50k Unsecured debts and can't see any way out.....

exponential

Evening guys.

I hope you are all well! 

It's been a while for me on here with my last visit being back in 2009 during my bankruptcy where I was helped through that by lots of very helpful people who no doubt are still active on this forum.

You'd think I'd learn from my past mistakes but life is cruel and sometimes things happen that are completely unexpected which throw you back into turmoil.

There are lots or reasons for my being in the position I am currently in which I am happy to share should anyone care to ask although it isn't easy listening. Certainly not for a Saturday evening anyway!

Basically, I have £50k worth of unsecured debts and am at the point where I can longer cope with the mental strain of attempting to pay for it all each month.
I am a self employed electrician and, although I earn good money, the scale of the debt I am in overwhelms any earnings I make.
I am constantly robbing Perter to pay Paul and moving money around (including money transfers through credit cards) just to be able to pay my mortgage each month and it has to stop.
My wife and two young children are suffering because of this and I want an end to it all as the burden on my shoulders is too great.

I am the sole earner in our home as my wife is unable to work due to her father having mixed dementia which seems to have come on strong since her mum passed away to cancer back in 2019. He needs regular visits to ensure he isn't doing anything silly like leaving the gas on or having a fall. Between that and looking after the kids and our home, I'd say she's doing ok but the financial pressure on me is huge with her not being able to work.

Life is not easy right now as we never saw any of the hardships and sorrow coming until it happened and now we are trying to pick the pieces of our lives up whilst trying to keep a roof over our heads and pay the bills.

My monthly outgoings are around £4k including the unsecured debts and my earnings match this closely but there is no room for error. If a client of mine is late paying an invoice, the effect it has is catastrophic as the scrabbling around trying to find the money is troublesome.

I am well aware of my responsibilities and fully intend to pay my debts but I am unable to do so at present.

Can anybody advise me on the best course of action here? I have never missed a payment and my credit files are surprisingly healthy with the exception of credit utilisation.

I am thinking of calling them all individually and coming to an arrangement similar to a DMP.

I can afford to pay the debts if it wasn't for the huge amount of interest applied each month!! It's ridiculous! 

My accountant suggests I write a letter to each creditor offering 70% of the overall debt for a period of time so I can grow my funds and pay them off in lump sums.

Is this a good idea???

fatbelly

Presumably you weren't a property owner in 2009 and now you are so we'll rule out bankruptcy this time around.

Your accountant's plan sounds very odd. You don't have 35k in cash to settle your debts and if he means to pay 70% of the contractual monthly instalment on 50k debt, that's a lot of surplus income. Does he think you have that much?

It sounds to me that you need to stop paying the nonpriority debts and follow this thread

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take -are-here-please-read-then-ask-questions


Moving forward you will be choosing beweenan IVA and a DMP

sourcrates

Your accountant may be excellent, at accounting, but their debt advice leaves a lot to be desired, I think they may be hinting at a token payment plan, which incidentally would be more like 1% and not 70.

elsien

On a non-related front, as your father-in-law had a care act assessment to see if he might be any other support and take some of the burden of your wife? 

https://www.ageuk.org.uk/information-advice/care/arranging-care/care-needs-assessment/

Brie

And more about your FiL - is he getting attendance allowance and therefore is your wife getting carer's allowance?  That would all help.  If FiL is getting AA it would be completely legit to pay some of that to your wife to cover her costs for caring as well.  No different than him paying the council or a private company for care.  

Meanwhile why not fill our a statement of accounts (SOA) as on the stickies at the top of the forum and we can see what else in your budget might be tweaked.  

exponential

fatbelly said:

Presumably you weren't a property owner in 2009 and now you are so we'll rule out bankruptcy this time around.

Your accountant's plan sounds very odd. You don't have 35k in cash to settle your debts and if he means to pay 70% of the contractual monthly instalment on 50k debt, that's a lot of surplus income. Does he think you have that much?

It sounds to me that you need to stop paying the nonpriority debts and follow this thread

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take -are-here-please-read-then-ask-questions


Moving forward you will be choosing beweenan IVA and a DMP

Hi,

You're right, I was not a property owner back then which did make things a lot easier but, having said that, it was still a nerve-wracking experience!

Basically, my accountant asked for 3 months' worth of bank statements and all information relating to my debts.
He then created an SOA for me and deduced that I am able to afford approx £500 a month towards my debts.
Taking the £500, he then divided it up between all creditors with the largest amounts going towards the larger of the debts on a sliding scale. 
The plan was to write a letter to each creditor explaining my circumstances with a proposal to freeze all interest and charges until my situation improves (basically a DIY DMP) and offer token payments.

He has even offered to give me continuous weekend work where he will pay me but hold back all monies except £50 with the rest going straight to my debts. Every second day I work, he will pay towards one of my debts up to £500 so we chip away at the debt quicker whilst on the DIY DMP.

Is this plan sound???

The reason for my post is that an AP (according to my research) can stay on your credit files for much longer than just defaulting instead and taking that on the chin for 6 years.

I am not looking to get out of paying my debts, I am responsible for them but I want to do this right and do it in the most painless way possible with regards to the length of time my credit files are screwed up for.

I don't want to do an IVA because, as a Sole Trader, this would affect my ability to obtain PL insurance and would also scupper my chances of becoming a company director should my business grow to the point where I incorporate. Anything to do with the insolvency service will harm my business and I will not be able to trade.

I have no equity in my house so can't release funds and have no savings or assets that could be sold.

My van is my means of being able to work so that can't be touched either.

exponential

sourcrates said:

Your accountant may be excellent, at accounting, but their debt advice leaves a lot to be desired, I think they may be hinting at a token payment plan, which incidentally would be more like 1% and not 70.

Hi,

I think you helped me with my BR back in 2009.

I may have misunderstood and gave you bad info. See my previous post.

exponential

elsien said:

On a non-related front, as your father-in-law had a care act assessment to see if he might be any other support and take some of the burden of your wife? 

https://www.ageuk.org.uk/information-advice/care/arranging-care/care-needs-assessment/

Hi,

We have looked into this but if my wife was to claim carers allowance, it would affect his PIP (whatever that is).
The money she would receive pales in comparison to what he would lose.

He has regular assessments but to be honest, I don't know anything about that so couldn't comment but I will bring it up. I'm quite certain my wife has looked into everything though. Maybe he doesn't quite meet the criteria for additional help yet?

fatbelly

It wouldn't affect PIP (Personal Independence Payment) but would remove a Severe Disability Premium

I know the dwp was trying to kill those off but it seems they still exist on legacy benefits and you get Transitional Protection if moved to UC

https://www.turn2us.org.uk/get-support/information-for-your-situation/severe-disability-premium/severe-disability-premium-and-universal-credit

exponential

fatbelly said:

It wouldn't affect PIP (Personal Independence Payment) but would remove a Severe Disability Premium

I know the dwp was trying to kill those off but it seems they still exist on legacy benefits and you get Transitional Protection if moved to UC

https://www.turn2us.org.uk/get-support/information-for-your-situation/severe-disability-premium/severe-disability-premium-and-universal-credit

I don't know enough about that to be able to comment really. Either way, the amount of debt I am in, any small payment my wife gets would not even make the smallest of dents in the overall debt. 

exponential

I think my options are either an AP or just default. Some of the debts are large with one being a loan at £16k. That would take a silly amount of time to pay off even at zero interest and then there would be the AP marker lasting 6 years after the loan is clear.