Here Goes...Starting Up on a Journey

Superhoopza · 6 January at 12:20AM

Hi All,

I've made some reckless decisions recently, tried to invest money, kept borrowing to invest more and lost it all. Ridiculous I didn't learn after the first one, two, three, ten attempts. But we are here now:

Essentially I am up to my eyeballs in debt and have about the same amount of debt and interest payments) than income. Although the below SOA shows I don't have enough to pay debts, with different payment dates, I can move payments around that I make to cover others...I think...just! Not ideal.

Here's the SOA and I'll add some notes underneath and then my initial thoughts:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

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

Number of children in household......... 0

Number of cars owned.................... 0[b]

Monthly Income Details[/b]

Monthly income after tax................ 3100

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 3100[/b][b]

Monthly Expense Details[/b]

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

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

Rent.................................... 600

Management charge (leasehold property).. 0

Council tax............................. 72

Electricity............................. 35

Gas..................................... 35

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

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

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

Mobile phone............................ 15

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

Satellite/Cable TV...................... 10

Internet Services....................... 10

Groceries etc. ......................... 120

Clothing................................ 20

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

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

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

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

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

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)...... 10

Haircuts................................ 25

Entertainment........................... 350

Holiday................................. 20

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

Total monthly expenses.................. 1402[/b]

[b]

Assets[/b]

Cash.................................... 400

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

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

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 400[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

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

Capital One (CC)...............3000......200.......35

118 Money (CC).................3600......267.......50

Barclaycard (CC)...............4600......200.......30

MBNA (Loan)....................5000......365.......40

MBNA (CC)......................13000.....360.......20

MyCommunityFinance.............7000......365.......30

Updraft (Loan).................8400......562.......30

Santander (CC).................5500......150.......20

Santander (overdraft)..........3000......50........40[b]

Total unsecured debts..........53100.....2519......- [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,100

Expenses (including HP & secured debts). 1,402

Available for debt repayments........... 1,698

Monthly UNsecured debt repayments....... 2,519[b]

Amount short for making debt repayments. -821[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 400

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

Total Unsecured debt.................... -53,100[b]

Net Assets.............................. -52,700[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

My Notes:

as mentioned I can move

1. As mentioned, I can move money from CC accounts to my bank account instantly for free (not illegal just don't want to discuss on here how). So I think my timing I can just about make the payments.

2. I am moving into my partner's place so rent, food and bills contribution is an estimate for now. I don't want to ask her until we do in a few months to not worry her about my situation. That is a no go for me. If I am well off with bill contributions please let me know. I'll be driving her car so will I presume only pay my insurance and petrol contribution, which should be modest as I won't be using the car much (I'm aware insurance is a fixed amount). If I don't follow through with this it will annoy her greatly as I've pushed this for a while, so can't really duck out of that cost.

3. Some of the bills will be averages for a few months or years, I have some things I'm committed to this year which won't be cheap but unavoidable, I'll just scrap and save the rest of the time.

4. Loan end dates: Updraft end of 2024, Mycommunityfinance Jan 25, MBNA Feb 25

5. I don't really have anything of value to sell, nor can get a part time job to supplement income. I will look around to do online research but these are quite niche so very difficult to get selected for.

6. MBNA 20% is only on £3k of my credit usage, the promotional rate for 0% ends in March...eek!

7. The only credit card I am eligible for right now is Zopa with a credit limit of £600 and no promotional rate, so pretty useless.

Ask any questions please on the above, I've probably missed out loads of context.

My initial thoughts of a plan:

Step 1: Obviously cut out any stupid investments or spending, stop the bleeding.

Step 2: Move spare credit limit from other providers over to clear the highest interest rate (118 Money). I spoke to them about reducing my interest rate and they said no. So clear that off. Once the balance is clear, that will then also allow me to make some payments on other credit cards from my statement date to payment date and move the money back before the payment date, reducing the interest on other cards for that time, of £4k a month (about £100 interest at an average of 30% APR). I did ask MBNA if they would allow me to do a balance transfer as I still have £3k credit limit there but unsurprisingly the offer on there has now expired.

Step 3: Ask Updraft if I can extend my loan to reduce my interest payments, to give me that breathing space each month and use the cash to again target higher interest rate accounts.

Step 4: Ask creditors to go on payment plans to freeze interest. Does anyone have experience of setting these up themselves away from people like Stepchange, how open are creditors of this nature to do so and what impact does it have on credit ratings?

Step 5: I've been pre approved for a £9k loan at 30% interest over 3 years (yes more debt). Use this to clear higher interest rates. Possibly? Only problem with loans is they all come out at the same time so I'm committing to higher expenditure on the first of the month.

That's a place to start. Please fire away with questions, advice and hopefully some support.

EssexHebridean · 6 January at 9:46AM

First question is - does your partner know that you have debts? If not then IMO you have to tell her, and before moving in together - it doesn’t take much of a stretch of imagination to realise what she might think if you move in, thus presumably reducing your outgoings, THEN announce that you have all this debt….being upfront and honest about your situation shows trust, and also gives her a chance to say “hang on though, is this a good time to be throwing our lot in together?” if she wishes - not saying she will, but she deserves to have the option.

So on the SOA “rent” is your household contribution to her existing costs I assume, which explains some of the things that are currently missing - contents insurance for example? Your grocery spend though - is that a joint spend? If that’s half then it looks a bit high, but if it was the full household cost of groceries that you were planning to pay, to be honest, these days that might be a bit on the low side, I currently budget £225 a month (2 of us here) for all food, household items and some toiletries, and while I can do lower, there are also months where I will be bouncing around that level or even slightly above. I’ve also been playing this game for a lot of years - so am fairly good now at being able to bring in a few low spend weeks if needed.

Do not even CONSIDER consolidating - you can’t borrow your way out of debt.

It looks like currently your expenditure exceeds your income - it’s not easy to see at a glance because of the formatting of the SOA - I wonder, did you use the “format for MSE” option? It used to present rather differently and be far easier to both read and comment on if so. If that is correct, then I’d suggest that you need to consider a debt management plan - either arranged via one of the debt charities or self managed. You do have decent income, and your costs, relatively speaking, are low, so this is a solution that might well work. Losing the interest though is critical, and to that end, simply stopping the debt payments and allowing them to default will be a huge help. Yes it will trash your credit file, but looking at those APRs, your file is already fairly well trashed anyway, so I wouldn’t worry about that. You use the period of time when you aren’t paying to the debts to save every penny of surplus income and also to ensure that your budget is working. The savings give you an emergency fund (you should continue to save into this monthly too) and also a “fighting fund” for possible full and final offers along the line. Both of those savings amounts should be considered untouchable for anything other than a genuine emergency or those F&Fs. Once the debts default, you start to pay them an affordable amount each month.

First step though - talk to your partner. Oh - and don’t even consider joining finances with her for the time being - she will NOT thank you for that!

Devongardener · 6 January at 10:20AM

You absolutely have to tell your partner about your situation before moving in with her! What happens if there are maintenance costs for the house and car she needs you to contribute to, holidays and socialising that she assumes you can afford.

I wouldn’t consider anyone moving in, in your situation until solvent. If you default on your debts, they will be linked to her address. I know she wouldn’t be liable for them, but it’s a whole lot of trouble for her to untangle if the worst happens.

fatbelly · 6 January at 11:01AM

I'm not used to reading soas in that format but it looks like you have £1800 per month available to service 52k of debt and no assets or complications. £400 cash.

A straightforward dmp will see you debt free in under 3 years so i don't think you need any form of insolvency. Just stop paying the creditors and save a fighting fund then make pro-rata offers.

Feel free to do this yourself, from whatever address. As long as you have no joint financial product with your partner she won't be linked. Obviously tell her what you are doing so she understands this. And make sure you are banking with a bank that you do not have debts to.

RAS · 6 January at 12:59PM

Credit records are linked to people not addresses, so moving in with GF will have no impact on her credit rating.

But you must tell her about your debt before she even agrees to your moving in. And don't do so if you have priority debts like CT, until you've paid them off. She needs to know how you intend to handle all this as it is going to restrict her ability to enjoy her income for several years.

It may well be that she wants/needs you to set up an SO paying your portion of the priority accounts (like CT) and utilities and essential food very shortly after you are paid. That way she can relax confident that she's not going to have to pick up bills if you have a financial crisis.

And have regular, at least 4 times a year, sit down discussions with your both credit records and household accounts.

Superhoopza · 6 January at 2:41PM

Thanks for the responses. I've edited the SOA to MSE format and reduced the groceries but added the entertainment, that's be really stretching it as I have some big events this year I have to attend. I'll respond to you all, the common theme seems to be that I have to tell my partner asap.

Superhoopza · 6 January at 2:51PM

fatbelly said:

I'm not used to reading soas in that format but it looks like you have £1800 per month available to service 52k of debt and no assets or complications. £400 cash.

A straightforward dmp will see you debt free in under 3 years so i don't think you need any form of insolvency. Just stop paying the creditors and save a fighting fund then make pro-rata offers.

Feel free to do this yourself, from whatever address. As long as you have no joint financial product with your partner she won't be linked. Obviously tell her what you are doing so she understands this. And make sure you are banking with a bank that you do not have debts to.

Can I set up a DMP myself or better to use stepchange etc? What would be the impact? Defaults? I presume that's better than arrangement to pay markers. Would like to get a mortgage with her in a couple of years but obviously need to tell her about all this as that will make it difficult, especially any impact on my credit history let alone having no money/being in debt.

What would be the best process to go about stopping paying the creditors, making offers and entering into DMPs with them. I've never missed a payment in my life, would this go in my favour for any negotiation?

Final point, should I look to get a new bank and get my income paid into there asap?

fatbelly · 6 January at 3:02PM

Superhoop91 said:

Can I set up a DMP myself or better to use stepchange etc? What would be the impact? Defaults? I presume that's better than arrangement to pay markers. Would like to get a mortgage with her in a couple of years but obviously need to tell her about all this as that will make it difficult, especially any impact on my credit history let alone having no money/being in debt.

What would be the best process to go about stopping paying the creditors, making offers and entering into DMPs with them. I've never missed a payment in my life, would this go in my favour for any negotiation?

Final point, should I look to get a new bank and get my income paid into there asap?

It's not difficult to set up your own dmp, and there are resources on

https://nedcab.cabmoney.org.uk/dmp.asp

Your past history won't make any difference

Your final point is correct unless you are currently banking where you have no debts to that banking group

EssexHebridean · 6 January at 5:17PM

Superhoop91 said:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 0[b]

Monthly Income Details[/b]
Monthly income after tax................ 3100
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 3100[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 600
Management charge (leasehold property).. 0
Council tax............................. 72 Assume this is based on you paying 50% - but have you and your partner taken into account that when you move in she will lose her single person discount?
Electricity............................. 35
Gas..................................... 35
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 0
Mobile phone............................ 15
TV Licence.............................. 0 If either of you ever watch live TV, or use iPlayer, you’ll need to factor this in.
Satellite/Cable TV...................... 10
Internet Services....................... 10
Groceries etc. ......................... 120
Clothing................................ 20
Petrol/diesel........................... 50
Road tax................................ 0
Car Insurance........................... 0 I think it would be a good idea to put in at least a nominal figure here - have you run your / partners details through any comparison sites to get an idea what the cost might be with you added?
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
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)...... 10 £120 a year for birthday and Christmas presents for your partner and ny other family you buy for, any close joint friends who she might feel it’s appropriate to buy for, plus your contribution to Christmas food. Sure this will be enough? I suspect not…
Haircuts................................ 25
Entertainment........................... 350 This is a high figure for someone with debt - It’s a tough one to justify. I think you need to give consideration to things you can make apologies for, and look to reduce that a fair bit.
Holiday................................. 20 £240 would be a pretty cheap holiday - again, this figure, realistic do you think?
Emergency fund.......................... 0[b] You need something in here - even if you use the period of stopped payments to the debts to build your basic fund, you should aim to keep contributing to it once you’ve started your payments.
Total monthly expenses.................. 1402[/b]
[b]

Assets[/b]
Cash.................................... 400
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0[b]
Total Assets............................ 400[/b]
[b]
No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
Capital One (CC)...............3000......200.......35
118 Money (CC).................3600......267.......50
Barclaycard (CC)...............4600......200.......30
MBNA (Loan)....................5000......365.......40
MBNA (CC)......................13000.....360.......20
MyCommunityFinance.............7000......365.......30
Updraft (Loan).................8400......562.......30
Santander (CC).................5500......150.......20
Santander (overdraft)..........3000......50........40[b]
Total unsecured debts..........53100.....2519......- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 3,100
Expenses (including HP & secured debts). 1,402
Available for debt repayments........... 1,698
Monthly UNsecured debt repayments....... 2,519[b]
Amount short for making debt repayments. -821[/b]

[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 400
Total HP & Secured debt................. -0
Total Unsecured debt.................... -53,100[b]
Net Assets.............................. -52,700[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Comments on the SOA are above. I’m not going to worry about commenting on the individual debts because your shortfall is such that you need to take action - and as already suggested, a DMP seems that it ought to work for you.

As you look like you bank with the same organisation you have debts with, you will need to make opening a new basic bank account with a bank or building society not linked to any of your debts a priority. Remember to give your payroll department the new details - if you do that immediately that gives enough time for it to be changed before your next payday. You’ll need to change the DDs for your priority bills too. Don’t use the current account switching service as that will transfer the DDs you don’t want too…although - thinking about it, @fatbelly - if OP stops all the DDs for the debts first, then switches via the switch service, would that work?

Once the debts have defaulted and the interest stops, you’ll find you can make a real impact on paying down. You don’t need to discuss stopping paying with the creditors at all if you don’t want to - although a simple letter to each letting them know that you are cancelling the DD due to financial issues may potentially stop them adding bounced DD charges on to your debts. You can also let them know that you aren’t willing to entertain telephone calls from them - keeping everything in writing means that you have a paper trail and there can be no confusion about that has been said by either side.

fatbelly · 6 January at 8:13PM

Yes, that seems good to me

Superhoopza · 8 January at 5:37PM

fatbelly said:

Yes, that seems good to me

fatbelly said:

Superhoop91 said:

Can I set up a DMP myself or better to use stepchange etc? What would be the impact? Defaults? I presume that's better than arrangement to pay markers. Would like to get a mortgage with her in a couple of years but obviously need to tell her about all this as that will make it difficult, especially any impact on my credit history let alone having no money/being in debt.

What would be the best process to go about stopping paying the creditors, making offers and entering into DMPs with them. I've never missed a payment in my life, would this go in my favour for any negotiation?

Final point, should I look to get a new bank and get my income paid into there asap?

It's not difficult to set up your own dmp, and there are resources on

https://nedcab.cabmoney.org.uk/dmp.asp

Your past history won't make any difference

Your final point is correct unless you are currently banking where you have no debts to that banking group

So I told her, tough conversation, but supportive. I will only be contributing to variable living costs, i.e. groceries, petrol, bill increases etc, so we estimate that will save around £700 per month beyond the SOR above. As all monthly payments listed are above the interest charge, I am going to slowly eat into the balances. I feel it's better to pay an extra £15-£20k overall than to default on them all.

Hopefully with time I'll start to get some 0% balance transfer offers.

I'm also going to speak to each creditor about the possibility of short term interest rate freezes, every little helps to clear the balances quickly. If not, one or two of them on a payment plan, which if I understand correctly, as long as I make the monthly contractual payments, means I am not in breach and won't have an arrangement to pay market against them but the interest rate will be capped, like a loan? I will ask them each individually, not sure how correct that may be?

This all relies on disclipline, it's a challenge I've set myself now which I'm excited to undertake.
First port of call is to use all my remaining credit on MBNA and Cap One to fully pay off the 118 card, so in one or two months I should have no interest on that, which was my highest rate card. I can also make small purchases on that throughout the month and pay it off each month to essentially not be paying any interest on monthly spending from now on.

Thanks for all the advice given, especially around the not taking another loan to consolidate.