Some advice please

Penguin29

Hi everyone,
i have been hovering over the post button for some days how. I am in around 21k of personal debt. 3x credit cards & a Very account. 10k, 6k, 4.5k & £500
. 

I have considered a DMP with step change but then I have been reading threads on here for around a week which suggest the best form of action is to first stop making payments to allow a default. I own part of my home (shared ownership) and just wondered if this would affect me keeping my home. 

Thank you for your time. 

kimwp

Well done on taking that scary first step. Each step will get easier.

If you can't afford the debts, then it's likely best to default on them (before going into a dmp with Stepchange). It will have a negative impact on your credit record, so may limit you to staying with your current provider when it comes to a remortgage for several years. But having defaults will limit the impact to six years after default, whereas arrangements to pay will stay on your credit for six years after the debt is settled.

It's almost always worth posting an SOA (link in my signature) of your income and outgoings before defaulting as you may find there are areas that you can cut back to avoid defaults. Even if this ends up not being the case, you'll have some very knowledgeable people to provide advice on the best next steps and having an SOA/budget is a very good idea for working through a dmp.

sourcrates

Consumer credit debts are mainly all unsecured, non essential personal borrowing.

It is theoretically possible for a lender to take legal action and obtain a charging order against a homeowner, this is an extremely rare occurrence though, and as long as payments are maintained to the arrangement, further enforcement action is not allowed.

That would be worst case scenario, in practice, once a DMP is set up, and you are making regular payments again, all carries on as normal, just like before, you won`t know you are in one basically, so please don`t worry about what could happen, as it likely won`t.

RAS

I'd double on putting up an SOA. More often than not part of the issue is that the person/family aren't budgeting for some irregular expenses. Which has given them a false sense of affordability and ended with those items going on cards when money is too tight. A sustainable SOA needs to be realistic.

The other essential reason you need to delay payments is that without cards you need a good emergency fund. As shared owner you are 100% responsible for repairs, so you need to be able to deal with a new boiler or a leaking roof etc. Or pay the mortgage if you are off sick.

Penguin29

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household...........  2

Number of children in household.........  2

Number of cars owned....................  [b]

Monthly Income Details[/b]

Monthly income after tax................ 1733

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

Benefits................................ 173

Other income............................ 0[b]

Total monthly income.................... 1906[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 221

Secured/HP loan repayments.............. 0

Rent.................................... 220

Management charge (leasehold property).. 0

Council tax............................. 180

Electricity............................. 50

Gas..................................... 15

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

Water rates............................. 20

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

Mobile phone............................ 38

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

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

Internet Services....................... 40

Groceries etc. ......................... 250

Clothing................................ 20

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 80

Childcare/nursery....................... 44

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

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 0

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

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

Presents (birthday, christmas etc)...... 0

Haircuts................................ 25

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 1203[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 0

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

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 0[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 42678....(221)......4.68[b]

Total secured & HP debts...... 42678.....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Very ..........................4500......167.......59.9

Virgin credit .................10000.....199.......19.9

NatWest credit ................6000......170.......19.9[b]

Total unsecured debts..........20500.....536.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,906

Expenses (including HP & secured debts). 1,203

Available for debt repayments........... 703

Monthly UNsecured debt repayments....... 536[b]

Amount left after debt repayments....... 167[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 0

Total HP & Secured debt................. -42,678

Total Unsecured debt.................... -20,500[b]

Net Assets.............................. -63,178[/b]

The reason I have not put the other adult in the house’s income is we are going through separation. We will have to still live together for at least another year. 

Grumpelstiltskin

OK So the other adult isn't paying anything towards their food, mortgage, rent, council tax all the utilities they are using?

You must get buildings and contents insurance, that is vital.

RAS

It doesn't quite work like that, going forward.

Obviously the house has value? How much? Because it's likely that your ex will want a share of the equity. And there's another issue if they are on the mortgage.

If you are separating, do so formally and claim benefits as a single person. Your ex pays you 20% of their gross income for child maintenance and a share of other costs, so half the CT, perhaps a third of utilities etc. 

It's messy but it can be done if you are genuinely separated.

Based on your SOA, you've obviously spent quite a lot on stuff. Some of that is useful now, some may be useful later, a box of clothes that will fit number 2 in a couple of years is a lot cheaper than buying those clothes, for example. Otherwise, no more stuff, and sell off anything you no longer need. The kids need to know that stuff isn't on the agenda whilst you need to handle the situation with your ex so he doesn't have shed loads to treat the kids.

I'd also challenge some of your very low costs like utilities and groceries, clothing. Go through old accounts and work out how much was spent last year.

You do have a new basic (no credit check) or Monzo/Starling account into which income is now going? You'll need to move the DDs for rent and mortgage, utilities personally. Do not use the switch facilities as that will set up the DDs for the debts.

ManyWays

Have you halved some of the expenses in your list, assuming your soon to be ex pays the other half?
If not, then the foillowing lines are either way too low or need some money in them if they are at zero

Groceries etc. ......................... 250
Clothing................................ 20

Childcare/nursery....................... 44

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

Medical (prescriptions, dentist etc).... 0

Presents (birthday, christmas etc)...... 0

Entertainment........................... 0

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

Penguin29

Hi,

I do have insurance it’s included amongst the ‘rent’ part of the shared ownership. 

Yes my ex husband will be paying half of everything. It’s a fresh break up and we are still trying to navigate the whole splitting thing. 

My house was evaluated at 220k by the mortgage company however tbh I don’t know how it works when it comes to selling a shared ownership because as I say this is a new break up and I didn’t plan on doing this (I definitely need to look into it)

I have my own bank account that my wages go into and then a joint bank account which his wages go into where I was sending all my wages across. We will now use the join account for just bills. 

RAS

So how much did you buy, 25%, 50%, as that dictates how much equity there is in the house?

The divorce settlement will tot up assets and debts and and look at the family needs. Do either of you have pensions, as the value of those will be taken into account.

The starting point is that net resources are shared 50:50, though one may hold onto their pension and the other get more equity, or some such. It's possible that one may get more or less that 50% depending on earnings potential.

You need to close the joint account, or at least take your name off. Association with your debt will drag his credit record down. Unless he's got his own debts.

Penguin29

Hi,
its 25% and we both have pensions through work. 

He has his own debt also.