Step change question

howmuchdebt?

I have recently left a very high paying job due to stress/my general health. My new salary is less than 50% of my old one, but my healthy is improving. We have a number of debts and are struggling with the monthly repayments although so far we've not missed any payments. 
We've taken advice from a debt support agency and been advised to take an IVA. I really don't want to do this. 
I think that we can manage the payments for £15,000 of the debt. However we cannot manage the £39,000 we owe on 2 American Express credit cards. The interest alone is £900 a month. 
What are people's experiences of coming to an arrangement with Amex? I've got their budget planner to complete tonight and submit then no doubt we'll get into negotiations. But am I wasting my time? 
I'm starting to feel more despair about the whole situation. 
Thank you. 

sourcrates

Hopefully its Stepchange you have been taking advice from, don`t take advice from anyone who charges you.

So is that the full amount of debt circa 54k?

If you choose to do this yourself, its up to you how you treat creditors and which debt to prioritise.

Debt management would see that interest stopped, after a while, allowing you to just repay the balance, you can do this one of two ways, either engage with them and see what payment plans they can offer, or go cold turkey, stop payments, allow the debts to default, and see who picks up the accounts after that.

Amex will likely just assign your debts to a collector, or sell them to a 3rd party.

Payment plans agreed with the OC tend to be short term and will result in arrangement to pay markers on your credit file, sometimes its best to just allow them to default and have done with it.

Misslayed

You've done the right thing by posting here. There are some very knowledgeable, experienced, non-judgmental folks here, who will offer you the best advice available- and free. Someone will be along before long. Your health is vitally important. 

Grumpelstiltskin

The first thing to do is read through this thread.

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

Complete a honest SOA, format for MSE and post on here.

When we can see full details off your situation we can give you the best advice.

What ever you do don't agree to any debt solution until you are 200% sure it is the correct  way to go.

If you can't afford to pay the unsecured debts just stop paying them until you know the best way forward, nothing terrible is going to happen if you don't pay for some months.

DisabledDan

howmuchdebt? said:

I have recently left a very high paying job due to stress/my general health. My new salary is less than 50% of my old one, but my healthy is improving. We have a number of debts and are struggling with the monthly repayments although so far we've not missed any payments. 
We've taken advice from a debt support agency and been advised to take an IVA. I really don't want to do this. 
I think that we can manage the payments for £15,000 of the debt. However we cannot manage the £39,000 we owe on 2 American Express credit cards. The interest alone is £900 a month. 
What are people's experiences of coming to an arrangement with Amex? I've got their budget planner to complete tonight and submit then no doubt we'll get into negotiations. But am I wasting my time? 
I'm starting to feel more despair about the whole situation. 
Thank you. 

Most people who come here are warned to avoid an IVA, it appears that the most common solution is a self managed DMP.

I did not find Stepchange helpful at all, I did get good advice from National Debtline

The first thing you need to understand about big debts that you can't afford to service is that it can be either be negotiated into a much lower amount or got rid of completely.   The latter assumes if you have nothing to lose and will never need credit again or at least for 6 years, the means no new mortgage or car (on finance) or even a new mobile phone on contract, existing ones usually remain in place as long as you keep up payments.  These are your Priority Debts.

Chances are your consumer debt like Amex was not secured on your home if you own one.

So the solution is to stop paying ALL consumer debts except those that are secured, (car & house), put the money you would have paid in an emergency fund, open a new account with a bank that is not connected to any of your existing lenders. This will mount up and you can use it to pay the 60% off debt if and when offered.

The worst case scenario is that a company gets a CCJ and you are asked to show the Court that because of your outgoings and other debt that you can only afford 57p a week etc, but honestly that is very rare.  Only one of my consumer credit debts got as far as a CCJ in the last year before the debt became Statute Barred at 6 years, they faked an application to ask the Court for deduction from wages, apparently this is a common tactic.

The second thing you need to understand is that your situation is not your fault, the lenders lend irresponsibly so they can trap you into being able to service the debt but not pay off the debt. If you stop paying they go through a few debt collection letters, maybe appoint a 3rd party and then they default the agreement and sell it off for 5p to 12p in the pound.  The new owners then appoint a debt collector for say 3 to 6 months, then when they get nowhere they appoint a different debt collector.  These maggots will try to pressure you but it is all waffle, once you have received their cycle of letters they will start talking about discounts of up to 60%.  As the debt gets older and older offers can increase to as much as 90% off. You can reduce the stress and anxiety by restricting how they contact you to just Royal Mail.  Although I advise getting a PAYG sim and a new email address just for the debt companies, by updating your records to these new phone and email you usually assure that only your latest data is passed on to whoever buys the debt.  Obviously you should not answer your real number to anyone who is not in your phone book or who withholds their caller ID, if it is anyone important they will leave a message.

Why would they sell it off?  Simple, the money never existed in the first place, what existed was an agreement by you to pay up to 39.9% interest on the money they invented on their computer and gave you access to.  The Lenders have liquidity ratios and all kinds of other solvency metrics, so when they sell off your debt they get to create a nice shiny new agreement with the next mug,  This system is called Fractional Reserve Lending/Banking, I am not against it in principle but I am against the debt collectors being able to chase the full amount of the debt despite only paying 5p in the pound.  IMO this damages world economies, but the purpose is as a deterrent to keep nice people from kicking all debt to the gutter.

If you visit the https://www.stoozing.com/soa.php website and create your money coming in and out then we can help you burn the budget at both ends, helping you identify spending cuts you can live with and preparation steps before you pull the pin on the grenade.

This is the thread for first steps

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps/p1

and this one is mutual support thread for DMP

https://forums.moneysavingexpert.com/discussion/5897083/dmp-mutual-support-thread-part-13#latest

Doing the DMP yourself allows you total control, it means less mess by having to involve a 3rd party.

Never agree to pay any company a single pennyt to sort out your debt.

Get started on the SOA https://www.stoozing.com/soa.php 

howmuchdebt?

It's been a couple of weeks since my original post, burying my head really, I hope I've got this right below: all comments welcome

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

Household Information[/b]

Number of adults in household........... 3

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

Number of cars owned.................... 2[b]

Monthly Income Details[/b]

Monthly income after tax................ 2200

Partners monthly income after tax....... 1747

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

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

Total monthly income.................... 3947[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1540

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

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 250

Electricity............................. 110

Gas..................................... 110

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

Water rates............................. 26

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

Mobile phone............................ 120

TV Licence.............................. 11

Satellite/Cable TV...................... 70

Internet Services....................... 0

Groceries etc. ......................... 600

Clothing................................ 50

Petrol/diesel........................... 120

Road tax................................ 25

Car Insurance........................... 80

Car maintenance (including MOT)......... 25

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

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

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

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 60

Buildings insurance..................... 33

Contents insurance...................... 0

Life assurance ......................... 150

Other insurance......................... 64

Presents (birthday, christmas etc)...... 30

Haircuts................................ 20

Entertainment........................... 50

Holiday................................. 0

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

Total monthly expenses.................. 3544[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 395000

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

Car(s).................................. 7500

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

Total Assets............................ 402500[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 177000...(1540).....5.5[b]

Total secured & HP debts...... 177000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Halifax loan...................4000......272.......0

Halifax loan...................7400......250.......0

Barclaycard....................5588......500.......0

American Express...............21788.....1000......0

American Express...............17656.....900.......0

Santander credit card..........3611......220.......0[b]

Total unsecured debts..........60043.....3142......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,947

Expenses (including HP & secured debts). 3,544

Available for debt repayments........... 403

Monthly UNsecured debt repayments....... 3,142[b]

Amount short for making debt repayments. -2,739[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 402,500

Total HP & Secured debt................. -177,000

Total Unsecured debt.................... -60,043[b]

Net Assets.............................. 165,457[/b]

[i]Created using the SOA calculator at www.stoozing.com. 

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

American Express now ringing/texting daily

Grumpelstiltskin

Some quick comments.

3 adults and only 2 incomes?
Council Tax £250?
How many mobile phones, are they in contract?
Clothing £50?
Life insurance £150?
Other insurance £64, what is that for?

howmuchdebt?

Grumpelstiltskin said:

Some quick comments.

3 adults and only 2 incomes?
Council Tax £250?
How many mobile phones, are they in contract?
Clothing £50?
Life insurance £150?
Other insurance £64, what is that for?

Thanks for your answer. 3 adults isn't strictly true, 1 is our daughter who is at uni, she's only home for the holidays and works to support herself. We don't charge her for board/food etc while she's home though. Council tax is right 12 x £250. 2 mobile phones, both sim only contracts. The life insurance includes my pension as there was no where else to put that. The other insurance is critical cover for us both. We did take advice from payplan who said put £50 a month for clothing in, that can be deducted. Thanks again.

RAS

Your food and phone costs need to halve, but the rest are at the higher end of normal except car maintenance which is too low. You also need something in for house maintenance, holidays and emergency funds. 

You owe a lot to Amex and they are a more difficult creditor. You may need to self manage and make a higher payment to them, as debt charities pro rata. One or two other members may have specific experience of what they'd accept in an SOA.

stu12345_2

why you paying into a pension when you have debts that you can't manage.
that is counter productive 


if you went down any insolvency route , IVA, dro, bankruptcy, you would not be allowed to continue paying in .

RAS

Stu, the OP probably never expected to be on a lower income or be looking at insolvency. In fact states in initial post that he really doesn't want to do an IVA. So doesn't know the rules and it hasn't factored into his finances.