£45k Unsecured debt - DMP?

OMB

Hi all

I have £45k in unsecured debt, most accumulated over the past couple of years due to misfortune and questionable choices. I'm now running at a deficit of over £250 a month and have started missing credit card repayments. Most of my credit card debt is now on full interest at 25-30%.

From what I've read, my best option seems to be defaulting on the debts by cancelling payments, using that money to save an emergency fund, and negotiating repayment on the debts after they've defaulted. I'm also aware I should set up a new bank account for my salary, the emergency fund, and other financial obligations not relating to the debts. Even if I were to make the necessary savings to get into a monthly net positive, I would have little contingency and the interest on the credit cards means I'm barely paying those debts down, if at all.

I'm looking for the following help:

1. Re-assurance that this is my best course of action, and advice if it isn't
2. Should I default on every debt? (both credit cards and loans)
3. Is the best thing to negotiate repayment directly, or through StepChange?
4. If I do negotiate directly, at what point does this happen, and do I initiate the conversation? I assume most of the time it is with a 3rd party debt collector after the debt has been sold?

I'll paste my SOA below, thanks for the help in advance!

Statement of Affairs and Personal Balance Sheet

Household Information	Count
Number of adults in household	1
Number of children in household	0
Number of cars owned	2

Income	Amount(£)
Monthly income after tax	£ 3,500.00
Partners monthly income after tax	£             -
Benefits	£             -
Other income	£             -
Total monthly income	£ 3,500.00

Expenses	Amount(£)
Mortgage	£    620.00
Secured/HP loan repayments	£             -
Rent	£             -
Management charge (leasehold property)	£             -
Council tax	£    135.00
Electricity	£      70.00
Gas	£      70.00
Oil	£             -
Water rates	£      25.00
Telephone (land line)	£             -
Mobile phone	£             -
TV Licence	£      15.00
Satellite/Cable TV	£             -
Internet Services	£      40.00
Groceries etc.	£    400.00
Clothing	£      20.00
Petrol/diesel	£    300.00
Road tax	£      35.00
Car Insurance	£      80.00
Car maintenance (including MOT)	£      40.00
Car parking	£             -
Other travel	£             -
Childcare/nursery	£             -
Other child related expenses	£             -
Medical (prescriptions, dentist etc)	£      10.00
Pet insurance/vet bills	£      20.00
Buildings insurance	£      37.50
Contents insurance	£      10.00
Life assurance	£             -
Other insurance	£             -
Presents (birthday, christmas etc)	£      25.00
Haircuts	£      15.00
Entertainment	£      50.00
Holiday	£             -
Emergency fund	£    100.00
Total monthly expenses	£ 2,117.50

Asset Description	Value (£)
Cash	£                 -
House value (Gross)	£ 135,000.00
Shares and bonds	£                 -
Car(s)	£     3,000.00
Other assets	£                 -
Total Assets	£ 138,000.00

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	£ 108,597.00	£     620.00	5
Total secured & HP debts	£ 108,597.00	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Virgin CC	£   6,064.24	£     182.00	21.66
Barclaycard CC	£   3,838.10	£     128.00	27.16
MBNA CC	£   5,799.82	£     174.00	28.67
Ikano	£   1,564.00	£     124.00	0
Zopa Loan	£   8,062.00	£     278.00	19.8
M&S Loan	£   9,868.12	£     210.00	10
TSB Loan	£   2,278.28	£     299.00	7.2
Capital One CC	£   2,662.33	£       97.00	22.47
Tesco Bank CC	£   4,975.77	£     165.00	24.9
Total unsecured debts	£ 45,112.66	£  1,657.00	-

Monthly Budget Summary	Amount(£)
Total monthly income	£ 3,500.00
Expenses (including HP & secured debts)	£ 2,117.50
Available for debt repayments	£ 1,382.50
Monthly UNsecured debt repayments	£ 1,657.00
Amount short for making debt repayments	-£    274.50

Personal Balance Sheet Summary	Amount(£)
Total assets (things you own)	£ 138,000.00
Total HP & Secured debt	-£108,597.00
Total Unsecured debt	-£   45,112.66
Net Assets	-£   15,709.66

NB:

• The second car was a backup while my van was in the garage for months (a big contributor to the debt) and will be sold ASAP.
• Groceries include pet food.

Grumpelstiltskin

hat pets do you have?  Groceries for 1 person should easily be £200 monthly so how much are you spending on pets?

You are showing £100 to an emergency fund but you are not showing any savings are you in fact saving this?

fatbelly

Yes
Yes
Do it yourself. It's not really negotiation. It's a case of ' this is my income. This is my expenditure. This is my surplus. Here is your share'

You could inflate your expenditure a bit so as to not show you are making monthly savings. If not spent on an emergency, it would be useful for full & final settlement deals.

However, most of your figures look ok to me

OMB

Grumpelstiltskin said:

hat pets do you have?  Groceries for 1 person should easily be £200 monthly so how much are you spending on pets?

You are showing £100 to an emergency fund but you are not showing any savings are you in fact saving this?

I have based this on anticipating what I will be spending while repaying the debt. Up until now I have not been working to a budget or tracking expenditure so it would be difficult to estimate what I have been spending on any category. I haven't been saving £100 per month, and I have 1 dog and 2 cats, admittedly the £400 per month is generous, but I wanted to be realistic with how much I would be able repay each month.

ManyWays

A van, are you self-employed? How much is the car you will be selling worth and will that reduce the car insurance? 
Your mortgage, when does your fix end and do you expect the rate will go up or down? 
That is a pretty expensive Zopa loan, some people here have won affordability complaints against Zopa loans. 

OMB

ManyWays said:

A van, are you self-employed? How much is the car you will be selling worth and will that reduce the car insurance? 
Your mortgage, when does your fix end and do you expect the rate will go up or down? 
That is a pretty expensive Zopa loan, some people here have won affordability complaints against Zopa loans. 

Not self employed, just prefer using a van and I don't have a family so it's functional. Car isn't worth much, hoping for £1500. Not insured on the car, my premium is high due to a claim last year.

Thanks for the heads up on the Zopa loan, I'll have a look on the forum.

RAS

Basically your plan is good. Do not use the switching mechanism to transfer DDs, inform each essential provider in term.

Increase clothing, add holiday as even if it's only visiting family you need to budget, and add parking as you will pay sometimes. If the van was that problematic, I'd suggest you need to budget for a replacement as well as increasing the maintenance costs. 

If you don't know what you really spend, I'd go through the last 3-6 months statements and allocate everything to a budget headline.