I’m in a right old mess - any advice appreciated

dabear1

Hi everyone,

I’ve been reading through many of the threads on this forum and digesting some of the incredibly helpful advice on offer here.

So, firstly, thank you. This has had a big impact on me facing up to this, hence my post today. 

Basically, I currently find myself with £17k+ of debt, £650+ monthly repayments, and very little income (although that is increasing, as I’ll explain).

It began with taking out credit cards that I used to top up my income - the usual sort of thing. 

Then, I was made redundant last year and went back to being self-employed (which I was for many years prior to getting the job).

Unfortunately, things didn’t go well, contracts falling through, and basically everything grinding to a halt. I found myself in depression, which really affected my ability to work day to day, although things have improved in that respect.

For months I was living off my dwindling savings and paying for stuff on my credit cards to keep me going. I held on to the belief that next month things would pick up etc, but everything that was on the table failed to materialise. So incredibly frustrating but that’s how the cookie crumbled. 

As my savings ran out, I signed on for Universal Credit and for the past 6 months or so I have been living on this + credit cards, and a little bit of sporadic income from self-employment and casual work.

In all honesty, I should really have looked for a job a long time ago but didn’t because self employment has always been what I wanted to do. I thought that this would be the month I would turn it around and that I would win that contract. And also burying my head in the sand somewhat. 

My monthly repayments on my debts have continued to increase and now exceed any income I have coming in. I’m basically running out of money and everything goes on keeping up with the repayments to the point I am putting food shops on more credit cards. I can’t continue doing it any longer as I have hardly any credit left. 

I also (very stupidly) took out a loan a few months ago as I didn’t have enough money to live and now that’s added almost £3k to the total amount I owe despite the loan being for £1.5k.

Oh and I’m £1.5k into my overdraft. My total debt balances are around £17.5k (see below)

Anyway, to a cut a long story short, things are starting to turn as I have changed my business direction slightly, and initially the signs are very positive. I finally have some income coming in from it. I also now have a job lined up (although part time and not the pay I would like). 

But the debts are a big problem. The repayments are eating up every single penny to the point I am putting food shops on cards, etc. 

I can’t believe I have let it get to this point and I feel incredibly ashamed if I’m truthful.

*My finances*

As I say, the problem I have is that monthly debt repayments currently exceed my income, and even with the new job and promise of increased self employed earnings it basically leaves me with more or less nothing, so I don’t really know what to do. I can’t sleep and know I need to do something fast because the money is near to running out (while it already has if you count the overdraft).

My current debts are as follows:

Credit cards:

Vanquis - £3,806.42 (next payment £170.78)

NW - £2,873.19 (next payment £71.01)

Marbles - £1,365.67 (next payment £97.58)

Fluid - £1,319.43 (next payment £45.90)

Virgin - £1,055.82 (next payment £30.96)

CapitalOne - £731.89 (next payment £40.39)

Zopa - £473.82 (next payment £23.15)

Debenhams - £465.40 (next payment £34.93)

Overdraft:

Overdraft - £1,580.85 (next payment £44.14)

Loans:

Lendable - £2,924.48 (next payment £63.50)

Buy Now Pay Later 

Creation - £926.73 (next payment £23.04)

TOTAL BALANCES: £17,523.79

TOTAL MONTHLY REPAYMENTS (EST): £662.88

I have never missed a payment so far but ironically it’s this that has drained all my money.

*Monthly Income*

Currently circa £300 UC credit + £100-£250 in casual earnings + any self-employment income (£0-£500).

Going forward from August it will hopefully be:

Job: approx £900/month 

Self-employed income (estimated:) £500/month (but that is uncertain, although I have great hopes that this will increase significantly to £1k+ in the not too distant future)

*Monthly Expenses*

Food shops - est £300

Tax payment: £27.58

TV license: £13.25

Mobile: £53.08

NHS: £11.16

Dentist: £16.66

Streaming: £5.99

Insurances: £28.48

Other subscriptions: £21.74

Travel: £50 estimated

TOTAL: £506.20

Also to mention - my situation is slightly unusual. I co-own our house outright with my brother (who I also live with) - no mortgage.

Most of the household bills (council tax, gas, electric, water, phone/broadband, pet insurance) are paid out of my brother’s account.

Prior to my problems, we would work out our expenditure each month, and work out the difference, etc, and then I’d do him a bank transfer for my share. I haven’t been able to do this for the last few months but previously it was between £200-£300 on average depending on the month.

*What to do*

I have been looking into DMPs. 

The thing that is stopping me is that I don’t know how I’m going to make it through the next month and a half. I’m already so far into my overdraft, so I am worse than having no money at all, I am already well into the minus and don’t know what I will do without any credit. I have basically relied on accessing credit for years and living in my overdraft, lol.

It also seems incredibly scary in terms of people saying I have to stop making all the repayments and getting letters/calls etc - but then I don’t think I have any other choice as if I carry on making the payments I’m just making it worse. I hate the thought of 10 different companies hounding me for missed repayments or god forbid turning up at my house. But reading on here it seems that’s the advice. Is that what a dent charity would say? Or can I pay some and not others? It’s all so confusing. 

I also don’t really know how that works in terms of not all bills coming from my account. It is complicated in terms of my self-employment and I know StepChange etc won’t help because of this. 

If it’s a DMP do I have to stop making the repayments before I am eligible? I was reading about defaulting etc.

Thanks so much for any help or advice you can offer.

gwynlas

Welcome to the board having made the first step you are already being proactive and you will get plenty of advice from others who have been in similar a situation. Personally I managed my own DMP but knew I had regular income so in a  different position, You might have different options as I am sure you will be told.

sourcrates

Eleven creditors, self employed income, homeowner, so you can`t go bankrupt, an IVA would be to restrictive, a DRO is out, so that just leaves a DMP.

New bank account is essential, and you should cease all creditor payments now.

Doing this on a self managed basis would be the ideal scenario for you, stepchange etc will not provide help to the self employed, you would need to take advice from business debtline should you need it, but its pretty much assured a DMP will be the way forward, but its your decision to take advice or not.

We only advise waiting for defaults as it stops all interest from accruing, and gives you a clear 6 year window till your credit file recover`s, you do not have to do this, its just works out better for you.

For someone who has "basically relied on accessing credit for years and living in my overdraft" this will require a root and branch rethink of how you treat money and budgeting, you can treat creditors individually, or as a whole, its your DMP you are in charge of it.

Collection activity is to be expected, mostly it will be letters and calls, Lendable/Fluid and Creation may cause you issues, they have a tendency to use the courts after a period of time, rather than the usual debt collection route, the rest are all mainstream lenders who will just use debt collection agencies or sell your debt to a 3rd party, but you can never be 100% certain what action a creditor will take as it can vary by customer.

All I can tell you is any impending legal action must follow civil procedure rules, a letter before action (LBA) is usually first, this gives you a chance to agree terms prior to legal action, and has a 30 day return window, so a CCJ can be avoided at this point.

Lots to take in, lots to think about, we can help with most issues on this forum.

If you ned to use credit to get to your next payday then so be it, but after that you need to implement your plan.

Grumpelstiltskin

OK Stop paying all your unsecured debts NOW.

Get a new basic bank account with a bank that has no connection with your current bank or any of your  your debts.

Get your UC and any other income paid into your new account  then your overdraft becomes just another debt and the bank can't take any of your income to cover it.

Nothing terrible is going to happen because you are not paying your debts, so don't panic about that.

fatbelly

Stop paying the non-priority debts - that is all the ones you have listed*

Open a new bank account for your income, one that is unconnected to your debts. The old overdraft just becomes another NP debt

With your new income your aim is to STOP living on credit and establish an income/expenditure that is stable and in surplus. You may need to review your £75 per week groceries spend

When you have achieved that, post a full statement of affairs and we'll see if a dmp is realistic. That will depend on your surplus and your debt balance at that time

*income tax is a priority debt so continue with your arrangement

dabear1

gwynlas said:

Welcome to the board having made the first step you are already being proactive and you will get plenty of advice from others who have been in similar a situation. Personally I managed my own DMP but knew I had regular income so in a  different position, You might have different options as I am sure you will be told.

Thank you! It’s great to be here and good to be taking action as I’ve kind of been burying my head in the sand through shame, ha.

I have three things that make it complicated really:

1. The self employment and variable income. It’s been more or less zero for months and while increasing, that is very much in the early stages. This also affects the UC amount each month - although hopefully I won’t be on that for much longer.

2. That I haven’t started the part-time job yet and what to do in the meantime etc

3. My living situation, co-owning with my brother and the fact a lot of the bills aren’t paid by me. I’ve tried online debt advice tools etc but they only give options for owning outright or with a partner.

sourcrates

dabear1 said: 

I have three things that make it complicated really:

1. The self employment and variable income. It’s been more or less zero for months and while increasing, that is very much in the early stages. This also affects the UC amount each month - although hopefully I won’t be on that for much longer.

2. That I haven’t started the part-time job yet and what to do in the meantime etc

3. My living situation, co-owning with my brother and the fact a lot of the bills aren’t paid by me. I’ve tried online debt advice tools etc but they only give options for owning outright or with a partner.

Which is why self management allows you to run things as you see fit, not how anyone else see`s it.

enthusiasticsaver

You have to stop using credit cards to top up your income as this is digging you into a bigger hole.  Read the thread on First steps and it will tell you there what to do.  Basically you should stop making credit card repayments and wait for them to default.  Save for emergencies in the meantime.  This process is not quick and they can take months to default you. They may sell them on and in time you can do a self managed DMP or contact stepchange and get them to deal with it.  Don't rush this step until the defaults have happened. Then they should stop the interest charges. 

You can write or email and tell them to only contact you via email and make them remove phone numbers from their records.  Emphasise the affect this has on your mental health.  They won't turn up at your house. 

I would open a new bank account for the universal credit and earnings from your new job. You should have a separate business account for self employment as that should be kept apart from personal finances. You will obviously have to muddle through on the overdraft until the new account is up and running and you have a decent budget. Going forward you will not be able to use credit so emergency savings are crucial.  £300 sounds a lot for groceries for just one person so see if you can make savings there. Once the mobile is out of contract go sim only.  Can you cancel any subscriptions? You don't mention a vehicle and that insurance is high for buildings and contents.  Do you use price comparison sites? What insurances  are they?

You have a massive advantage in that you own your house and your brother is paying utilities.  The debt is not huge and once you sort your income out hopefully you can deal with this  relatively quickly. 

elsien

What are your other subscriptions and are you properly separating out your business expenses from your personal ones?

dabear1

enthusiasticsaver said:

You have to stop using credit cards to top up your income as this is digging you into a bigger hole.  Read the thread on First steps and it will tell you there what to do.  Basically you should stop making credit card repayments and wait for them to default.  Save for emergencies in the meantime.  This process is not quick and they can take months to default you. They may sell them on and in time you can do a self managed DMP or contact stepchange and get them to deal with it.  Don't rush this step until the defaults have happened. Then they should stop the interest charges. 

You can write or email and tell them to only contact you via email and make them remove phone numbers from their records.  Emphasise the affect this has on your mental health.  They won't turn up at your house. 

I would open a new bank account for the universal credit and earnings from your new job. You should have a separate business account for self employment as that should be kept apart from personal finances. You will obviously have to muddle through on the overdraft until the new account is up and running and you have a decent budget. Going forward you will not be able to use credit so emergency savings are crucial.  £300 sounds a lot for groceries for just one person so see if you can make savings there. Once the mobile is out of contract go sim only.  Can you cancel any subscriptions? You don't mention a vehicle and that insurance is high for buildings and contents.  Do you use price comparison sites? What insurances  are they?

You have a massive advantage in that you own your house and your brother is paying utilities.  The debt is not huge and once you sort your income out hopefully you can deal with this  relatively quickly. 

Thanks so much for the reply - you have made me feel better already. I wish I had dealt with this months ago but it is what it is.

I actually already have another bank account with a different bank (zero balance) but essentially I have no money to put into it yet?

Currently all the current debt repayments are done on direct debit. Do I just cancel them immediately or wait until just before each one is due? I have never missed a payment in my life so this feels scary.

In terms of the current overdraft, what would happen to that? I guess they just keep taking the charges out of the remaining balance? 

Also, what about the loan, and buy now pay later debts? Do I treat those the same as the credit cards and just cancel the direct debits?

Apologies if I’m asking any silly questions.

Themoneyshot

What's stopping you leveraging your favourable living situation, getting a full-time job minimum wage and ploughing over £1k a month off your debts? You'd be debt free in under 2 years and be in a much stronger position to concentrate and work on your business then, should you still wish to do so.