Redundancy & 44k unsecured debt - the perfect storm

confidencewoman

Evening all,

Posting my SOA and overview of situation and hoping for some guidance on next steps - apologies if this is repetitious, I've looked at different threads with many similarities (which is encouraging to know we are not alone) but each situation is unique and I'd really appreciate your advice.

I was made redundant from a high paying job about a year ago. I received a generous settlement but chose not to repay my debts, and rather to invest in renovating the property I had recently bought which frankly was an absolute wreck. This was based largely on the fact that I was homeless (having been renting in London, where I worked) and needed somewhere to move into! I got a new job a few months post-redundancy, but earning less than half of what I was. My renovation has ended up costing so much that I have burned through my settlement/savings, and am now down to my last £7k or so. I am sitting on it to pay tradespeople as the house is not fit to live in yet! I guess technically I am homeless, fortunately I have friends I can live with. Meanwhile, I am borrowing on my credit cards to eat/live, and realise that I've hit the buffers now or am about to. I'm trying to juggle completing the reno so I can get a true valuation and potentially borrow a little more from my mortgage company to pay off debts - but having spoken to them (Newcastle BS), this is a no go: I am falling down on affordability etc and although my credit score is good (haha) all they see is a lot of debt, and a proportionately low salary. Fair enough - I accept responsibility for getting myself into this dire situation, although the redundancy was entirely brutal, unexpected and not in my game plan

Today I received confirmation of "Breathing Space" as I went initially down the StepChange route, who are suggesting a DMP, but almost everything I am reading on this forum suggests I do the default thing with all my unsecured debts. This terrifies the pants off me as - like many others - I have diligently paid every single payment, bill etc on time my entire working life and worked hard to get a really good credit score. I am 49 btw, single and with no children/dependents.

Here is my SOA which I hope includes everything. I really appreciate any advice anyone can give, thank you in advance...

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	3,250
Monthly expenses (incl. HP & secured loans)	2,468
Available for debt repayments	782
UNsecured debt repayments	1,245
Amount short for making debt repayments	-463

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	276,000
Total Secured & HP Debt	-159,000
Total Unsecured Debt	-43,800
Net Assets	73,200

Household Information

Number of adults in household	1
Number of children in household	0
Number of cars owned	0

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	3250
Partners monthly income	0
Benefits	0
Other income	0
Total monthly income	3250

Expenses	Amount(£)
Mortgage	980
Secured/HP loan payments	165
Rent	0
Management charge (leasehold property)	0
Council tax	140
Electricity	60
Gas	0
Oil	0
Water Rates	20
Telephone (land line)	0
Mobile phone	35
TV Licence	15
Satellite/Cable TV	0
Internet services	25
Groceries etc.	250
Clothing	50
Petrol/diesel	150
Road tax	15
Car Insurance	35
Car maintenance (including MOT)	20
Car Parking	0
Other travel	0
Childcare/nursery	0
Other child related expenses	0
Medical (prescriptions, dentists, opticians etc.)	40
Pet Insurance/Vet bills	0
Buildings Insurance	30
Contents Insurance	0
Life Assurance	140
Other Insurance	120
Presents (birthday, christmas etc.)	33
Haircuts	15
Entertainment	80
Holiday	0
Emergency Fund	20
Subscriptions	30
Total monthly expenses	2468

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	152000	(980)	4.55
Hire Purchase (HP) Debt	7000	(165)	15.9
Secured & HP Debt totals	159000	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Lloyds credit card	8000	215	23.72
MBNA credit card	12200	305	25.97
First Direct credit c	5200	155	22.9
RBS Loan	3100	150	5.6
Paypal credit	3600	135	23.9
Vanquis credit card	2800	30	31.4
John Lewis credit car	4800	155	25.15
Virgin Money credit c	4100	100	23.29
Unsecured Debt totals	43800	1245	-

Asset Description	Value (£)
Cash	7000
House Value (Gross)	260000
Shares and bonds	0
Car(s)	9000
Other assets (e.g. endowments, jewellery etc)	0
Total Assets	276000

Comments on the results

You do not have enough monthly income to meet your expenses and your minimum monthly debt repayments. Seek ways to increase your income and/or reduce your expenditure by £463. Whatever your results show, it always pays to seek advice or comments from others. Why not post your SOA details on our Debt Management discussion board or on your preferred discussion forum elsewhere. Thankyou for using the SOA Calculator at www.LemonFool.co.uk


 

elsien

Why do you have a life assurance if it’s just you? What is the other insurance for?

Emmia

If the property isn't currently liveable in (and won't be for a while) would you be better selling it now, using the cash realised to pay your debts and then using money left over to buy somewhere where you can service a mortgage on your current income?

The property renovation is a millstone dragging you down, carrying on is likely to make your debt worse, not better.

TheAble

Will the 7k you have in savings be enough to finish the renovation? 

FlorayG

elsien said:

Why do you have a life assurance if it’s just you? What is the other insurance for?

Exactly my first thought. You don't have anyone you need to leave your assets to so why are you insuring for that? 
Also you say cars - 0 when you clearly do have a car from the expenses lines

Ordinary_Yet_Unique

Another possibility, and I am not saying this is a great one, is to sell the house and pay off your debt. This would leave you with about £70000 plus for a fresh start. 

You would then need to ensure you live within your means with sensible budgeting. You would have a good deposit for another property. Perhaps rent in between to really decide what you really want to do property wise. Ideally do not buy something which needs renovating!

As I said just an idea, which may or may not be a sensible solution.

confidencewoman

elsien said:

Why do you have a life assurance if it’s just you? What is the other insurance for?

Sorry - it's my life insurance plan - cover is for if I cannot work due to illness etc. Vitality call it a "Life Plan", I guess I should put this under "other insurance"

confidencewoman

Emmia said:

If the property isn't currently liveable in (and won't be for a while) would you be better selling it now, using the cash realised to pay your debts and then using money left over to buy somewhere where you can service a mortgage on your current income?

The property renovation is a millstone dragging you down, carrying on is likely to make your debt worse, not better.

I hadn't thought of that but I feel like it would be a very backwards step when I am so close to finishing it and have added significantly to the value, but I have to consider that option - yes - thanks for pointing it out. 

confidencewoman

TheAble said:

Will the 7k you have in savings be enough to finish the renovation? 

I'm certainly trying to stretch it as far as I can to do so, yes! I have done a huge amount of work myself too, to cut costs. 

confidencewoman

FlorayG said:

elsien said:

Why do you have a life assurance if it’s just you? What is the other insurance for?

Exactly my first thought. You don't have anyone you need to leave your assets to so why are you insuring for that? 
Also you say cars - 0 when you clearly do have a car from the expenses lines

My mistake, I have one car on hire purchase...

Emmia

confidencewoman said:

Emmia said:

If the property isn't currently liveable in (and won't be for a while) would you be better selling it now, using the cash realised to pay your debts and then using money left over to buy somewhere where you can service a mortgage on your current income?

The property renovation is a millstone dragging you down, carrying on is likely to make your debt worse, not better.

I hadn't thought of that but I feel like it would be a very backwards step when I am so close to finishing it and have added significantly to the value, but I have to consider that option - yes - thanks for pointing it out. 

Your risk if you carry on as you are could be repossession by the Bank.