a few months breathing space to build a small emergancy fund
An IVA is a formal arrangement, which requires quite strict budget choices, and a steady income stream for up to 60 months.
Whichever choice you make, your credit file is likely to suffer, if you re-mortgage with the same lender, no credit checks are done on you, go elsewhere, they will be.
More than a third of IVA`s fail....fact.
Could A Debt Relief Order help you ?
Never pay a fee for a Debt Management Plan.
For free non-judgemental debt advice, contact either : Stepchange, National Debtline, or CitizensAdviceBureaux.
I’ll second that an SOA is the priority here - complete it openly and honestly, and it needs to reflect the situation right now. Then use the “format for MSE” option and copy and paste into this thread and we can take a look. Even when people think they have cut things to the bone you’d be amazed how often we can find savings that have just been missed!
Appreciate you support and advice.
I'm interested where I go from here, your feedback and advice.
Thank you
You've already realised that 2 x PCP contracts is an expensive way into car ownership. There is a get-out clause in the Consumer Credit Act explained here
https://nationaldebtline.org/fact-sheet-library/hire-purchase-debt-ew/
As for the interest, you will never get 0% on that many debts except that you employ a strategy - think you've realised that too.
My suggestion is that you default and try to stabilise your budget, save an emergency fund (which might even have to be a couple-of cheap-cars fund) then look at a debt management plan.
I wouldn't go near an IVA because I don't think it has advantages for you - you could easily end up paying more.
And the family's debt advice was shocking!
The biggest issues are the PCP contracts on the cars which are a shockingly expensive way of buying them and you have two. If you can ditch at least one of them that will help. As you only pay less than £200 a month in fuel I am assuming you don't use them that much. It will save you a fortune not only in the debt repayments but also running costs. The debt is presumably a result of overcommitting on the cars not leaving you enough disposable income to live. I agree with @fatbelly in that a DMP and defaulting is the way forward and cutting out as much of those little amounts which all add up as possible.
As to the mortgage you can stick with your current lender and a dmp will not affect that.
You need something in presents and you need to start saving for emergencies so you can get out of this reliance on credit. How old are the teenagers? Are they able to get a small pocket money job if they are over 16? Definitely ditch the bank fee and the bin cleaning and ideally cancel the gym memberships unless they are used a lot. Walking or running is free and in the summer lots of local parks have free outdoor gyms. Electricity is expensive but yours is extortionate. Presumably you are cutting back on energy costs as much as possible? We pay £235 a month for combined energy on a 4 bed detached so with the £67 government help it is around £168. You must either live in a mansion or very inefficient home energy wise. As your council tax is not huge I assume you are not looking for energy saving ways of reducing the bill.
You have made a good start but the biggest issue is a not insubstantial mortgage, 2 expensive PCP contracts, a huge energy and grocery bill and lots of little extras which all add up. The debt is a result of that as no doubt you have resorted to cards to buy a lot of these things.
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