Multiple joint debts and banking query

Cg1527

Hello all.

Myself and my husband have came to the realisation we cannot afford to pay off our debts - we are spending far more than is coming in and have been finding we are paying our CC's just so we can then use the money for food shops etc.  We have got ourselves into such a mess trying to clear off one debt, by securing more debt, and then building up more debt and know it needs to stop now.

First of all, we have filled in our details on Step Change.  Total debts of 91000 through 2 official loans, 1 family member loan and the rest CCs.  My debt situation is worse, my husband's loan being 24500 and CC 6500 - the rest is all in my name.  

First question is, would it be better, for our mortgage renewal in 3.5 years time, if I did the Debt plan myself for my debts, and we continue to pay off my husband's loan and CC as normal.  It's worrying thinking about both of our credits getting smashed - although I have read comments that may happen anyway as we will be linked financially.  According to our budget where we have included everything, we have 845 left over for debts, so I don't really think that'll be enough to cover his loan (370 pm) and CC (80pm) as well as my plan - whatever it will be.  But felt I needed to ask in case its an option.    

Also, are the first few months messy when you do set up a plan - e.g. should we expect debt letters, or will a moratorium stop that happening until a payment plan is in place, then should we be ok as long as we make the monthly planned payments or do some companies still hound you?  We have never missed a single payment, but have missed a lot of sleep worrying about it.

Finally, we've been asked to consider moving bank as currently I have a loan (now 12,000) and 2 CCs (15,000 and 5,000).  I have banked with my bank (Bos)  for 32 years and I really don't want to bank elsewhere.  I always find them reliable, and have excellent CS.  We have perks on our account (mobile insurance, breakdown cover, and holiday insurance) for only £10 pm and that's much cheaper than we'd get for mobile insurance alone. I also don't fancy the stress of changing all our DDs as my head is already burst with everything going on.  We have a joint account with £1000 OD but we are not using it just now.  I was hopeful if we called to explain, they may let us keep our account and the payment plan may stop them recovering the debts I'm due them from our account (offsetting?) but in reality I don't know if this would happen.  

I appreciate any advice.

C

   

sourcrates

You don`t mention what your income is, but judging by your debt, its likely to be quite high.

High earners tend to have high levels of debt, asset rich, yet cash poor.

All the tell tale signs of reliance on credit are there, you seem to have accepted that things need to change, but they will need to change by a much greater degree than you anticipate.

Once you enter any kind of long term debt management, your creditors will be looking to off load your debts pretty sharpish, as they are not geared up to manage them, either they will sell them on, or assign them to collectors, either way, you should not be banking where you have debts, the right of offset can and might be used, its not a first choice for most banks, but they are allowed to use it, so never bank where you have debts.

The good news is once agreements are in place, whether you do this yourself or go with one of the debt charities, everything should run smoothly, you just pay less than you were, over a longer period of time, hopefully with all interest stopped.

Basic first steps are to cancel all non essential payments, and set up a new bank account, in your case that will be a necessity rather than choice.

You will both need to commit to this 100% in order turn it around, take a few months to get organised, save an emergency fund, as you will not have access to credit, tell your creditors your intentions if you want too, but that will only delay defaulting on your accounts, which is the point all interest is stopped.

Your attitude to budgeting and debt has to change along with your thought process, have a read of this thread kindly put together by another forum user, it lists the basic first steps to debt management -

In Debt and Wannabe Debt Free? First Steps! — MoneySavingExpert Forum

Grumpelstiltskin

I echo everything Sourcrates says you must move to a basic bank account with a bank not connected with your current bank.

Start by reading this thread In Debt and Wannabe Debt Free? First Steps! — MoneySavingExpert Forum

Fill out a honest SOA format for MSE  and post on here then we can give you the best advice for your situation.

enthusiasticsaver

I would check out the thread linked above.

An soa is a good first step
https://www.lemonfool.co.uk/financecalculators/soa.php

As you have debts with BOS you need a basic bank account elsewhere to prevent them offsetting money against the debts after you default.

Most of these packaged accounts are not worth the fees you pay and realistically holidays are not going to happen often enough for you to need travel insurance and you don’t need mobile insurance and breakdown cover is cheaper than the bank fees. 

If you have a mortgage and joint current you and your husband are linked so once the defaults happen ( for either or both) your credit files will both be shot for 6 years until the defaults drop off. If you do a DMP you can self manage or stepchange can manage it although your family loan cannot be included. You can get new mortgage deals with your existing lender if your old ones expire though as they don’t credit score existing customers. 

You will need to come to terms with budgeting and managing finances without credit. 

enthusiasticsaver

Are the loans secured on your house? If so you cannot default on those. One of the reasons we never recommend debt consolidation or converting unsecured loans into secured is that once this happens you are committed to pay so secured loans cannot be tackled with a DMP. Your house is at risk if that is the case. 

RAS

You need a new bank account with no overdraft, you risk a lot if BoS use the right of reset and may well find the joint account closed anyway.

I'd suggest opening a new account, getting your salary paid in there and then moving the essentials DDs across. Do not switch. It may be a faff but scrabbling together a mortgage payment if BoS decide to offset will be even less fun.

Cg1527

Hello,

Yes we are sick of the cycle and want to change once and for all.  Before we moved, and had a child, we had much more excess income and always managed to clear our cards before interest rates hit but now we don’t.  It’s a hard lesson we will learn from.

We have no secured debt.  We have filled in our details with Step Change (Scotland) and are thinking to go through them.    I have filled in the SOA but couldn’t upload or change to MSE format (thinking it’s my phone) but I have taken screen shots if that helps.  I’ll upload.

Thank you again for taking your time to reply.
C

stu12345_2

protected trust deed is one option if you are in Scotland , it is shorter than an English iva, you may have to sell your cars to get one at £3000 each total. but it protects your home and lasts 4 yrs.
 a dmp will take a longer time to clear your debts.

when you give step change your details, they will analyse and give you the best option and answer. they will explain why the other options are not suitable etc. you get a reply in 5 working days
I can see them running 4 solutions and picking the best and fastest one.

and regarding the banks right to set off, they must write to you giving you 14 days notice that they have the right to do so.
( basically   min warning of 14 days to get a new bank account with another bank not linked to any debts you owe and get your wages moved)!
they must leave you enough for essential costs and bills and priority bills.if they took too much you can complain to the financial ombudsman.

Grumpelstiltskin

Your SOA shows some items you can cut back, food, mobile phones ( if out of contract go Sim only) clothes, charity shops and Vinted are your friends.

You must have an emergency fund saved up, you are not going to have access to credit and sure as houses something will break and need replacing. You need to be able to cover emergencies.

You can't afford expensive cars as Stu says if you go for a Trust Deed you have to have cars worth £3000 or less.

stu12345_2

 I read something about the equity left at the end of the 4 years protected trust deed on cars value, eg if it is still worth over £3000 at end of 4 years , you are obligated to pay the equity to the creditors or extend your trust deed. and this you may keep the  higher valued car(s)during the 4 years deed

does anyone have info on this, ps your gas and elec are exceeding high.
and when does the car payments end.

step change may reject the idea of trust deed due to cars value, but they may explain they may have to be sold in order to qualify.

 a dmp is only advised if it's under 10 years in length.


do you need £20000 worth of cars. if you got rid of them to cheaper cars, ended their  payments, reduced other overheads the dmp may last 8 years. I will want to know what stepchange suggest.

you can do joint dmps, but trust deeds must be done individually 

you need a solution that protects your home, but doesn't take years and years

and do not be loyal to any bank, you are just a number to them. as for moving direct debits,  if step change get you a solution,  you shut down your bank anyway, and set up direct debits for priority bills only or pay manually, eg gas, elec., council tax

you could even move the sliders on your bank app right now on the regular payments to cancel. on the non priority debts, eg credit cards, so they won't get any money this month at all, so you can build an emergency fund asap.

you know you need a solution, you know it will affect your credit rating. and that you can't carry on the way you are living at the moment.
as you said more is going out than is coming in, and sadly that can't carry on like that .

put your trust in step change, they will give you a solution within 5 days, I assume you got to the point where you fully  applied and they gave you a reference number in the meantime 

Cg1527

That’s very good to know re giving us notice if they intent to offset.  I will look into other banks also meantime.  I was tempted to call their (BoS) debt support line after being a customer for so long but I also know anything can happen when debts are sold on so realistically it may be a waste of time.  

Step Change recommendation was a payment plan and after reading up about it, I think that’s what we will do.  I don’t want to risk our house at all, and I’m sure if we got a plan in place we will stick to it as we are embarrassed and so angry with ourselves we’ve got ourselves into this situation.  

Step change recommended we change our food budget based on average spending, we do usually spend anywhere from 60-90 per week (we have 2 cats and their food and cat litter bump up our spending some weeks).

That’s a good idea to start saving.  Currently, we have no excess income but I’m hoping if we got a fair plan in place, we can  put a little aside.  I can very randomly get some overtime and I’m hoping if that happens, then I can just put yahg straight into a little savings account.  That’s what I’m hoping anyway.  

Thats both of our cars values by the way too, we work in different cities and need the 2 cars.  Mines is HP, traded in my old one which seemed

like a good idea at the time.  It still has 4 years left.


I genuinely know our spending habits have to change, we’ve been silly thinking we’d manage.  I’ve started using vinted (which I love!) and I’ve changed my own phone to pay as you go (£10 pm).  My husband’s phone is on contract at £50 pm with 1.5 years left.

I think I’ve answers the above questions,

I appreciate all of the advice! 

Thank you again,
C