Action is the antidote to Anxiety...

NotMyStrongPoint

ManyWays said:

my current lender is Santander and my rate is a lovely 1.74
So the rate is going to more than double in June.... If you are struggling now, this is likely to push you over the edge 

Yes, exactly!  This is why I feel my situation is about to implode and needs addressing - otherwise I would have simply continued to plod along.  Even if I manage to lock in to a rate with Santander without them credit checking and therefore being aware of my debt level, my situation has to be addressed because I cannot stomach any increase! 

I just feel that entering a into DMP as advised elsewhere is a really scary step and I want to understand if this really is the best option.  

EssexHebridean

NotMyStrongPoint said:

[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......... 2

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

Monthly Income Details[/b]

Monthly income after tax................ 3000

Partners monthly income after tax....... 0 As said - the debts are "household" so you shouldn't be shouldering the full weight of them - which means that your husband's income needs to be factored in as well. 

Benefits................................ 147

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

Total monthly income.................... 3147[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 445

Secured/HP loan repayments.............. 139

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

Management charge (leasehold property).. 0

Council tax............................. 215 Is this paid over 10 months, or 12? If 10, then there will be no payment taken this month or next, so ensure that you ring-fence those amounts as soon as the money is in your account and set it aside against building your emergency fund. You can then contact the council and ask them to change you to billing across 12 months for the next tax year as this helps with budgeting. 

Electricity............................. 179 Check that you are being billed against actual readings - and yes, even if you have a smart meter you need to periodically check that what the actual meter itself says matches the bills! 

Gas..................................... 0

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

Water rates............................. 81 This is high - i assume you're not metered? probably worth looking at getting a meter put in. 

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

Mobile phone............................ 47 How many phones is this for? 

TV Licence.............................. 15

Satellite/Cable TV...................... 44

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

Groceries etc. ......................... 520 This can probably be tweaked downwards a bit - but likely not that much. Do make sure that you are factoring in everything you spend here though - so top up shops, and any food bought while out that doesn't come under entertainment. 

Clothing................................ 40

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

Road tax................................ 17 Hopefully you aren't actually paying this monthly? It costs more to do so I believe, so that's worth checking. 

Car Insurance........................... 53

Car maintenance (including MOT)......... 75 That's great - but your cash assets read zero, so where is this money being saved? IS it actually being saved? 

Car parking............................. 0 You never pay to park at all?

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

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

Other child related expenses............ 120

Medical (prescriptions, dentist etc).... 22 Is this anything that can be saved on by purchasing a prepaid prescription certificate? 

Pet insurance/vet bills................. 75

Buildings insurance..................... 23

Contents insurance...................... 25 The insurances seem a little high - have you checked these through comparison sites when renewing, and checked you are paying the right amount for the cover you need? 

Life assurance ......................... 65

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

Presents (birthday, christmas etc)...... 50 Again, make sure that this money is being set aside - and for Christmas 2026, plan ahead, set a budget and stick to it! 

Haircuts................................ 0 Nobody ever has to pay for a haircut at all? Not even the person who cuts everyone else's hair if that is how you work it? 

Entertainment........................... 0 Not realistic, and definitely not with a couple of children to think about.

Holiday................................. 0 You never go anywhere at all? Not even a weekend away staying with family? 

Emergency fund.......................... 0 You need to get working on building this too.[b]

Total monthly expenses.................. 2370[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 420000

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

Car(s).................................. 10000

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

Total Assets............................ 430000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 117000...(445)......1.74

Hire Purchase (HP) debt ...... 786......(139)......0 what does this relate to? I'd assumed the car, but there are two lots of car finance below?[b]

Total secured & HP debts...... 117786....-.........-   [/b]

[b]Unsecured Debts[/b]

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

HMRC...........................10118.....250.......0 Keep paying this.

HSBC CC........................3800......98........0 STOP paying this...

Tesco CC.......................1800......65........0 ...and this....

By Now Pay Later...............2900......99........0....and this (by the way, are all these interest rates really 0%?)

Personal Loan..................5200......202.......0 as above

MNMBA CC.......................1200......60........0 and again

Sainsburys CC..................800.......25........0 Yes, this too

Car Finance....................6400......247.......0 What sort of deal is this?

Car Finance....................1300......102.......0 What sort of deal is this?[b]

Total unsecured debts..........33518.....1148......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,147

Expenses (including HP & secured debts). 2,370

Available for debt repayments........... 777

Monthly UNsecured debt repayments....... 1,148[b]

Amount short for making debt repayments. -371[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 430,000

Total HP & Secured debt................. -117,786

Total Unsecured debt.................... -33,518[b]

Net Assets.............................. 278,696[/b]

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

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

See comments above in bold... 

NotMyStrongPoint

Yes @ManyWays this exactly the reason for my thread. I am well aware that this situation is about to implode come June because I will have increased expenditure that I simply cannot afford.

I am trying to ascertain if the advised DMP is the best option because it seems like a very scary option that will impact me improving my credit score and damage my chances of getting a mortgage but this may not be the case as discussed further up.  I rather presume it is only unsecured debt that a DMP deals with?

EssexHebridean

I think the first thing to consider is what you think your other options might be? 

You can ignore your credit "score" too - it literally doesn't exist. The thing you need to consider is your credit file - and defaulting on unsecured debt to ensure that you can continue to pay the secured stuff, then gradually paying down the defaulted stuff over time via a DMP will have an impact there yes - debts stay on your file for 6 years from the date of default. If however you negotiate stopping interest and paying reduced amounts, then the chances are that you will get arrangement to pay (AP) markers on each debt - and those stay on your file for 6 years after the point you have paid off the debts... As you can see, a DMP can be very much the lesser of two evils for many people. 

NotMyStrongPoint

@EssexHebridean you are AMAZING, I cannot believe people give their time to financial idiots like me!  The expenses are relatively accurate as entertainment is only when my husband has funds to give to this category, same for haircuts and anything else.  I have cut back on EVERYTHING which is why life is so miserable. I appreciate what you say certain other aspects and I will look to see if insurance/water etc can come down but I doubt there is significant room for movement.  My husband can earn nothing, well certainly only enough to cover his own business expenditure, with nothing coming into the house.  Sometimes he does well and hopefully, now Covid is well and truly behind us, things will pick up, it is certainly showing signs. But i cannot base any financial decisions including anything from him because that is what got me into this mess in the first place!  

More importantly, when you say "stop paying" the certain non-secured debts like my credit cards A) no the interest is not 0, I just have no idea what it is, high probably, but this will cause the accounts to default, do I tell them in advance I can't pay and ask for a payment holiday or just stop paying and not worry my accounts and credit file will be smashed!?

The small car finance is HP on a car - finance comes to an end next March and the car might be worth £1,500!
The larger car finance is PCP with a balloon payment due in June of £5,600 - car worth £10-£10.5k

I really am super grateful for your continued advice 

EssexHebridean

Notifying them that you are intending to stop paying will almost certainly lead to them "negotiating an agreement" with you - and then that can lead to AP markers, so usually the advice is just to stop the DD's. You will need to open a new bank account unrelated to any banking institution you have debts with too - and you must open it afresh too - don't use the switching service or that will lead to the DDs being transferred over as well, not what you want! So open the new account, then set up ONLY the DDs you want - so the ones for your priority bills and the secured debts. 

I think you and your husband need to sit down and talk through whether his business is still viable or not - it can't be doing him any good working hard only to cover expenses and not actually earn anything either - and now might be the time for him to look at winding the business up - or transferring it to being a side hussle - and getting an employed role to bring some money in. 

Yes - you've nailed it, trying to cut back on everything does make life miserable! This is why going forwards your budget will include reasonable sums for things like entertainment and haircuts! 

As for your credit file - yes, for 6 years it's going to take a hit, BUT equally, the idea is that going forwards you will come out of this in a healthier state financially, and so will only choose to use credit when IT works for you - not when it makes you a slave to it! As already explained, the mortgage is manageable by just sticking with your existing lender, and for everything else for the next few years you will be budgeting, saving and if anything unforseen comes up, you'll have an emergency fund to cover your back! 

You're not a financial idiot either - you just don't know some of this stuff yet, and nobody can know the things that have never been explained to them, can they now?! 

TheAble

NotMyStrongPoint said:

ManyWays said:

my current lender is Santander and my rate is a lovely 1.74
So the rate is going to more than double in June.... If you are struggling now, this is likely to push you over the edge 

Yes, exactly!  This is why I feel my situation is about to implode and needs addressing - otherwise I would have simply continued to plod along.  Even if I manage to lock in to a rate with Santander without them credit checking and therefore being aware of my debt level, my situation has to be addressed because I cannot stomach any increase! 

I just feel that entering a into DMP as advised elsewhere is a really scary step and I want to understand if this really is the best option.  

I make it £579 @ 4% or £613 @ 4.5%. That's based on 28 years to run if I've assumed that correctly?

tigergambit

@NotMyStrongPoint Hopefully you are beginning to see the way clear of this - there is ALWAYS a way.

If you stop paying  all but HMRC and the car loans then by June you will already have saved almost half of the final payment before you need to commence DMP payments. So you won't need to borrow quite so much from family/friends and you will have confidence in your ability to pay it back.

You will need to ignore creditors until you get defaults. In the meantime work on a second SoA with a view to creating one which you can show creditors if you really need to. The aim is to pad this so that you are as close as possible to maximum reasonable amounts with the result that you have as little as possible left for creditors. I know that this is counter-intuitive but you need the extra to live a little and to build up an emergency/settlement fund. Remember that creditors have no means or desire to check this - for example they don't know how long you have to pay HMRC unless you tell them. It is in your interests to tell them as little as possible. 

After a couple of years the debts will have been sold on and  you can then start to negotiate full and final settlements for a portion of the remaining debt.

Everyone on here has been through debt problems, so don't beat yourself up and keep reminding yourself that to your creditors you are just a number and as long as you play the game they are unlikely to do anything nasty.

NotMyStrongPoint

@EssexHebridean and @tigergambit A HUGE THANK YOU - honestly from the bottom of my heart. You are too kind with your comments.  I am 46, and I really feel as though I should know better but I have never really been in debt until it snowballed in the last 6-7 years so I had no idea how to manage my way out of it whilst protecting my credit file.  Taking a 6 year hit when you are 46 still seems like a counter-intuitive move BUT I think my stress levels will settle if I feel as though I have a path out, even if that means taking said hit.

Another question, if you don't think i'm taking the proverbial p***! As I have substantial equity in my house, do you think it would be advisable/possible for me to take a lump sum out when I remortgage to pay back some of the debt (I appreciate that would mean a credit check, hence the question!).  For example: if I stopped paying all creditors apart from my priority debt but from the money saved I managed to pay off the HP accounts and smaller balances in full so I just had the larger credit cards outstanding (but they would be in arrears), do you think this might be viable/sensible? The interest rate would certainly be less!!!

I tell you, my children will never be in this position. Not because they will be provided for but because I am going to educate the hell out of them about what a unnecessary stress and waste of money this all is!!      

NotMyStrongPoint

@TheAble my current mortgage has 27 years left to run so yes, this is about right. I have done a few calculators and my figures were £615 at 4.5%.  I should have overpaid at 1.74%, I would be sitting pretty about now!!! Hindsight is a wonderful thing!!