Add 65k debt to mortgage, dmp, or something else?

kimwp

Kittymumof4 said:

ManyWays said:

Is the mortgage cost on the SOA the amount it will be going up to?

Is the £175 Study costs the one off payment owed to a friend, or for your child at uni?
Are they getting any maintenance loan at all, do they have a part time job?
The groceries look very low unless child at uni covers their own? 

The entertainment and present costs need to be lower. And the emergency fund, yes you want to build one up but as an ongoing going budget that isnt realistic.

What is the other Insurance?

I think you should give up on your self employment, you cant afford any costs, it complicates debt options and you arent well enough anyway. Rething in a few years if things feel more stable and you feel more up to it. 

I agree with @fatbelly's suggestion to stop paying all the debts and switch to a new bank account, then use the money you have for the next few months to pay for the holiday then to build an emergency fund

After that a new SOA.
Your first thought for future expenses needs to be No. Future holidays, another pet, etc Sorry but this is a change of mindset and it is needed

The mortgage cost on the SOA is the new cost when it goes up. 

The study cost is my studies. I have a student loan for the course costs but these are in addition and are compulsory for the course. I have 2 years left after thus year. I could defer and leave in July, but then I need to qualify within 5 years or I'd have to start it all again or just not continue and I think the qualification will help me to earn, especially as my son gets older and more independent. 

The grocery allowance is the absolute basics we can live on. My older uni child is also fed from this. I'm not sure if it's realistic to continue this long term or if I should account more.

The emergency fund, I've put that because we have some doors and windows that need replacing. We've been holding off but its getting to the point where we're struggling to close and lock them. We've had a quote to repair rather than replace them but it's still £1000. 

Entertainment is high due to our son and his needs to go out, for the sake of him but for our sanity too. I will look at taking more of these costs from his DLA though. We do lots of free things but it would make things extremely difficult if we didn't pay for certain trips out now and then. 

We need to look into the insurances, we've seen various coming out of the account but not sure what they all cover so we've planned to look at the paperwork at the weekend to see if any of these can go. I know we have mortgage and unemployment protection, not sure of the others. 

I'm thinking the same about the self employment. I think my husband is hanging onto the hope that I'll magically start earning enough to keep up with debt payments. 

We definitely won't have any more pets! At least not unless we get ourselves into a better position financially and only when ours are no longer with us. 

Holidays, I'm not sure how I'll manage that one. My son talks about our annual holiday almost every day and won't understand at this stage why we suddenly can't go. It's a self catering budget holiday but still a cost. 
My son is currently in a mental health crisis with risk of su*cide so I cannot tell him about any of this, he does understand that we don't have much money at the moment but I can't tell him more than this as I'm trying to keep him safe and stable as much as possible. 

The holiday this year, we have around £750 to pay, we'll use grocery allowance for shopping while we're there and we always do as much free stuff as possible but will have to be extra careful, using the entertainment money and his DLA allowance for anything extra he spends. 

With the emergency fund then, how long does it usually take from stopping payments to coming to an agreement to pay less? Just trying to work out how much we could potentially save before restarting payments. Is interest still charged while the accounts are going unpaid and while we're paying them off with the lower amounts? 

Okidoki, so the windows and doors fix is a separate category, not an emergency fund (which is for unknown things)

There isn't a usual time to come to an agreement. You stop paying the debts so they default and start 6 year count down til they come off your credit record (and also interest is usually stopped at this point too). Once defaulted, you contact the provider to ask where to send payments to and you only send what you can afford. So if you are still building up your window/door fix fund and emergency fund at that point, you tell them you are only able to afford small payments at the moment and you will increase the payments when you can. Later, once you have been paying a while, you can think about making full and final offers to write the debt off at a proportion of what is still owed. Note, this is applicable to the dmp route, I'm not sure what of this applies to the IVA route.

RAS

It's going to be 3-18 months to get defaults, generally in the mid range. Meantime you save the money into your emergency fund. You shouldn't be looking at IVAs until the new ones start in July and it's likely to take time to bed down.

So pay the holiday off, then sort out the windows. To put it bluntly, repair those that will survive 6 years and then consider replacing any really on their last legs. Once you are on holiday, start saving a little each month into the emergency fund and use the rest for the windows. No point starting an IVA or DMP knowing you need urgent repairs.

Kittymumof4

kimwp said:

Kittymumof4 said:

ManyWays said:

Is the mortgage cost on the SOA the amount it will be going up to?

Is the £175 Study costs the one off payment owed to a friend, or for your child at uni?
Are they getting any maintenance loan at all, do they have a part time job?
The groceries look very low unless child at uni covers their own? 

The entertainment and present costs need to be lower. And the emergency fund, yes you want to build one up but as an ongoing going budget that isnt realistic.

What is the other Insurance?

I think you should give up on your self employment, you cant afford any costs, it complicates debt options and you arent well enough anyway. Rething in a few years if things feel more stable and you feel more up to it. 

I agree with @fatbelly's suggestion to stop paying all the debts and switch to a new bank account, then use the money you have for the next few months to pay for the holiday then to build an emergency fund

After that a new SOA.
Your first thought for future expenses needs to be No. Future holidays, another pet, etc Sorry but this is a change of mindset and it is needed

The mortgage cost on the SOA is the new cost when it goes up. 

The study cost is my studies. I have a student loan for the course costs but these are in addition and are compulsory for the course. I have 2 years left after thus year. I could defer and leave in July, but then I need to qualify within 5 years or I'd have to start it all again or just not continue and I think the qualification will help me to earn, especially as my son gets older and more independent. 

The grocery allowance is the absolute basics we can live on. My older uni child is also fed from this. I'm not sure if it's realistic to continue this long term or if I should account more.

The emergency fund, I've put that because we have some doors and windows that need replacing. We've been holding off but its getting to the point where we're struggling to close and lock them. We've had a quote to repair rather than replace them but it's still £1000. 

Entertainment is high due to our son and his needs to go out, for the sake of him but for our sanity too. I will look at taking more of these costs from his DLA though. We do lots of free things but it would make things extremely difficult if we didn't pay for certain trips out now and then. 

We need to look into the insurances, we've seen various coming out of the account but not sure what they all cover so we've planned to look at the paperwork at the weekend to see if any of these can go. I know we have mortgage and unemployment protection, not sure of the others. 

I'm thinking the same about the self employment. I think my husband is hanging onto the hope that I'll magically start earning enough to keep up with debt payments. 

We definitely won't have any more pets! At least not unless we get ourselves into a better position financially and only when ours are no longer with us. 

Holidays, I'm not sure how I'll manage that one. My son talks about our annual holiday almost every day and won't understand at this stage why we suddenly can't go. It's a self catering budget holiday but still a cost. 
My son is currently in a mental health crisis with risk of su*cide so I cannot tell him about any of this, he does understand that we don't have much money at the moment but I can't tell him more than this as I'm trying to keep him safe and stable as much as possible. 

The holiday this year, we have around £750 to pay, we'll use grocery allowance for shopping while we're there and we always do as much free stuff as possible but will have to be extra careful, using the entertainment money and his DLA allowance for anything extra he spends. 

With the emergency fund then, how long does it usually take from stopping payments to coming to an agreement to pay less? Just trying to work out how much we could potentially save before restarting payments. Is interest still charged while the accounts are going unpaid and while we're paying them off with the lower amounts? 

Okidoki, so the windows and doors fix is a separate category, not an emergency fund (which is for unknown things)

There isn't a usual time to come to an agreement. You stop paying the debts so they default and start 6 year count down til they come off your credit record (and also interest is usually stopped at this point too). Once defaulted, you contact the provider to ask where to send payments to and you only send what you can afford. So if you are still building up your window/door fix fund and emergency fund at that point, you tell them you are only able to afford small payments at the moment and you will increase the payments when you can. Later, once you have been paying a while, you can think about making full and final offers to write the debt off at a proportion of what is still owed. Note, this is applicable to the dmp route, I'm not sure what of this applies to the IVA route.

Okay thank you that makes sense. I know it's probably variable but what would be a decent emergency fund? How much should we save before paying more off the debt? If my husband came out of work we'd be pretty screwed, his wage is high for the role, it would be hard for him to find an equivalent paid role elsewhere. But I guess if that happened we'd have to rethink then. 
It feels so scary knowing that there will be no credit option at all in the future. It's a relief too in a way as I know we won't be able to keep getting further into debt, but also scary as we've always had it to fall back on. 

kimwp

Kittymumof4 said:

kimwp said:

Kittymumof4 said:

ManyWays said:

Is the mortgage cost on the SOA the amount it will be going up to?

Is the £175 Study costs the one off payment owed to a friend, or for your child at uni?
Are they getting any maintenance loan at all, do they have a part time job?
The groceries look very low unless child at uni covers their own? 

The entertainment and present costs need to be lower. And the emergency fund, yes you want to build one up but as an ongoing going budget that isnt realistic.

What is the other Insurance?

I think you should give up on your self employment, you cant afford any costs, it complicates debt options and you arent well enough anyway. Rething in a few years if things feel more stable and you feel more up to it. 

I agree with @fatbelly's suggestion to stop paying all the debts and switch to a new bank account, then use the money you have for the next few months to pay for the holiday then to build an emergency fund

After that a new SOA.
Your first thought for future expenses needs to be No. Future holidays, another pet, etc Sorry but this is a change of mindset and it is needed

The mortgage cost on the SOA is the new cost when it goes up. 

The study cost is my studies. I have a student loan for the course costs but these are in addition and are compulsory for the course. I have 2 years left after thus year. I could defer and leave in July, but then I need to qualify within 5 years or I'd have to start it all again or just not continue and I think the qualification will help me to earn, especially as my son gets older and more independent. 

The grocery allowance is the absolute basics we can live on. My older uni child is also fed from this. I'm not sure if it's realistic to continue this long term or if I should account more.

The emergency fund, I've put that because we have some doors and windows that need replacing. We've been holding off but its getting to the point where we're struggling to close and lock them. We've had a quote to repair rather than replace them but it's still £1000. 

Entertainment is high due to our son and his needs to go out, for the sake of him but for our sanity too. I will look at taking more of these costs from his DLA though. We do lots of free things but it would make things extremely difficult if we didn't pay for certain trips out now and then. 

We need to look into the insurances, we've seen various coming out of the account but not sure what they all cover so we've planned to look at the paperwork at the weekend to see if any of these can go. I know we have mortgage and unemployment protection, not sure of the others. 

I'm thinking the same about the self employment. I think my husband is hanging onto the hope that I'll magically start earning enough to keep up with debt payments. 

We definitely won't have any more pets! At least not unless we get ourselves into a better position financially and only when ours are no longer with us. 

Holidays, I'm not sure how I'll manage that one. My son talks about our annual holiday almost every day and won't understand at this stage why we suddenly can't go. It's a self catering budget holiday but still a cost. 
My son is currently in a mental health crisis with risk of su*cide so I cannot tell him about any of this, he does understand that we don't have much money at the moment but I can't tell him more than this as I'm trying to keep him safe and stable as much as possible. 

The holiday this year, we have around £750 to pay, we'll use grocery allowance for shopping while we're there and we always do as much free stuff as possible but will have to be extra careful, using the entertainment money and his DLA allowance for anything extra he spends. 

With the emergency fund then, how long does it usually take from stopping payments to coming to an agreement to pay less? Just trying to work out how much we could potentially save before restarting payments. Is interest still charged while the accounts are going unpaid and while we're paying them off with the lower amounts? 

Okidoki, so the windows and doors fix is a separate category, not an emergency fund (which is for unknown things)

There isn't a usual time to come to an agreement. You stop paying the debts so they default and start 6 year count down til they come off your credit record (and also interest is usually stopped at this point too). Once defaulted, you contact the provider to ask where to send payments to and you only send what you can afford. So if you are still building up your window/door fix fund and emergency fund at that point, you tell them you are only able to afford small payments at the moment and you will increase the payments when you can. Later, once you have been paying a while, you can think about making full and final offers to write the debt off at a proportion of what is still owed. Note, this is applicable to the dmp route, I'm not sure what of this applies to the IVA route.

Okay thank you that makes sense. I know it's probably variable but what would be a decent emergency fund? How much should we save before paying more off the debt? If my husband came out of work we'd be pretty screwed, his wage is high for the role, it would be hard for him to find an equivalent paid role elsewhere. But I guess if that happened we'd have to rethink then. 
It feels so scary knowing that there will be no credit option at all in the future. It's a relief too in a way as I know we won't be able to keep getting further into debt, but also scary as we've always had it to fall back on. 

As you say, it's variable. A years worth of expenses not covered by guaranteed income is the ideal, but there's benefits implications of anything over £6k. Maybe consider if your husband lost his job and you had to rely on benefits, what the monthly shortfall would be and save 3-6 months of that? Or just aim for £2-3k as being the likely max of an emergency need like a new-to- you car to pick your son up from school. Then replenish or add to it as you can?

Kittymumof4

Okay, thank you so much for all of this, I can't tell you how grateful I am. I find myself sorting this out mostly on my own having had very little sleep for the past few weeks worrying about it all. My husband is helping but he's in a panic too and is trying to hold his job down, which involves a lot of driving, and he too is sleep deprived. He has also talked about how the kids and me would be better off without him due to his life insurance and pensions. 😭 So I need to get a grip on all of this and I'm honestly so thankful to all of you. 

So please can you tell me if this plan of action is correct? 

1) Set up new bank account (today)
2) Transfer income to new account (do I just tell my husband to ask his employer to do this, and I ring up work and pensions for the benefits?) 
3) Transfer essential direct Debits to new account (how do I do this? Do I ring them up) 
4) Cancel all direct Debit payments to credit cards (do I do this or will it automatically happen when the account goes into unapproved overdraft?) How do I do this? 
5) Log out from my current bank account online (with overdraft remaining?) 
6) Ride out the rest of the month somehow until husband gets paid. (I need to buy food and pet basics but very near to the approved overdraft limit.) 
7) In the meantime, tell HMRC that I'm no longer self employed. 
8) When income starts to go into new account, open a second account for savings? 
9)Pay off holiday over the next 2 months. 
10) Start saving towards windows/doors and emergency fund 
11) Ignore communication from creditors unless they threaten legal action? 
12) Wait for accounts to default.
13) Work out payments to creditors by splitting what we can afford between them all? Do I do this equally or based on the amount we owe them? So do I say pay them all £40 or some more than others if we owe them more? 
14)  As they do, one by one, contact each individual creditor to set up an affordable payment. Do I need to send them details of our income and outgoings to prove we are paying what we can afford? 


My brain is jumbled and I need a clear plan to try to ease the sheer panic I'm in, otherwise I'll lose it and won't be able to deal with any of this. 

I'm so scared because we owe so much and can pay so little. What if they don't agree to it? I can see the interest piling up while we're not paying and as it stands, it's already going to take us almost 15 years to pay this off and that's from when we actually start paying. 

Sorry another question, the mortgage is in both of our names, as is the bank account with the overdraft. Most of the debt is in my husbands name, the first 2 credit cards on the SOA are in my name. So both of us will have these on our credit rating. For my work in the future, and for my college studies, I need a clear DBS. If I end up with CCJs will they affect this? I read that it can affect employment, and although I'm hoping to start again as a sole trader at some point I'm scared that all of this will prevent me from working, which will then make it even more difficult to pay off the debts. 

RAS

Slow down a bit.

Yes, hubbie needs to find out from his employer the date by which he needs to inform them of the new bank account, and organise. You need to make sure that is sorted before transferring DDs etc.

You can arrange for the benefits to move.

With respect to this month, start by making an audit of the existing stocks of food. List larder, fridge, freezer. Make sure your kids know the situation.

Any bendy veggie, wizz up in the blender for soup. Or to bulk out pasta sauce, can the kids chop into chunks?

Now meal plan until the new salary comes in. You could go over to the moneysaving oldstyle forum and make a new thread labelled store cupboard challenge and list everything even if one of the kids lists them on-line. Or take photos and inset them?

Tell hubbie you love him and that he's worth the world to you all. 

EDIT:

CCJ do not affect CRB records.

There will be no chance of legal action until the defaults are registered.

kimwp

Kittymumof4 said:

Okay, thank you so much for all of this, I can't tell you how grateful I am. I find myself sorting this out mostly on my own having had very little sleep for the past few weeks worrying about it all. My husband is helping but he's in a panic too and is trying to hold his job down, which involves a lot of driving, and he too is sleep deprived. He has also talked about how the kids and me would be better off without him due to his life insurance and pensions. As below, if there is any pssibility he genuinely thinks this, then third party help should be sought. Debt issues are completely manageable and people in our lives are so much more valuable than cash. 😭 So I need to get a grip on all of this and I'm honestly so thankful to all of you. 

So please can you tell me if this plan of action is correct? 

1) Set up new bank account (today) Yes - ideally completely unconnected (many of the banks are connected by the same parent bank) to where you have debts or overdrafts, but this is just a precaution against the unlikely event that the company will use "right of offset" to take money from your account.
2) Transfer income to new account (do I just tell my husband to ask his employer to do this, and I ring up work and pensions for the benefits?) Yes and I think yes, unless you can do it in an online account. 
3) Transfer essential direct Debits to new account (how do I do this? Do I ring them up). Call them or you might be able to change some online. 
NB, some things will take time to change to the new account, so you'll need to track where they are coming from to make sure there is enough money in the right account until they're coming from the new account.
4) Cancel all direct Debit payments to credit cards (do I do this or will it automatically happen when the account goes into unapproved overdraft?) How do I do this? You do it. There should be an option in your bank account to cancel direct debits.
5) Log out from my current bank account online (with overdraft remaining?) Not sure why you need to log out? Do you mean literally log out or do you mean ignore it? If you mean ignore it, see my note about keeping an eye to make sure the essential direct debits are funded from the old account if they haven't yet changed to the new details.
6) Ride out the rest of the month somehow until husband gets paid. (I need to buy food and pet basics but very near to the approved overdraft limit.) Are you taking advantage of Olio and potentially food banks?
7) In the meantime, tell HMRC that I'm no longer self employed. I don't know the implications of this, but sounds sensible.
8) When income starts to go into new account, open a second account for savings? It's sensible to put savings into higher interest accounts. There are regular savings accounts with higher amounts, some of these lock the money away until maturity, some have min monthly payments. The main MSE site has pages with the best savings accounts for different circumstances.
9)Pay off holiday over the next 2 months. 
10) Start saving towards windows/doors and emergency fund 
How long do you have to pay off the holiday? If longer than you need, I'd start putting money in the emergency fund at the same time as paying off the holiday.
11) Ignore communication from creditors unless they threaten legal action? They probably will state that there may be legal action if you don't pay, but to the best of my understanding (not being a professional in the area, but having been a reader and contributor of this board for years), they can't do anything until you default. And once you default, in the unlikely event that they take you to court, a judge won't order you to pay more than you can afford. So if you are paying what you can afford (while saving an emergency fund etc), there's no advantage for them to take you to court. It feels like a lot of money to us, but it's really tiny amounts to the banks.
12) Wait for accounts to default. Yes, Call them (or wait until they call you) and tell them they can only communicate in writing so you don't get bothered by calls. You'll then only get letters and emails. Note, the debts will probably get passed to Debt Collection agencies, but this doesn't make any difference.
13) Work out payments to creditors by splitting what we can afford between them all? Do I do this equally or based on the amount we owe them? So do I say pay them all £40 or some more than others if we owe them more? If you ask a charity like step change to manage it, they'll split it proportionally to the size of the debt is my understanding. But it's up to you. They won't see what you send to the others. (NB, if you ask a charity to manage it, wait until you get defaults first, otherwise they'll want to start sending money straight away and that will delay the defaults and subsequently these being removed from your credit record)
14)  As they do, one by one, contact each individual creditor to set up an affordable payment. Yes Do I need to send them details of our income and outgoings to prove we are paying what we can afford? No, though some might ask. 

Again, the above is relevant to a DMP, I am really not familiar with IVAs.

My brain is jumbled and I need a clear plan to try to ease the sheer panic I'm in, otherwise I'll lose it and won't be able to deal with any of this. 
You really don't need to be in a panic, a lot of people go through this process and you've understood the process very quickly.

I'm so scared because we owe so much and can pay so little. What if they don't agree to it? I can see the interest piling up while we're not paying and as it stands, it's already going to take us almost 15 years to pay this off and that's from when we actually start paying. 
Defaults will mostly stop interest being charged. Either way, in a DMP you will make full and final payments a couple of years after defaults. These "full and finals" will be an agreement to write off the debt by paying them (usually the Debt Collection Agency) a smaller amount than you owe. So interest being added is pretty irrelevant. But consider an IVA if fatbelly is suggesting it - normally the advice is steer clear due to high failure rates, so if fatbelly (or sourcrates) suggests it, it's worth considering.

Sorry another question, the mortgage is in both of our names, as is the bank account with the overdraft. Most of the debt is in my husbands name, the first 2 credit cards on the SOA are in my name. So both of us will have these on our credit rating. For my work in the future, and for my college studies, I need a clear DBS. If I end up with CCJs will they affect this? I read that it can affect employment, and although I'm hoping to start again as a sole trader at some point I'm scared that all of this will prevent me from working, which will then make it even more difficult to pay off the debts. 
It depends on the employment I think. Others will be in a better position to advise than me.

I think the primary thing is to talk to your husband and if there is any possibility that he genuinely thinks that the family would be better off if he is dead, then you need to get him to the GP as soon as possible. Or get him to ring samaritans or similar (his company might have employee resources for this) to talk to someone. We don't need to be at crisis point to benefit from talking to an independent about our issues.

I've put comments above.

Kittymumof4

Thank you both so much. This is all so helpful. I feel a bit better now I have some clear steps to take. I will speak to my husband about it later, I think he feels like there's no way out without wrecking our future so I hope that having a plan in place and your reassurance will help him too. 

So with the bank account then, while we're waiting for direct Debits to switch over should I be transferring enough over to our old account to cover these until they're all switched over? They won't be able to track our new account will they if we are transferring money from the new one to the old one? 

kimwp

Kittymumof4 said:

Thank you both so much. This is all so helpful. I feel a bit better now I have some clear steps to take. I will speak to my husband about it later, I think he feels like there's no way out without wrecking our future so I hope that having a plan in place and your reassurance will help him too. 

So with the bank account then, while we're waiting for direct Debits to switch over should I be transferring enough over to our old account to cover these until they're all switched over? They won't be able to track our new account will they if we are transferring money from the new one to the old one? 

Yes, you don't want to miss payments on your essential bills if you can help it. In terms of tracking where the money is coming from, I don't think they'd bother (or even can) and I don't think they can just take money that another institution is looking after as you haven't registered it with them anyway because it might not be you that owns that account, but a different person who shares your name. The main thing is not using the switch service as this would move the direct debits of your debts across and then they might take money even though the direct debit has been cancelled. They can't set one up with your new account without your permission and they won't know what your new account details are anyway.

Grumpelstiltskin

When you transfer the direct debits over they should work immediately.

Your old bank will not be interested in where you have gone. They have more important things to do than look at every customer who goes elsewhere.