A plan for Debt-free journey

GoodGuy2024

Hi all, 

After years and years in a vicious cycle relying on credit cards. I’ve decided enough is enough. I’ve come to realise that I should have managed the household finances way better in the past and I do feel disappointed with my self, but on the other hand I know I had to do what I’ve done to keep things moving. 

My beloved mother passed away few weeks ago and probably that was the shock I needed to empower me that I need to get all my finances affairs in tact in the next few years for a better healthy life for me, my wife and my kids. 

Ever so grateful to have come up this forum which is very knowledgeable, supportive and full of kind people who’s willing to share their own experience to help others..I wished I had come up this forum earlier, I would definitely have been encouraged to embrace the change and take actions sooner. I also believe things happen in life at the right time, so now it is the time. 

I have been reading a lot of the pinned threads and aware of the plan, the  Qs

1) I have is that my affordability on SC is showing between 397-410 a month, and the recommend debt solution is DMP payment over 8 years.. : realistically speaking that’s a long time, would I be looking to cut that period to a shorter one knowing that hopefully when my Debt gets sold to agencies I can negotiate a better deals with them? 

2) how flexible the dmp payments should be in the future, I’m just tiny bit worried that essential bills like rent and taxes are going up and up ( they never go down- let’s be honest!) and hence my affordibility of £400 now might not be the same next year or the year after. Are these periodically reviewed? And how much of a say can a person have in it - ie would credits or agencies that buy debt have access to my new accounts to see my income and outgoings or do I need to provide a proof of income changes as and when that happens. 

I might be showing some signs of worrisome but I like things to be clear in my head. 

3) for good few months now I have been using my full overdraft facility .salary comes ins, pay overdraft fully then use it again fully and so on. I have just opened a new nationwide bank account so that i could have a fresh start where my salary comes in. I couldn’t stay with first direct bank account as I have debt with them - overdraft and credit card. I think this was a good move, isn’t it? 

My SOA are stated below: 

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

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 3

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 3760

Partners monthly income after tax....... 0

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

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

Total monthly income.................... 3760[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

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

Rent.................................... 629

Management charge (leasehold property).. 0

Council tax............................. 159

Electricity............................. 125

Gas..................................... 125

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

Water rates............................. 55

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

Mobile phone............................ 45

TV Licence.............................. 14

Satellite/Cable TV...................... 0

Internet Services....................... 24

Groceries etc. ......................... 800

Clothing................................ 200

Petrol/diesel........................... 125

Road tax................................ 16

Car Insurance........................... 126

Car maintenance (including MOT)......... 50

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

Other travel............................ 30

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

Other child related expenses............ 180

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

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

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

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 50

Haircuts................................ 100

Entertainment........................... 150

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

Emergency fund.......................... 100

School trips/uniforms/phone costs....... 80

School meals 3 children ................ 180[b]

Total monthly expenses.................. 3363[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 0

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

Car(s).................................. 5000

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

Total Assets............................ 5000[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

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

Barclays CC....................10000.....100.......0

Virgin Money CC................18000.....180.......0

Tesco CC.......................1500......41........NaN

V12 retail finance ............1016......127.......0

First Direct OD................500.......0.........0

Halifax OD.....................700.......0.........0

PayPal CC......................1870......100.......0

First Direct CC ...............8000......215.......0[b]

Total unsecured debts..........41586.....763.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,760

Expenses (including HP & secured debts). 3,363

Available for debt repayments........... 397

Monthly UNsecured debt repayments....... 763[b]

Amount short for making debt repayments. -366[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 5,000

Total HP & Secured debt................. -0

Total Unsecured debt.................... -41,586[b]

Net Assets.............................. -36,586[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

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

GoodGuy2024

Sorry another Q: i still have 4k on the Barclays credit card, and wondered if it is advisable to move the remaining 4k from Barclays CC Into smaller accounts like Tesco 1500 and Paypal 1800 and 700 Halifax overdraft, that way I have less number of creditors to deal with in this journey? I don’t have 0% balance transfer offer. 

Your views/advice will be appreciated. 

GoodGuy2024

The other dilemma I have is

- when is the right time to stop making payments ie cancelling exiting Credit card direct debits? I believe my priority next needs shifting from payments to raising as much as possible of emergency fund. 

- where do I need to held this emergency fund? In a separate account - savings? 

I know I asked so many Questions, but please bear with me. 

Brie

Sorry for your loss.  But you are right that sometimes these shocks are what brings us to our senses and make it time to re-evaluate life and all that includes.

Questions
Does the income include any from your wife?
Are there no child benefits at all?
Any APR/percentages on the cards/OD?

My first thought is to ring all the creditors and say you are taking a break from payments and to give yourself time to get sorted.  Most will normally allow about 60 days for you to come up with a plan.  Meanwhile ensure that all priority payments continue to be met - rent, council tax, utilities, water.

And yes you are right to open a new, unrelated account for your money to go in to.  

And yes do set your target payments a bit low to give you a chance to deal with future increases of rent etc.  If you are doing a DIY DMP the creditors will ask for a yearly update to ensure things are still ticking along at the same rate.  That's a good time to let them know if you need to reduce a payment for whatever reason.  But generally they will want to be sure that each of them is getting a pro rata amount of your available money.  

Do watch out for companies that require you to pay them to do the DMP.  Why pay someone to do things you might be able to do (you sound quite financially competent).  Community Money Advisers (CMA) do DIY DMPs and will help you deal with the correspondence while you set up the standing orders (never DDs) to the creditors.  NationalDebtline and StepChange and Christians Against Poverty (CAP) have their systems as well and all of these are charities so not out to push you into what's going to make the best profit for them.  

GoodGuy2024

Brie said:

Sorry for your loss.  But you are right that sometimes these shocks are what brings us to our senses and make it time to re-evaluate life and all that includes.

Questions
Does the income include any from your wife?
Are there no child benefits at all?
Any APR/percentages on the cards/OD?

My first thought is to ring all the creditors and say you are taking a break from payments and to give yourself time to get sorted.  Most will normally allow about 60 days for you to come up with a plan.  Meanwhile ensure that all priority payments continue to be met - rent, council tax, utilities, water.

And yes you are right to open a new, unrelated account for your money to go in to.  

And yes do set your target payments a bit low to give you a chance to deal with future increases of rent etc.  If you are doing a DIY DMP the creditors will ask for a yearly update to ensure things are still ticking along at the same rate.  That's a good time to let them know if you need to reduce a payment for whatever reason.  But generally they will want to be sure that each of them is getting a pro rata amount of your available money.  

Do watch out for companies that require you to pay them to do the DMP.  Why pay someone to do things you might be able to do (you sound quite financially competent).  Community Money Advisers (CMA) do DIY DMPs and will help you deal with the correspondence while you set up the standing orders (never DDs) to the creditors.  NationalDebtline and StepChange and Christians Against Poverty (CAP) have their systems as well and all of these are charities so not out to push you into what's going to make the best profit for them.  

Thanks a lot Brie, 

my wife doesn’t work - we’ve relocated to where we are a year ago.
yes sorry! I forgot about the child benefit as it goes to my wife’s account. 

The virgin money CC APR is at 0%  till end of of Sept this year and first direct APR is at 0% till February next year.  Both have maxed out I’m afraid.

Tesco and Barclays are at 25% I believe so started paying interest rates on them a month or two ago.

The two OD will be at 30% APR but these interest payments doesn’t exceed £10 as I put money towards them every month but end up using them fully by the mid- end of each month. 

Brie

I'd continue paying the minimum on the 0% cards until the offers end and then stop.  And stop all the others asap, but as I said - call them and tell them what you are doing and why.  Don't move any money about if it means you are essentially taking a cash advance from a cc and paying high %.  

And I know that people like to have an emergency fund - I suspect in your situation you do really need one if you are not going to have credit available for a while.  Yes - it needs to be tucked away somewhere none of the creditors can get to it - so not in any banking group where you owe money.  

GoodGuy2024

Brie said:

I'd continue paying the minimum on the 0% cards until the offers end and then stop.  And stop all the others asap, but as I said - call them and tell them what you are doing and why.  Don't move any money about if it means you are essentially taking a cash advance from a cc and paying high %.  

And I know that people like to have an emergency fund - I suspect in your situation you do really need one if you are not going to have credit available for a while.  Yes - it needs to be tucked away somewhere none of the creditors can get to it - so not in any banking group where you owe money.  

Calling them sounds daunting but I’ll do it and get the 60 days started. Is this what’s called ‘Breathing space’?

ive just had a look a first direct website and it’s likely they’ll ask me for complete a budget/income/expenditure sheet. I actually created an account with StepChange and there is the option for them to apply for the breathing space on my behalf, I just need to give out my credit details etc, so I might use them to do this. 

Yes I would like to DIY DMP, when it comes to it.

GoodGuy2024

Another Question : for the furniture loan taken from V12 finance. I pay £127 a month towards it which will end on April/May next year. It was 18months 0% loan when I took it a year ago so have 7months left in it.

what I don’t understand would it be a problem if I carry on paying for this till it ends while getting CCs and ODs defaulted? OR better to stop it too with everything else apart from priority bills. 

Sarahwithlove

Your better off stopping it all now so you can get your defaults out the way and build an emergency fund. You won't be able to have any credit whilst on a DMP so emergency fund is essential. I'd start off with someone like stepchange to get yourself up and running and then go to self managed. 

Brie

GoodGuy2024 said:

Brie said:

I'd continue paying the minimum on the 0% cards until the offers end and then stop.  And stop all the others asap, but as I said - call them and tell them what you are doing and why.  Don't move any money about if it means you are essentially taking a cash advance from a cc and paying high %.  

And I know that people like to have an emergency fund - I suspect in your situation you do really need one if you are not going to have credit available for a while.  Yes - it needs to be tucked away somewhere none of the creditors can get to it - so not in any banking group where you owe money.  

Calling them sounds daunting but I’ll do it and get the 60 days started. Is this what’s called ‘Breathing space’?

ive just had a look a first direct website and it’s likely they’ll ask me for complete a budget/income/expenditure sheet. I actually created an account with StepChange and there is the option for them to apply for the breathing space on my behalf, I just need to give out my credit details etc, so I might use them to do this. 

Yes I would like to DIY DMP, when it comes to it.

GoodGuy2024 said:

Another Question : for the furniture loan taken from V12 finance. I pay £127 a month towards it which will end on April/May next year. It was 18months 0% loan when I took it a year ago so have 7months left in it.

what I don’t understand would it be a problem if I carry on paying for this till it ends while getting CCs and ODs defaulted? OR better to stop it too with everything else apart from priority bills. 

Breathing Space is something official that SC or other agencies can apply for on your behalf.  But if you (or the agency) contacts the creditors they may grant this on an unofficial basis since they see that you're trying to sort things out.

If you've got SC on your side then they can put together a financial statement for you and submit it to the various creditors to help you set up your DIY DMP.

There is a problem with paying one creditor at a full amount and others at zero or a token payment.  It's called giving preferential treatment.  Might not matter with a DMP but certainly would with DROs and possibly other debt solutions. 

NeverendingDMP

If you have definitely decided you are going to dmp it's best to stop paying all of them and save an e fund first. I wouldn't go though the hassle of moving money about to make it less creditors to deal with. Once it's set up one more won't make that much of a difference, but please do revisit your summary of affairs. House or contents insurance? Even just contents as your renting and with three children you might find your gift budget is less than what it actually adds up too. 
More than all that my thoughts are with you for your recent loss. Please also remember to be kind to yourself and pause and have a break if you need to.