In a big financial mess and I can't see the wood for the trees :(

lea

Hello

My situation feels pretty complex to me, and I would welcome any outside thoughts or suggestions on how I might be able to move forward from the right mess I have gotten myself into over the past decade. It really feels unfixable and daunting and I've had my head in the sand for a while now but its time to face up to it. I owe approx. £38k on credit cards and a store account and I'm not coping.

I'm in my early 40s and seperated from my husband (not divorced) who I am on relatively good terms with, about 8 years ago. We own a property worth approx. £300k together, which has a £150k mortgage outstanding. He owned the property outright when we met due to owning the property with a family member who passed away unexpectedly and their mortage was repaid through insurance. Shortly after, my ex set up a business with a business partner, the partner walked away and their company owed approx £175k on a business overdraft, which the bank called to be repaid. We were about to be married, already living together and he didnt have a great credit rating at that point due to starting up as self employed so I went onto a mortgage with him (he wouldnt have gotten the mortgage based on his income alone), and we took equity out of the property to repay the business overdraft. I went onto the title deeds and we had the property mortgage together.

A few years later, we seperated and it was decided he remained in the property and took in a lodger in the spare room to help cover bills that I used to pay towards. I left and somewhat naiveley rented elsewhere, but property prices are high in my area and over the years I used credit cards to supplement my income to meet the rent and bills and day to day expenses.

I am now in a new relationship, and live with my partner in a house in which he part rents part owns under a shared ownership scheme and I have no financial rights to, but contribute to board and bills when I am able to. 

2 and a half years ago, I changed careers from a low paying and stressful local government job, in an attempt to be for once in a job I didnt hate and also increase my income. I am now working in TV and film and am still fairly entry level, and whilst I am working fairly regularly now, last year the industry experienced strikes and I was out of work for a lot of the year. My debt increased substantially as I was in and out of work, working a day here, a week there, and when I wasnt earning I was using my credit card to live on, and the debt continued to grow.

Whilst I have never missed a payment on any credit card, mortgage payment etc, I can no longer get any more credit or balance transfer cards and I would guess 70% of my credit card debt is now on standard rates. When I am working, like I am now, I am repaying as much as I can on the highest rate, lowest balance card, but this means I am not able to put any money aside for the period where I'll inevitably be out of work when this job finishes, until I find my next one.

The mortgage I have with my ex lasts until early 2026 and is on a very low fixed interest rate (around 1%) so my ex understably does not want to consider anything regarding the property ownership until closer to that time. As he owned the property before I came along and there is a sentimental bereavement back story with him owning the property, he's wanting to remain there and is digging his heels in about not selling. His business barely keeps afloat, pays him not much more than minimum wage, so he also cannot afford to 'buy me out' of the house. In any case even if he could - techincally the mortgage paid off his business loan so that probably a further complication?

I'm in my current job until the end of May, at which point I don't yet know what will happen. Jobs come up very last minute in this industry which can be stress inducing but as it stands, until I find another job either in this industry or another, I won't have an income after the end of next month.

My debts are as follows:

-Lloyds credit card - £1989.27 (limit of £9750) - 25.68% p.a
-Virgin credit card - £12082.54 (limit of £13000) - 19.17% p.a
-HSBC credit card - £5939.08 (limit of £6500) - 0% on £4780.59 ends 1 Aug 24, 0% on £1158.49 ends May 25
-MBNA credit card - £11061.30 (limit of £14800) - 3.9% until May 25
-Fluid credit card - £2182.50 (limit of £2500) - 0% until Jan 25
-Owed to partner (he has put on a balance transfer credit card he has, so needs to be repaid) - £1900 - 0% until March 25
-Next account - £2109 - 24.9% APR

I also have an M&S credit card with zero balance and a limit of £10500 however there have been no balance transfer offers in the past few years.

I am currently bringing home £500 - £550 p/week after tax. My partner is currently covering all the household bills in an attempt to enable me to overpay on my lloyds card to try and clear that as soon as I can. However he earns less than me so its a struggle. We have gone through our bank accounts and cancelled all unneccessary TV subscriptions etc.

Sorry for the long post, I wanted to try and explain as much as I can. I want to try and stay in tv and film as although the work is currently irregular, as my experience grows I can expect to work more regularly and consistently and have the potential to earn more than I am now, and more than I could in a standard office job that I'd be doing otherwise. However if it comes to it I will get a 'regular' job to ensure I have an income.

Any advice would be gratefully welcomed. Thanks for reading.

RAS

Hi, welcome but you need to advise us as to exactly what APR "standard rates" are, please.

lea

RAS said:

Hi, welcome but you need to advise us as to exactly what APR "standard rates" are, please.

Thanks - I'll amend my post and put them on.

TheAble

Do you contribute towards the mortgage payments on the house you own with your ex?

Brie

Presumably you are still on the mortgage so hopefully ex is covering that ok and will continue to do so.  How likely do you think he will be able to take it all on himself when it comes up for renewal??  With or without buying you out?

People will ask that you fill out the standard Statement of Accounts on the top sticky as that will give the best view of your total situation.  Even if you don't post it here it's a good exercise to go through to see where there may be some wiggle room in the budget.  If you do post it back here you'll get some good ideas on how you might handle everything.

My initial thought is to throw as much as possible on the Lloyd's card that being the one with the highest apr and not an actual huge balance.  Then I would ask for the credit limit on it to be cut by £1k.  I'm wondering if that would prompt them to offer you another 0%.  Or maybe M&S will come through.  The less credit you're using and less you have available the better risk you are so that's what you need to aim for.  

The worry will be what APR will HSBC start charging in Aug so that may well be the next one to hit.  

Where possible have your DD set up to be a bit above the minimum. So if you are expected to pay £99, pay £100 as it looks a little less obvious to other creditors that you are just scraping by.  Pay that £100 for a couple of months and then drop it down to £98 or whatever, again a bit above the minimum.  

That should be the case for everything except the debt your really trying to clear, any spare pennies should be going on it as the less interest you get charged the more money goes on the principle.  

I'm probably stating very obvious things you already know but sometimes I like to state the obvious on the off chance it isn't - if you know what I mean.  

Best of luck with it - the debt clearance and the career and everything else.  

lea

TheAble said:

Do you contribute towards the mortgage payments on the house you own with your ex?

Not at the moment, as there is a lodger who is covering 'my share' however the lodger is due to move out over the coming months and ex says he is not keen to get another lodger - I am going to tell him if thats the case he will have to cover all the bills as I cannot afford to.

RAS

OK, this takes cast iron will but there is a way to reduce the amount on the Lloyds card, assuming you can still spend on the Virgin card, if you are paying for anything other than debts, but I suspect that what you need to look at are your priorities, both short-term and longer term.

Apart from your indebtness, you also have a huge amount of available unutilised credit, which will be deterring creditors even more from offering deals. So cut the M&S card limit back to say £1k and reduce the Lloyds limit. However, you are also tied to your ex and their credit record, and vice versa, which may not be helping either of you.

I'll take you through it in case it helps you or another. Take those things you would buy, and put them on the lower rate card. Then immediately pay the exact same amount off the higher interest rate card, or perhaps round up to the next pound. You've only got a 5.5% difference but even that would be worth the candle.

However, given the parlous state of your finances and your partner's, I think you need to get hold of the other end of the stick.

Your priority has to be to pay for your living costs, and to accept that the consumer credit need to be tackled differently. Stop paying any of the consumer credit accounts. The world won't end, the creditors will write to you, eventually default and then the interest rate is frozen and you pay back what you can afford. Once the debt is sold on, you can do what are known as full and final offers, hopefully below 50%. 

Your absolute priority has to be to stop paying this month and save what salary you have to fund your living costs until you get more work. If necessary, take temporary work to fill the gap. 

Even if you get new work, you use your salary to fund your living costs and save up everything you can into an emergency fund. Initially aim for £1k, then three months' salary, so you are not on the permanent roller coaster. By that time some of the creditors will have defaulted and you pay them £5 per month if that is all you can afford.

Longer term, you have to divorce and insist on a proper financial settlement. Given how long stuff like financial settlements take, it'll easily take a year or more. And there is nothing to say that your agreement could not require that the deal to be finalised when your ex's current deal ends. If you wait until early 2026, they'll have already signed up for a new deal (3-6 months before the end of the existing one is normal). Starting now gives your ex time to get their ducks in a row, acknowledge that the only reason they are still in the house is because you were prepared to take out the mortgage when the business debt had to be paid. 

Your ex may have been able to survive by taking a lodger but they've also had the opportunity to try and make the business work. Tough I know during Covid but in the years before the situation would have been more favourable, and they don't appear to have made progress?

By the way, if you start paying everyone a fiver immediately, you'll accrue arrangement to pay markers. Those damage your credit record a lot longer than defaults. If you can get everything defaulted in the first year and sever your finances from your ex, in 7 years you'll have pristine credit record.

sourcrates

As you are technically a homeowner, no point in making things stressful for yourself, if you can`t service your existing debts, then your choice is between debt management and IVA.

The former (Debt management) is the most likely choice, as your income fluctuates, and it can be flexible according to your available budget, your not bound by any rules, and its just much simpler all round.

Decide whether to self manage, or use a debt charity, and put your plan into action.

Google "stepchange" and "debt management plan".

lea

Brie said:

Presumably you are still on the mortgage so hopefully ex is covering that ok and will continue to do so.  How likely do you think he will be able to take it all on himself when it comes up for renewal??  With or without buying you out?

People will ask that you fill out the standard Statement of Accounts on the top sticky as that will give the best view of your total situation.  Even if you don't post it here it's a good exercise to go through to see where there may be some wiggle room in the budget.  If you do post it back here you'll get some good ideas on how you might handle everything.

My initial thought is to throw as much as possible on the Lloyd's card that being the one with the highest apr and not an actual huge balance.  Then I would ask for the credit limit on it to be cut by £1k.  I'm wondering if that would prompt them to offer you another 0%.  Or maybe M&S will come through.  The less credit you're using and less you have available the better risk you are so that's what you need to aim for.  

The worry will be what APR will HSBC start charging in Aug so that may well be the next one to hit.  

Where possible have your DD set up to be a bit above the minimum. So if you are expected to pay £99, pay £100 as it looks a little less obvious to other creditors that you are just scraping by.  Pay that £100 for a couple of months and then drop it down to £98 or whatever, again a bit above the minimum.  

That should be the case for everything except the debt your really trying to clear, any spare pennies should be going on it as the less interest you get charged the more money goes on the principle.  

I'm probably stating very obvious things you already know but sometimes I like to state the obvious on the off chance it isn't - if you know what I mean.  

Best of luck with it - the debt clearance and the career and everything else.  

Thanks for replying. Ex is covering mortgage and bills on owned property himself and with help of the lodger, although lodger intends to buy soon and ex doesnt want to replace him.

I hadnt thought of setting the DD to a little above the minimum on the other cards - thank you. Will do that now.

Re requesting the card limit to be reduced - on my credit reports one of the things they say is in my favour, is that I'm not utilising all my available credit. If I reduce my limits will it have a detriment to that aspect of my credit report? I cleared the M&S account a number of years ago and am yet to receive a new BT offer so am feeling doubtful...

Thanks for all your advice and best wishes re the career! 

lea

RAS said:

OK, this takes cast iron will but there is a way to reduce the amount on the Lloyds card, assuming you can still spend on the Virgin card, if you are paying for anything other than debts, but I suspect that what you need to look at are your priorities, both short-term and longer term.

Apart from your indebtness, you also have a huge amount of available unutilised credit, which will be deterring creditors even more from offering deals. So cut the M&S card limit back to say £1k and reduce the Lloyds limit. However, you are also tied to your ex and their credit record, and vice versa, which may not be helping either of you.

I'll take you through it in case it helps you or another. Take those things you would buy, and put them on the lower rate card. Then immediately pay the exact same amount off the higher interest rate card, or perhaps round up to the next pound. You've only got a 5.5% difference but even that would be worth the candle.

However, given the parlous state of your finances and your partner's, I think you need to get hold of the other end of the stick.

Your priority has to be to pay for your living costs, and to accept that the consumer credit need to be tackled differently. Stop paying any of the consumer credit accounts. The world won't end, the creditors will write to you, eventually default and then the interest rate is frozen and you pay back what you can afford. Once the debt is sold on, you can do what are known as full and final offers, hopefully below 50%. 

Your absolute priority has to be to stop paying this month and save what salary you have to fund your living costs until you get more work. If necessary, take temporary work to fill the gap. 

Even if you get new work, you use your salary to fund your living costs and save up everything you can into an emergency fund. Initially aim for £1k, then three months' salary, so you are not on the permanent roller coaster. By that time some of the creditors will have defaulted and you pay them £5 per month if that is all you can afford.

Longer term, you have to divorce and insist on a proper financial settlement. Given how long stuff like financial settlements take, it'll easily take a year or more. And there is nothing to say that your agreement could not require that the deal to be finalised when your ex's current deal ends. If you wait until early 2026, they'll have already signed up for a new deal (3-6 months before the end of the existing one is normal). Starting now gives your ex time to get their ducks in a row, acknowledge that the only reason they are still in the house is because you were prepared to take out the mortgage when the business debt had to be paid. 

Your ex may have been able to survive by taking a lodger but they've also had the opportunity to try and make the business work. Tough I know during Covid but in the years before the situation would have been more favourable, and they don't appear to have made progress?

By the way, if you start paying everyone a fiver immediately, you'll accrue arrangement to pay markers. Those damage your credit record a lot longer than defaults. If you can get everything defaulted in the first year and sever your finances from your ex, in 7 years you'll have pristine credit record.

Thanks for all this great advice!

As I mentioned in my last post response to Brie - on my credit report one of the things they say is going in my favour is that I have a large amount of unutilised credit - if I reduce the limits, will that impact on that? Eg my report currently says 'You've not gone near your total credit card limit in the past 6 months' and that I'm currently using 65% of my available credit.

Re suggesting I purchase on a lower rate credit card, and repaying on the higher rate, is that instead of using my debit card?  

Re consumer credit, is that the Next account? I'm currently paying around £120 a month on that.

I'm definitely going to look for temporary work if a tv or film job doesnt come up, because I can't afford to be out of work.

Re 'If you can get everything defaulted in the first year' do you mean, stop paying all my credit cards?

I guess one of my concerns is jeopardising any settlement I might get from my ex, we're on good terms atm, whilst he can't afford to buy me out he does have family he could potentially lean on financially a bit (I dont) - I'm wondering about asking if he wants to buy me out when the current mortgage deal ends. If so, should I ask for half the equity or what would be a fair amount? A lot of my debt has accrued because we split and he was able to stay in the house and I had to rent which was outside of my means....

Thanks again for your help, whilst I have a fair to good understand of BT's, other financial stuff is beyond me!

RAS

Will reply properly later, if others don't.

Briefly, yes use lower rate card instead of debit card, as long as you can immediately repay your higher rate card from the bank account to which the debit card is linked..

Consumer credit is everything but the mortgage.

Your ex's credit rating will already be affected by the high level of debt you have, because you are financially linked, so it is in his interests to sever the link ASAP.