Completed SOA, don't know what to do?!

ZeroBalance28

Sat down with my husband yesterday to finally start facing up to our debt issues as we've been burying our head in the sand for a long tim! Bit of background - July 2024 we took out a second mortgage to consoldiate some debt from building work that went well over budget, the amount was affordable and freed up some funds but then my husband lost his job in Sep 24. He struggeld to get a  new job and was doing some freelancing but with no savings behind us and starting from scratch the debt has wracked up yet again. He now has a new full time job and a small amount of freelance work (this is month to month and could stop at any time) but the job is quite a bit less salary than before so with the second mortgage and now all of the credit ran back up i can't see a way out 

Can anyone advise on any of this, are we looking at an IVA or soemthing? I thought we were managing albeit with little left over but logging it all shows we are way under even with the freelance that could stop at any point. We have no savings, emergency or otherwise and are not currenlty saving anything for 'rainy days', all of our credit is maxed out so we are one tyre blow out or leaky roof from a disaster i think.

Please be gentle, i am feeling really ashamed and emotional about this

Household Information[/b]

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

Number of children in household......... 3

Number of cars owned.................... 1[b] - car is leased so not an asset, 2 years left

Monthly Income Details[/b]

Monthly income after tax................ 2226.87

Partners monthly income after tax....... 2880

Benefits................................ 242

Other income............................ 1000[b]

Total monthly income.................... 6348.87[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1450 - (currenlty paying interest only until Jan 26, £509/month. Current fixed due to end around March 2027)

Secured/HP loan repayments.............. 804.6999999999998 (5 year fixed from Aug 24, no early repayment charge)

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

Management charge (leasehold property).. 0

Council tax............................. 189

Electricity............................. 253.25 - combined gas/electric, octopus fixed rate just sorted

Gas..................................... 0

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

Water rates............................. 62.13

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

Mobile phone............................ 100 - 5  sims plus 2 handsets

TV Licence.............................. 15

Satellite/Cable TV...................... 108.59 sky

Internet Services....................... 32 sky

Groceries etc. ......................... 650 - regularly doesn;t cover the full month - 3 teenage boys in the house

Clothing................................ 50 - small amount towards school uniform and football kits, plus growing out of clothes/shoes

Petrol/diesel........................... 70

Road tax................................ 0 (car is leased, tax paid by lease company)

Car Insurance........................... 56.79

Car maintenance (including MOT)......... 17 (saving for service/year)

Car parking............................. 20 -city centre staff discount parking, public transport would be £120/month

Other travel............................ 80 - husbank tram/bus ticket

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

Other child related expenses............ 386 - football subs and registration fee, spends, school dinners, haircuts, saving for son;s 18th in March

Medical (prescriptions, dentist etc).... 41.78

Pet insurance/vet bills................. 122.21 - insurance, food, flea tablets

Buildings insurance..................... 33.86 combined building and contemts - post office just renewed

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

Life assurance ......................... 49.9

Other insurance......................... 29.79

Presents (birthday, christmas etc)...... 290

Haircuts................................ 17

Entertainment........................... 273

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

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

Car lease............................... 317.23

Extra spending money.................... 300

Sundries................................ 120[b] - window cleaner, 'petty cash' for unexpected expenses

Total monthly expenses.................. 5939.23[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 490000

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

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

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

Total Assets............................ 490000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 330000...(1450).....1.5

Secured Debt.................. 78000....(804.7)....10.59[b]

Total secured & HP debts...... 408000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Lloyds card....................10051.....29........24.9

TSB card.......................14933.....162.......24.9

Next...........................316.......18........24.9

Natwest overrdaft..............3194......100.......39.49

Clearpay.......................46........22.74.....0

TSB card 2.....................6647......119.......24.9

Barclaycard....................1000......30........28.9

Virgin card....................16855.....180.......20.01

Cap 1 card.....................4263......150.......15.66

MBNA card......................12243.....368.......23.59

Sofa...........................1486......57.13.....0[b]

elsien

Hello, welcome to the forum.
You have quite a lot in there for entertainment and presents - Three Teenage children so not unexpected, but I was just wondering if that money is actually being put aside, and if not where else it might be going? 

And what does” extra spending money” actually cover because the stuff you know about should already be in your budget and accounted for.  Ditto sundries, which just seems to be a duplicate of the extra spending money category? 

And if it’s just evaporating, your first job should be to work out where it’s evaporating to.

Most people don’t get the figures right first time. Are yours a guess or have you gone back over credit card statements et cetera to try and put it down a bit more? 

RAS

You've not posted the final analysis but you've over 6k per month in income, nearly 6k in spends and about 60k in debt including the car lease?

Historically, I'd suggest that having debt worth less than a year's income, it's doable. 

Others will be better able to advise but I can't see an IVA accepting some of your spends. And your current surplus is low.

You will need to explain to the "kids" that their lives are going to be different in future and they need to manage their expectations. And that their past lives for the last decade or so were funded by overspending which came back to bite you all in the bum when dad lost his job.

The APR on that secure loan may be lower but you may well end up paying more in interest because of the longer time frame.

Are the unsecured debts joint? Once you have 10 posts, can you go back and edit the list with his, hers, joint, please. I assume the Natwest OD is joint?

(Edit)Do either of you have sole bank accounts that are in credit? (/).Otherwise, whatever happens going forward, you need to get new basic sole bank accounts (no credit check) or sign up for Monzo or Starling. Also each set up an instant access ISA with a fiver.

Come back and let us know about joint accounts.

You'll be transferring income and essential DDs to the new accounts but do not use the Switch mechanism as that transfers the DDs to creditors.

You'll need more advice from other people before doing that though.

I suspect a bit more info on the car lease would be useful.

Once you stop paying the unsecured debt, you'll have money to put into an emergency fund (ISA). You are going to need at least a month's expenditure.  Your creditors will react but it'll take 6-18 months for them to default the debts.

That means you have time to save, review your current spending and make decisions.

Do nothing in haste, that's the sure way to make a bigger mess.

Smudgeismydog

Well done for acknowledging the situation, and posting.

I echo the other posters noting the following categories look high;

Sky satellite £108.59
Presents at £290 
Entertainment £273 on top of £386 for child related expenses
Extra spending money of £300 plus sundries at £120

If you really want to crack this, as RAS explained, it would be helpful to have a discussion as a family, that your lifestyle will need to change. 

Grumpelstiltskin

I think you need a very serious family conversation.

You just can't carry on as you are.

The teenagers should be looking for part time jobs to pay for their phones etc.

If you don't have a large change of lifestyle things will get to a point where you can't get out.

RAS

Smudgeismydog said:

Well done for acknowledging the situation, and posting.

I echo the other posters noting the following categories look high;

Sky satellite £108.59
Presents at £290 
Entertainment £273 on top of £386 for child related expenses
Extra spending money of £300 plus sundries at £120

If you really want to crack this, as RAS explained, it would be helpful to have a discussion as a family, that your lifestyle will need to change. 

Smudge is right on every point above.

I'm also concerned about sustainability.

£50 for clothing with three teens? How much did you spend last year? Even if they are all male, the younger ones need new shoes twice a year, socks and smalls.

Been there done that as a teen. School dictated styles and colours in those days, so a new pair of regulation shoes every 6 months didn't leave much for fashion.

£20 per adult is possible if you've already got a good wardrobe and buy carefully. With growing teens, some hand down may be possible if you allow another tenner and frequent chazzers.

You haven't any allowance for house maintenance? Extending the life of your major asset is essential. Within 6 years, you may have to replace a boiler, get the gutters cleaned etc. You won't be able to afford redecoration, but freshening a room every two years might be a good idea?

enthusiasticsaver

ZeroBalance28 said:

Sat down with my husband yesterday to finally start facing up to our debt issues as we've been burying our head in the sand for a long tim! Bit of background - July 2024 we took out a second mortgage to consoldiate some debt from building work that went well over budget, the amount was affordable and freed up some funds but then my husband lost his job in Sep 24. He struggeld to get a  new job and was doing some freelancing but with no savings behind us and starting from scratch the debt has wracked up yet again. He now has a new full time job and a small amount of freelance work (this is month to month and could stop at any time) but the job is quite a bit less salary than before so with the second mortgage and now all of the credit ran back up i can't see a way out 

Can anyone advise on any of this, are we looking at an IVA or soemthing? I thought we were managing albeit with little left over but logging it all shows we are way under even with the freelance that could stop at any point. We have no savings, emergency or otherwise and are not currenlty saving anything for 'rainy days', all of our credit is maxed out so we are one tyre blow out or leaky roof from a disaster i think.

Please be gentle, i am feeling really ashamed and emotional about this

Household Information[/b]

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

Number of children in household......... 3

Number of cars owned.................... 1[b] - car is leased so not an asset, 2 years left

Monthly Income Details[/b]

Monthly income after tax................ 2226.87

Partners monthly income after tax....... 2880

Benefits................................ 242

Other income............................ 1000[b]

Total monthly income.................... 6348.87[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1450 - (currenlty paying interest only until Jan 26, £509/month. Current fixed due to end around March 2027)

Secured/HP loan repayments.............. 804.6999999999998 (5 year fixed from Aug 24, no early repayment charge)

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

Management charge (leasehold property).. 0

Council tax............................. 189

Electricity............................. 253.25 - combined gas/electric, octopus fixed rate just sorted

Gas..................................... 0

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

Water rates............................. 62.13

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

Mobile phone............................ 100 - 5  sims plus 2 handsets

TV Licence.............................. 15

Satellite/Cable TV...................... 108.59 sky

Internet Services....................... 32 sky

Groceries etc. ......................... 650 - regularly doesn;t cover the full month - 3 teenage boys in the house

Clothing................................ 50 - small amount towards school uniform and football kits, plus growing out of clothes/shoes

Petrol/diesel........................... 70

Road tax................................ 0 (car is leased, tax paid by lease company)

Car Insurance........................... 56.79

Car maintenance (including MOT)......... 17 (saving for service/year)

Car parking............................. 20 -city centre staff discount parking, public transport would be £120/month

Other travel............................ 80 - husbank tram/bus ticket

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

Other child related expenses............ 386 - football subs and registration fee, spends, school dinners, haircuts, saving for son;s 18th in March

Medical (prescriptions, dentist etc).... 41.78

Pet insurance/vet bills................. 122.21 - insurance, food, flea tablets

Buildings insurance..................... 33.86 combined building and contemts - post office just renewed

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

Life assurance ......................... 49.9

Other insurance......................... 29.79

Presents (birthday, christmas etc)...... 290

Haircuts................................ 17

Entertainment........................... 273

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

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

Car lease............................... 317.23

Extra spending money.................... 300

Sundries................................ 120[b] - window cleaner, 'petty cash' for unexpected expenses

Total monthly expenses.................. 5939.23[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 490000

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

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

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

Total Assets............................ 490000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 330000...(1450).....1.5

Secured Debt.................. 78000....(804.7)....10.59[b]

Total secured & HP debts...... 408000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Lloyds card....................10051.....29........24.9

TSB card.......................14933.....162.......24.9

Next...........................316.......18........24.9

Natwest overrdaft..............3194......100.......39.49

Clearpay.......................46........22.74.....0

TSB card 2.....................6647......119.......24.9

Barclaycard....................1000......30........28.9

Virgin card....................16855.....180.......20.01

Cap 1 card.....................4263......150.......15.66

MBNA card......................12243.....368.......23.59

Sofa...........................1486......57.13.....0[b]

The summary at the bottom of that soa is missing.  

The unsecured debt stands at £71034 and monthly repayments £1235.87.  All of which is high interest so I guess you can no longer get 0% deals? As you only have £400 spare even with the freelance money obviously something pretty drastic needs to happen at this stage.  

You cannot afford many of those categories in the soa. An IVA is pretty inflexible and they would not agree to many of that expenditure so I suggest you look at a DMP instead. Cut back as far as possible but you will be having to repay those debts for quite a few years.  Doing a DMP should freeze the interest though so that will stop it increasing. 

I would look to cut back or out the following categories. 

Satellite TV
Petty cash and expenses.  
Clean your own windows or reduce the number of times they are cleaned. 
Extra spending money
Presents
Entertainment
Vet insurance/costs
Child related expenses.  

You will need to adjust your lifestyle but life will be better if you are not juggling credit. 

I would start immediately by defaulting (cancelling debt repayments) and saving for emergencies as you have no access to credit. 

katsu

Can you check your gas and electric and try to reduce your usage? You are getting into the cold season so it's the time that cutting back will help you.

Cancel the sky TV. Even a year without it will get you about £2k off your debts so it's well worth it.

That £100 on mobiles... how much are the sim only deals? Can you save a few extra there? How long left on the 2 phone handset contracts? 

 Sundries and extra spending is nearly 8-10% of your income so start getting that down. 

Especially as you have over £270 of entertainment every month. 

The great news is that whilst you'll probably still go for a DMP, you'll be able to make this work as you have room to save. 

Also you say that your £650 groceries regularly doesn't cover the full month.. make a more realistic number there so you can start getting the money divided up realistically and then manage to it. Have a few cheap meal days etc to get the budget and month to match. 

Good luck. You can do this!

ZeroBalance28

Thank yuo for all your responses so far, we will sit down again and try to work on some of these figures and the advice on DMP (not sure what that is but can look it up) . I'm not sure why the summaries cut off but they are below. 
Some of the figures are guesstimates such as clothes, school uniform and shoes etc do get exoensive so will need to investigate exactly how much. Gas/electric is a fixed rate we have just started so don;t think we can change it, but will look into phones and tv

Grumpelstiltskin

With a shortfall of more than £1K monthly it will need more than tinkering around the edges for eg. phones and TV.

You need to work out exactly where your money is going and it will need a lifestyle change by all the family.

RAS

A Debt Management Plan is when you stop your agreed repayments on debts, and replace them with lower affordable payments.

This sounds counter-intuitive but can lead to you getting debt free quicker.

If you are only making the minimum payments, almost all will be absorbed by interest. It could take decades to pay off the principal.

Stop meeting the contractual payments and interest and fees on defaulted debts are halted. Start paying once the debt is defaulted and you are immediately reducing the principal. 

So instead of £1k minimum payments reducing the principal by £50 if you are lucky, a £500 payment is now reducing it by same amount. In 6-7 years your credit record recovers.

Don't pay until the default is registered because Arrangement to Pay markers harm your credit record for 6 years after the debt is paid off. It's also important to accrue a good emergency fund whilst you wait for the defaults.

And hopefully, after a few years the new debt owners will accept discounted settlements. 

You'll be able to arrange new fixes with your existing  mortgage provider without credit checks as long as it is up to date. Note your current interest only arrangement may affect that.