No choice but to consider DMP - help appreciated!

kimwp

emsgirl said:

Thanks kimwp. I don't think this SOA is as accurate as the Stepchange one - I will review it again tomorrow as I think the Stepchange went through things in more detail and I think I have missed things out as I did this in a rush so it isn't as accurate a reflection as it should be.

We have just had lots of bad luck over the years. My husband's son from a previous marriage died and we spent a lot on his funeral. This was the first thing that went onto credit cards. Then my husband had a heart attack when my two children were both under the age of two so he was out of work for a couple of years recovering. We couldn't claim anything because of my wage. So started slipping into debt. When he finally went back to work as he was earning minimum wage and we had to spend so much on childcare it was hardly worth him earning. So we started to build up more credit card debt. Then we ended up getting a loan to replace my car which had gone kaput and another one to get a run around for him to get to work. Then he decided to go self employed 1mth before covid hit to earn more money. He was due to start this work in April 2020 and so never got to start due to covid! So he missed out on pay he would have got on furlough if he had remained employed and he couldn't claim anything because he hadn't yet started his self employed work and my wage was too high for any benefits for him. With that and the cost of living we have just sunk further and further into debt. To be honest his money has been very hit and miss over the years so this really hasn't helped. He gives me £500 per month but some months I end up subbing some of that back as he's spent more on petrol or often ends up giving more to another child from his previous relationship when extra things are needed for them. Obviously I don't get it at all on the months he's not worked.

We've also had lots of things like unexpected vets bills and car bills and house repairs which have gone on credit cards as we have no emergency fund. Once the credit cards stopped letting me swap to new 0% rates was when it became impossible - the minimum payments increased and there was so much interest the balances just keep growing. I really never thought I'd end up in this position

Gosh, it sounds like you've been through the mill, emotionally as well as financially. 

In addition to adding your partner's debts to the SOA, you need to be realistic about how much his petrol usage and money towards his other kids is - take a look at what it has been over the last year and average it. Is he going to be defaulting and sorting his debts too?

ManyWays

In that case an IVA starts to look attractive.
With that much equity, an IVA may well be rejected. 

emsgirl

Thanks again all for your comments. It really has been tough for a good few years we seem to take one step forward and a few steps back! I am keen to avoid an IVA if possible as I do think with a DMP I could realistically pay back my debts in a few years if the money isn’t just going on interest all the time. My husband has far less debt than me so I think he plans on just paying his now as he is currently in employment so hopefully we can expect a bit more stability with his income going forward. I also think he can get another 0% balance transfer for one of his cards so that will help us to pay it back more reasonably anyway. I will look at doing a more accurate SOA over the weekend and go from there.

emsgirl

fatbelly said:

On that SOA a dmp is realistic and clears the debts in around 40 months

If the real surplus is a lot less, like £500, then you are looking at over 10 years to get debt free. In that case you may find that stepchange suggest an IVA.

In either strategy you start by defaulting on the debts, getting your banking separated from them and saving an emergency fund

You do need to get your mortgage back on track or you are storing up bigger problems. No more extending the term or going interest free.

Your fixed deal expires in Jan 27 so your 125k mortgage is going to get more expensive. Do you see yourself staying in this house long term? Or downsizing when the kids move out? I can see there might be a strategy of long dmp followed by settlement deals eventually, which could work for you.

Thanks this is what I was hoping to do as I think if I continue as I’m doing I won’t ever clear my debt due to interest and minimum payments increasing and being in deficit each month after all payments anyway. I would like to stay in the house after my kids have grown if possible - they are only 13 and 14 now so still think it will be a long while before they leave. I appreciate my mortgage will go up significantly from Jan 27 (as I am on an amazing rate at the moment!) which is why I thought about extending the term under the mortgage charter to lower the payments so I could use the money for reduced settlements of debt hopefully and then overpay once I am debt free. Thanks so much for your advice - I’m finally beginning to feel like there is some hope of me one day paying off my debts and living my life again.

emsgirl

kimwp said:

Hi emsgirl, just a quick note to say don't worry, once you've defaulted, the banks will want to minimise their costs, they won't want to spend time and money on meticulous detective work, figuring where your pay has gone or how much your house is worth. After defaulting, you'll contact them, say "I can afford x amount, where do I send it?" And they will say "lovely thank you, here are the details". Ahead of that, you will get letters and potentially calls (but you can tell them to only contact you by letter), because they have to do due diligence in telling you that you are at risk of defaulting and damaging your credit record - but that's fine, because a default is what you are aiming for. NB, don't start paying until you have a decent emergency fund built up. (Though you can always reduce payments later to rebuild it if needed)

Regarding your SOA, your non-debt outgoings are significantly less than your income, so on paper you shouldn't be in debt, particularly if you only had one pay rise in the last six years, your husband lost his job and the cost of living increase - these would mean you used to have a much wider margin between income and outgoings. Is your SOA accurate (includes all outgoings accurately including annual spends?). Did your outgoings used to be much greater?

It just feels like it will be personal as it feels so wrong to stop paying debts when I’ve struggled every month for years to pay them no matter what! But I understand what you are saying - I just need to be brave enough to take the plunge and do it. As you say I’m not as important to them as I think I am and they are likely to be happy if I’m offering to pay something at least. I had visions of me being made an example of as given my luck the last few years that’s just the sort of thing that would happen to me! I understand from what you’ve said that’s unlikely to be the case. Are the phone calls likely to be troublesome? I plan to just ignore them completely and email everyone to say email contact only but worried it will be stressful being hounded by calls. Thanks again for all your advice it’s very much appreciated 

emsgirl

ManyWays said:

In that case an IVA starts to look attractive.
With that much equity, an IVA may well be rejected. 

So if I can offer to pay the debt off in 10yrs then a DMP is ok but if not then a IVA would be the next option? And if an IVA is not acceptable because I have equity in the house then how would that work? Would bankruptcy or order of sale then be a more likely possibility then? Thanks so much for your advice so far you’ve been very helpful 

emsgirl

RAS said:

We really do,need to see that SOA as it seems you've been struggling with essential payments for some time?

I think that once you stop paying the consumer credit, you need to get the mortgage payments back on track as soon as possible. That, CT and food are priorities, then utilities.

Thanks RAS I will aim to put up a more accurate SOA over the weekend. I would hopefully have no issues paying my priority debts if I stop paying the consumer credit. I’m hoping I would build up a reasonable emergency fund over 3-6mths too so that would get me back on track and then I could aim to pay off reduced settlements if it gets to that stage. Just looking out for any potential pitfalls I need to avoid along the way. Thanks so much for your advice.

kimwp

emsgirl said:

kimwp said:

Hi emsgirl, just a quick note to say don't worry, once you've defaulted, the banks will want to minimise their costs, they won't want to spend time and money on meticulous detective work, figuring where your pay has gone or how much your house is worth. After defaulting, you'll contact them, say "I can afford x amount, where do I send it?" And they will say "lovely thank you, here are the details". Ahead of that, you will get letters and potentially calls (but you can tell them to only contact you by letter), because they have to do due diligence in telling you that you are at risk of defaulting and damaging your credit record - but that's fine, because a default is what you are aiming for. NB, don't start paying until you have a decent emergency fund built up. (Though you can always reduce payments later to rebuild it if needed)

Regarding your SOA, your non-debt outgoings are significantly less than your income, so on paper you shouldn't be in debt, particularly if you only had one pay rise in the last six years, your husband lost his job and the cost of living increase - these would mean you used to have a much wider margin between income and outgoings. Is your SOA accurate (includes all outgoings accurately including annual spends?). Did your outgoings used to be much greater?

It just feels like it will be personal as it feels so wrong to stop paying debts when I’ve struggled every month for years to pay them no matter what! But I understand what you are saying - I just need to be brave enough to take the plunge and do it. As you say I’m not as important to them as I think I am and they are likely to be happy if I’m offering to pay something at least. I had visions of me being made an example of as given my luck the last few years that’s just the sort of thing that would happen to me! I understand from what you’ve said that’s unlikely to be the case. Are the phone calls likely to be troublesome? I plan to just ignore them completely and email everyone to say email contact only but worried it will be stressful being hounded by calls. Thanks again for all your advice it’s very much appreciated 

It can be really hard getting out of a state of mind, particularly when it's something you have been so focussed on. But once you decide a new path, and tread it for a while, it will become comfortable. 

My understanding is that you can tell them to only contact you by mail and they then aren't allowed to contact you by phone, so you shouldn't get any/many calls.

A bank making an example of someone would be a really sure way for them to go out of business, as no-one would want to borrow from them in the future. 

Wait to decide on a DMP or IVA  until you have an accurate SOA (which may take a bit of poking by the posters here once you've posted it, to make sure you have sufficient allowance for things before you decide what you can afford to pay towards your debts.) It'll be hard to stop your brain jumping around the possibilities, but let's get each step sorted in turn.

ManyWays

emsgirl said:

ManyWays said:

In that case an IVA starts to look attractive.
With that much equity, an IVA may well be rejected. 

So if I can offer to pay the debt off in 10yrs then a DMP is ok but if not then a IVA would be the next option? And if an IVA is not acceptable because I have equity in the house then how would that work? Would bankruptcy or order of sale then be a more likely possibility then? Thanks so much for your advice so far you’ve been very helpful 

The problem here is that you have more equity in the house than your unsecured debts, so some creditors will reject an IVA because of that. It often isnt a good idea anyway, so just get going on a DMP

emsgirl

ManyWays said:

emsgirl said:

ManyWays said:

In that case an IVA starts to look attractive.
With that much equity, an IVA may well be rejected. 

So if I can offer to pay the debt off in 10yrs then a DMP is ok but if not then a IVA would be the next option? And if an IVA is not acceptable because I have equity in the house then how would that work? Would bankruptcy or order of sale then be a more likely possibility then? Thanks so much for your advice so far you’ve been very helpful 

The problem here is that you have more equity in the house than your unsecured debts, so some creditors will reject an IVA because of that. It often isnt a good idea anyway, so just get going on a DMP

Thanks ManyWays. This is partly what I’ve been worried about - having equity in the house affecting things. So as long as I can pay back in under 10yrs a DMP would usually be accepted regardless of the equity but if it would take over 10yrs then I’d have to go down the IVA route and they may refuse that due to having equity. So if they refused an IVA could I still insist on doing a DMP or would they be looking to make me sell the house to release equity or look at bankruptcy as an option? I think if my budget is ok I could realistically pay £600-£700 per mth towards the debts so that would pay it off on a DMP within 10yrs which is what I want to do. I’ll get the SOA done accurately this weekend so hopefully that will make it clearer. Thanks for your help.