In debt crisis and not sure what step to take next.

nicki_2

Sorry for the long post - I just wanted to make my current position and how I got here clear.

I've been in debt since 2008 despite my best efforts to live within my means. I've been self employed but it's always been a small business with the intention that eventually I would go out and get a "normal job" when my son went off to university. This has been scuppered after I was diagnosed with Fibromyalgia in late 2018, but I kept hoping that I could at least get a part time job outside the house still. I was making payments, and always paying off more than the minimum, but still had to use credit cards to cover stuff like clothing when my son had a growth spurt, or to replace the washing machine etc.It was all going okay until my son turned 18 and I lost £400 a month in benefit income (which included the child support from his dad) in August 2019. I set up repayment plans with the credit card/loan companies they sold the debt to and all was going well and I was trying to find more income. Then the pandemic hit and I had to isolate so my business took a hit, but I was one of the ones who fell through the cracks for business support. My health started taking a downturn during this time, my son (who had been contributing to the household finances through his student loan) moved out so he could attend uni and find a job without risking my health and I applied for PIP, but got turned down despite taking it all the way through the appeals process to court. At this point I was using my overdraft more and more up to its limit and only spending maybe £30 a month on food as I had some storecupboard supplies I could fall back on.

Fast forward to July 2022, son moved back home as he couldn't afford to move into his own place due to student credit/loans he'd run up. He started working full time, contributing to the household again to the tune of £500 a month and paying off his debts. My housing benefit got cut due to his contribution, but it was fine, I could pay bills, and I could still put food on the table thanks to him. Meanwhile my health wasn't getting any better. I was trying to find more income sources which I could manage. Then in Jan 2023 I got c0vid. My health took a nose dive. Long story short I ended up in hospital September 1st 2023 having a radical hysterectomy (they took everything) due to so many large fibroids that I was basically 9months pregnant unable to breathe or eat properly. I literally had 2 weeks to sort out my business, get everything I needed together for the hospital, and prepare the house/meals etc for me doing nothing for up to 12 weeks as it was open abdominal surgery. September my son moved out again somewhat unexpectedly to attend uni again (he was supposed to stay home until mid October while I got over the worst of the recovery but that ended up not an option & he had to go back then or he wouldn't get the alumni discount on his course fees) so no longer contributes to the household. My housing benefit got messed up and until January they were still paying me what I was receiving when son was here and contributing (error on my part at first - I was 14 days post op, 9 days out of hospital on meds usual post op meds and fighting an infection, had a major foggy brain when I had to email them and made a mistake in the reference number and didn't notice. I was told to wait 8 weeks when I'd called before I emailed so I did. Then I had to wait another 8 weeks after that error was spotted and corrected) so I have burnt through all of my small 'savings' which was what remained of my overdraft I had been clearing while my son was home, paying bills. Housing benefit has been sorted finally in January, but they've decided to pay me less than what they were, and I now have to find £50 a month just to cover that short fall. My son can't support me as he's a student, and he's gone from working 30+hrs a week when he lived at home to part-time while he studies. He has no intention of moving back here when he finishes his course as it's bad for both of us health wise (mentally and physically in my case as my fibromyalgia flares up due to stress caused by his shift patterns disrupting everyday life) but is willing to help me out if I need anything major like a new laptop for work. 

The past 6 months I've been making a loss with my business (commission earned has been less than my expenses of £7.50, and some months I've had to pay out more due to my health making me miss deadlines so I have to pay for deliveries to arrive) despite taking September off completely,  I still worked October onwards. I am really struggling to work between pain, fatigue and brain fog. I'm in the process of getting my new GP surgery up to speed with my health problems, and am waiting on diagnostic tests before I can start applying for any form of PIP or ESA. I'll be getting help with that application.

My outgoings are £726.82 a month without groceries or debt repayments. This is as low as I can get it covering rent, TV licence, broadband, mobile bill, council tax (ready for the new financial year), gas/electric, water, and a prescription certificate (I'm on 2 difference meds atm so this is cheaper). I have no luxuries at all. So £8721.84 a year. My rent is set to go up in May with the new tenancy agreement by another £50.

My income is housing benefit 4 weekly and working tax credits weekly averaging out to £670.28 a month. My income from work can be anything from £0 to £20 a week IF I'm lucky, if I'm really lucky I can earn more but it requires my health to be co-operative and that usually only happens for a day or two before I crash and can't work again for a day or two, sometimes 4 days. I'm fighting my health constantly to hit 30hours every week.  Anything I earn is currently going straight towards either business expenses which have to be paid asap each month or I can't earn, or to cover the difference between my benefits and my bills. I've worked out I need to earn £13.05 each week just to cover my bills, no food or debts. I was selling old stuff before Christmas on local selling sites and used that money to pay for food, but I'm running out of things to sell and also struggling to have the brain capacity to do it.

So this is where I have a problem. I owe approximately £10,174 on 4 credit/storecards (before making any payments this month), then my overdraft is currently sat at £1650 even after the cost of living payment was received. Since 2020 I've been paying £1 a month to two debts, £5 to another (they bought the debt from someone else and on doing my income/expenses they insisted I could afford it when my son was here), £25 to another as I was desperately trying to clear that debt and keep that line of credit open (that amount was set by me when son was here), and approximately £30 a month in interest on my overdraft. I can't see a way out of this except either a debt relief order or bankruptcy* but I have no idea what to do for the best. I tried going on the websites for the charities but I kept getting told that because I'm self employed they can't help me. I'm happy to go for debt relief order as I really can't see my situation improving in the next 12 months, even if I get disability benefits I'm due to be switched over to Universal Credit so that's going to cause me more problems. By my calculation (I use financial software to track everything and it forecasts my cash flow) I won't be able to pay my rent by July.

Can anyone advise me what I should do? My brain can't process the pros/cons of the options, or get my head around who I would be best to contact. Also what happens with my overdraft? I have the overdraft I'm using on my main account I've had for 30yrs with Natwest, but I also have an overdraft with Monzo which I'm not currently using (if I overspend slightly then I immediately make a transfer from Natwest to monzo so I'm not using that overdraft), and that account is for my spending on groceries etc.

*Before I do anything I've got to get my ex partner unlinked from me financially. I don't understand why he is still linked when I told all parties involved we were no longer linked in 2008!! He's married to someone else with a mortgage etc so I don't want this mess to effect his finances.

sourcrates

Hi and welcome.

First off, its important to understand that credit cards/store cards, and an overdraft, are all non essential debts, and if they prove to be unaffordable, then stop paying them, and use your budget to service essential debts only.

Essential debts are your rent/council tax/food/utilities, in fact everything you spend money on except your consumer credit debts.

The bank accounts with overdrafts should also be discarded, open a new basic account with no borrowing facility at a bank with whom you have no debt.

Then use that for your everyday banking, then the overdraft can be considered to be just another non essential debt.

You need a firm, secure base from which to deal with this, and those are the first steps.

You can write to creditors/ banks, informing them of your circumstances, ask them to put a hold on your accounts until you form a strategy to deal with them.

Others will be along to comment shortly, but it looks like a DRO or possibly a token payment plan (for now) might be a start.

RAS

The starting point is that you need a new basic bank account. Then move all your income into that account and your essential DDs, rent, CT, food and utilities. Do not switch as that will transfer all the DDs to your current creditors.

The experience of a recent poster was that the reason their ex was still linked to joint accounts was because they had failed to go to a branch and take their name off the account, the poster couldn't do it. Write to your ex, if possible pen and paper and get proof of posting. Tell them you are already in an arrangement to pay and they need to get themself de-linked. And to check their credit record for anything linking you both and sort it because you'll have to stop paying next month.

Stop paying creditors other than rent, utilities or council tax. Make sure your increased rent is notified to the BA. Your first job is to stabilise your finances and try to balance the books, which means not paying creditors. Do double-check MSE in case you can find cheaper phone or internet packages. 

What's your housing situation?

EssexHebridean

It's already been said, but in step by step terms.

First open yourself a new basic bank account, and stop paying ANYTHING to unsecured debt. .
Second - get your benefits and any other payments paid into said bank account.
Third - stop using the bank account you already have which has the overdraft.

I would say that this is the point where you need to start getting yourself sorted with a budget too - as this will then make sure that you know precisely what goes where, and when, and how much. 
Although I appreciate that there isn't much you can save on
- is your mobile a basic offering on a SIM only deal costing you a maximum of about £8 a month?
- Do you pay your TV license monthly, rather than quarterly? 
- Have you explored broadband social tariffs? (I think universal credit is the gateway benefit to this?) 
- Have you been through one of the calculators to establish whether you are getting all the benefits you are entitled to?
- As your son is no longer there, have you got the single person discount applied to your council tax? 

Finally - have you explored whether you will be better off not trying to work, right now, when it is such a struggle anyway? I appreciate you want to do "something" but currently if it is affecting your ability to meet even your essential living costs, I think it is worth you checking whether it is practical to continue?

Yankee24

With those figures you don’t have a business, you have a hobby.  Is there anyway you can get a part time or even a full time job?

nicki_2

Thank you for replying.

RAS said:

The starting point is that you need a new basic bank account. Then move all your income into that account and your essential DDs, rent, CT, food and utilities. Do not switch as that will transfer all the DDs to your current creditors.

I don't pay my debts by DD for this reason. It's always manually via their websites (same with my energy bill). I wanted to stay in control of those payments. I'll be looking at switching my bank account in the new financial year after checking them out as it means changing information in a lot of places (The account my benefits currently get paid into I can't transfer anywhere other than to another account with the same bank) and my brain can't cope with that right now.

RAS said:

The experience of a recent poster was that the reason their ex was still linked to joint accounts was because they had failed to go to a branch and take their name off the account, the poster couldn't do it. Write to your ex, if possible pen and paper and get proof of posting. Tell them you are already in an arrangement to pay and they need to get themself de-linked. And to check their credit record for anything linking you both and sort it because you'll have to stop paying next month.

The joint bank account we had has been closed down a long time ago, so I think this is a hangover from my credit card where he was a secondary card holder. I've spoken to my ex and he's sent me the information to have him unlinked according to a form I got from one of the credit reference agencies. I'm going to get that sorted and check the other agencies. If he needs to do anything I'll let him know.

RAS said:

Stop paying creditors other than rent, utilities or council tax. Make sure your increased rent is notified to the BA. Your first job is to stabilise your finances and try to balance the books, which means not paying creditors. Do double-check MSE in case you can find cheaper phone or internet packages.

I'm at the cheapest options with my current providers. My mobile I can't currently switch as it's linked to my sons phone (he sends me the money to pay his bill) but he's going to be taking it over when he can get his passport sorted so he has ID which will hopefully be when he gets paid in April. Then I'll be looking at a sim only deal with a different provider (Cheapest I can get atm with my current provider is more expensive). My internet is the cheapest option I can access as I'm not on universal credit yet and just switched to a 12month deal. I'm currently £17.43 in credit, but that's going to disappear due to the price increase so I'm leaving that as it'll probably be gone when I get my next bill in May and it'll keep my monthly payments at their current amount for the next 6 months or so in theory if I have my maths right.

RAS said:

What's your housing situation?

I'm currently in privately rented house and only paying slightly more than council housing tenants until the rent goes up with my next tenancy agreement. I'll be informing the benefits office asap when I have the tenancy in hand - I asked and they won't do anything before then. Then there is a 4 week delay as I'm paid retrospectively.

EssexHebridean

An easy win to make savings would be to switch your energy payments to "Variable Direct Debit" - that way you get the benefit of the lower DD rates, but are still just paying for the energy you are using in a month. You must ensure that you budget for higher bills in winter with this method, but presumably you are already doing this anyway as you are paying on receipt of bill. Some suppliers (EDF for a start) refer to this payment method as "whole amount monthly".  Payment on receipt of bills is THE most expensive way to pay for your energy. 

nicki_2

EssexHebridean said:

It's already been said, but in step by step terms.

First open yourself a new basic bank account, and stop paying ANYTHING to unsecured debt. .
Second - get your benefits and any other payments paid into said bank account.
Third - stop using the bank account you already have which has the overdraft.

I would say that this is the point where you need to start getting yourself sorted with a budget too - as this will then make sure that you know precisely what goes where, and when, and how much. 
Although I appreciate that there isn't much you can save on
- is your mobile a basic offering on a SIM only deal costing you a maximum of about £8 a month?
- Do you pay your TV license monthly, rather than quarterly? 
- Have you explored broadband social tariffs? (I think universal credit is the gateway benefit to this?) 
- Have you been through one of the calculators to establish whether you are getting all the benefits you are entitled to?
- As your son is no longer there, have you got the single person discount applied to your council tax? 

Finally - have you explored whether you will be better off not trying to work, right now, when it is such a struggle anyway? I appreciate you want to do "something" but currently if it is affecting your ability to meet even your essential living costs, I think it is worth you checking whether it is practical to continue?

I'm switching my account when I've managed to look at them. ATM my brain is struggling just to deal with work. Mobile is linked to my sons, as soon as he's sorted taking it over I'll be switching to SIM only with another provider. My current contract is cheaper than any of the SIM deals I can get with my current provider. TV is paid monthly. I can't get the social tariffs as I'm on legacy benefits, I'm going to be reassessing if it's worth me making the jump to universal credit now before they start the forced switch in September. I'm getting all the benefits I'm entitled to, but I'm not sure why I'm getting less housing benefit than I should be. My council have a Benefits Maximisation team who I'm going to get in touch with. Single person discount is now applied to my council tax, and my new bill which came in over the weekend. I wouldn't be better off not working as my health effects my ability to do day to day things, but I've been refused PIP because at the time my good days slightly outweighed my bad and I've adapted as I've been having issues since 2011! I'm in the process of trying to find out whats the matter with me as things have got worse. I saw the GP this morning and she is going to consult with her colleagues as she can't specify a diagnosis based on my symptoms, especially when all my blood tests come back normal lol The most experienced GP at my practice actually said "what are we going to do with you? We can't give you XYZ as you react to it, we can't give you YXZ as you're at risk of .... and we've already tried STW" I suggested they should just put me down and she started laughing with me.

nicki_2

Yankee24 said:

With those figures you don’t have a business, you have a hobby.  Is there anyway you can get a part time or even a full time job?

Thanks for the reply.

I'm aware its more of a hobby, I have other small streams of income (surveys, selling stuff when I can etc) which bumps my income up to the self-employed threshold normally. I've just had a terrible health year so not been able to do as much plus the cost of living has hit my customers so they're ordering less. I can't sit and earn money at the computer when I'm asleep or have so much brain fog I can't even remember how to make toast and instant coffee. 

Working outside the home is not an option for me due to my variable (by the minute some days) physical health. For example my legs buckle without warning causing me to fall - I've nearly fallen 4 times today - but the doctors don't know why, my arms/hands will suddenly fail and I drop whatever I'm holding or I can't even turn a key that's already in a door (if my dog could speak he'd tell you how infuriating that is). I have problems understanding accents so even call centre or customer facing roles are not an option. I've been looking for jobs that I can do from home but a lot of them involve taking calls which I can't do because as well as the difficulty with accents, as the day progresses and I get tired I start saying the wrong words, mishearing what's said to me and slurring my speech, none of which is good if I'm on the phone to a customer (my current customer base understand so all but 2 text me instead). My cognitive issues are like having dementia at times, that's the only comparison I can make that gets close to what I experience. Trying to find work is a case of trying to weed out the ones I can do that aren't scams and that takes brain power which I don't have a great deal of.

nicki_2

EssexHebridean said:

An easy win to make savings would be to switch your energy payments to "Variable Direct Debit" - that way you get the benefit of the lower DD rates, but are still just paying for the energy you are using in a month. You must ensure that you budget for higher bills in winter with this method, but presumably you are already doing this anyway as you are paying on receipt of bill. Some suppliers (EDF for a start) refer to this payment method as "whole amount monthly".  Payment on receipt of bills is THE most expensive way to pay for your energy. 

I'm looking into switching provider, but that's more brain power again that I'm struggling to find. I got confused last time, but hopefully I'll have a good brain day in the next couple of weeks when I've not got to use it to do my tax return, and be able to reassess. I'm only paying this way as they tried to take my DD from £90 a month (which is the highest it had been for almost 20 years) to £240, then £280 when I complained. Since my son moved out my bills have gone down, and I'm taking every conceivable energy cutting option I can without going without heating (I have Raynauds so I have to have the house at least 18degrees or I start to loose function in my fingers and toes - I'd rather pay for heating than risk gangrene/loosing toes). I've budgeted £150 every month and roll over whatever I don't need to pay onto the following months payment (I have a spreadsheet that I update every time they change the prices which works out how much I should be budgeting on a monthly basis based on the last 12 months meter readings and also historical meter readings so I budget whichever is the higher amount - thank you past me who had enough brain sense to set that up nearly a decade ago!) which means at the minute the software (Microsoft money) I used to track my bank account has me paying £293.27 to my supplier next month, but I know it won't be that, and I'll keep rolling it over each month so when I get bills in the £200+ over winter I'll already have the money set aside so to speak.

EssexHebridean

A quick call to your provider should be able to get you switched to variable DD - if you are with EDF they refer to it as “whole amount monthly direct debit” I think. This immediately saves you I believe 7% on what you are paying currently. If you are with one of the suppliers that uses WhatsApp or messaging on Twitter (X) then that might be a more straightforward way of dealing with this for you? It sounds like it would suit you really well as this is something you are very on top of and you are already budgeting for the higher winter bills anyway! 

I feel your pain (literally) on Reynauds too - not fun is it! This is the first winter we have had central heating since I developed it - the difference has been astonishing. I never realised quite how much difference being able to maintain a comfortable temperature would make!