Feel like my life is on hold. Feel stuck. Advice greatly needed

Ruthven88

Hi all,

TL;DR - SOA below

Newbie here. In need of a roadmap out of debt. Background: I got into debt around 2021 when I bought my first ever house which, being honest, I couldn't afford on a £1,600 per month salary, but I was desperate for my own place after successive lockdowns. I'm now on +£1k more but dealing with the accumulation of credit card debt so it doesn't really make a difference. I bought a new build so didn't have any furniture or white goods. A good deal of money went on this. Then low salaries + the cost of living crisis hit, and, I'll own it, not a little 'selfish' spending and living beyond my means. It's now snowballed to an unmanageable level.

I'm considering contacting Step Change to do a DMP, but I'm hearing just cancelling direct debits and defaulting is a better option? How can this be true? Also, I have an excellent credit rating according to Experian. How far is this likely to fall and for how long if I enter into a DMP? Will this condemn me to my current 1 bed for at least 6 years? I want to protect it as much as possible, although I appreciate I'll need to accept some level of collapse.

I'm surprisingly relaxed about these debts. They don't really keep me up at night. But I'm 37 now, and the prospect of being in long term debt IS becoming a stressor. I just want to be debt free. This would genuinely solve my problems.

I do have a partner and I'm open about my debts with her. However, I have not included her in the SOA as I want to see if I can do it alone. I want to be debt free before we even consider getting married and having kids. Sooner rather than later! 

Any advice appreciated. Hopefully this is a judgment-free zone. Constructive admonishment expected and welcome!

PS - remortgaging to consolidate debt not an option as I have a help-to-buy loan that I need to pay back.

Thanks all

Statement of Affairs and Personal Balance Sheet

Household Information

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 1

Monthly Income Details

Monthly income after tax................ 2600

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0

Total monthly income.................... 2600

Monthly Expense Details

Mortgage................................ 585

Secured/HP loan repayments.............. 124.5

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

Management charge (leasehold property).. 0

Council tax............................. 145

Electricity............................. 38.5

Gas..................................... 38.5

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

Water rates............................. 64

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

Mobile phone............................ 20

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 31

Groceries etc. ......................... 230

Clothing................................ 70

Petrol/diesel........................... 230

Road tax................................ 17

Car Insurance........................... 69

Car maintenance (including MOT)......... 23

Car parking............................. 25

Other travel............................ 52

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

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 25

Pet insurance/vet bills................. 153

Buildings insurance..................... 10

Contents insurance...................... 10

Life assurance ......................... 0

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

Presents (birthday, christmas etc)...... 25

Haircuts................................ 0

Entertainment........................... 100

Holiday................................. 50

Emergency fund.......................... 0

Total monthly expenses.................. 2135.5

Assets

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

House value (Gross)..................... 164000

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

Car(s).................................. 2500

Other assets............................ 0

Total Assets............................ 166500

Secured & HP Debts

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

Mortgage...................... 113017...(585)......4.53

Secured Debt.................. 51.......(8.5)......0

Hire Purchase (HP) debt ...... 5268.....(116)......6.9

Total secured & HP debts...... 118336....-.........

Unsecured Debts

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

Halifax........................13453.....297.......26

American Express...............4896......250.......33.9

Santander......................1835......50........24.9

Total unsecured debts..........20184.....597.......-

Monthly Budget Summary

Total monthly income.................... 2,600

Expenses (including HP & secured debts). 2,135.5

Available for debt repayments........... 464.5

Monthly Unsecured debt repayments....... 597

Amount short for making debt repayments. -132.5

Personal Balance Sheet Summary

Total assets (things you own)........... 166,500

Total HP & Secured debt................. -118,336

Total Unsecured debt.................... -20,184

Net Assets.............................. 27,980

Grumpelstiltskin

OK  Does your partner live with you? If so are the figures your half of the totals ( ie Mortgage, council tax, utilities, groceries etc)

ManyWays

In addition to @Grumpelstiltskin's key questions, when does your mortgage fix end? 

kimwp

Clothing is high - cut this back to essentials (replacing worn out clothes)

 car insurance is high, did you shop around?

Water bill is high - consider a meter

Defaulting is considered better than an arrangement to pay because a default will drop off your credit record six years after it is registered, whereas an arrangement to pay (more likely if you enter a dmp before defaulting) will drop off six years after the debt is paid off.

It's good that remortgaging to consolidate is not an option, that would increase the risk of losing your house.

For a dmp to be sensible, you need to have some surplus to be able to pay towards your debts.

enthusiasticsaver

You have a shortfall although it looks like there is some possibility of cutting back. Pet insurance/vet bills are very high.  Are you comparing quotes? Groceries is high for one person and you could probably not buy clothing for a while and just cope on what you have already. 

If you default then your credit record will be affected for 6 years. The pros of a DMP  is that usually interest is frozen and you can set an affordable monthly payment figure.  You will not have access to credit so you need to save a decent emergency fund. 

Ruthven88

kimwp said:

Clothing is high - cut this back to essentials (replacing worn out clothes)

 car insurance is high, did you shop around?

Water bill is high - consider a meter

Defaulting is considered better than an arrangement to pay because a default will drop off your credit record six years after it is registered, whereas an arrangement to pay (more likely if you enter a dmp before defaulting) will drop off six years after the debt is paid off.

It's good that remortgaging to consolidate is not an option, that would increase the risk of losing your house.

For a dmp to be sensible, you need to have some surplus to be able to pay towards your debts.

Thanks for your response. Car insurance includes breakdown cover. Clothing can easily come down. Water bill is high as I had a leak but should come down after my next annual bill.

Re defaulting do I just cancel my direct debits? Should I tell them in advance of my intentions? Is it best to commit to a token monthly payment (say £1-£50 a month) for 3-6 months and save up an emergency fund, and then create a bespoke DMP/Step Change DMP?

Also, I have heard AMEX are aggressive at pursuing defaulted debts. Am I risk of CCJ?

Sorry for all the questions

RAS

Can you just clarify the points asked previously? I'd also add pets?