Not sure where to start. Large debt & just sold house but likely being made redundant tomorrow

horsey666

Hi everyone,

I’m hoping someone can offer some advice.

My wife left me three years ago, and for the first 18 months I really struggled to cope — not just emotionally, but with managing everything outside of work. I found it hard to keep up with the mortgage on my own (she moved out), along with all the bills, child maintenance (two teenage kids who stay with me a couple of times a week), and so on.

Long story short, I buried my head in the sand and my debt grew from around £9k to £45k (credit cards and loans). I currently take home about £4,000 per month, and around £1,500 of that goes toward minimum payments on my debts. I’ve never missed a payment, but I’m only ever paying the minimum.

Recently, we sold the house, and I now have about £33k from the sale. I’m currently living with relatives.

My original plan was to pay off as much debt as possible and then move into a rental property. I figured if I could get my debt down to around £15k, I could use my salary to pay that off completely over time.

However, I’m 99% certain I’ll be made redundant tomorrow. I’ll likely struggle to find another job that pays as well — or possibly any job at all for a while, as I’m currently waiting for back surgery for a trapped nerve and can’t walk properly.

I’m not sure what to do next. I’m planning to speak with someone (StepChange or Citizens Advice), but my first instinct was to just use the £33k to pay off as much debt as I can. The problem is, I’m worried that if I do that, I’ll end up effectively homeless — still with some debt left and no money coming in.

Would it be wiser to hold onto some of the money to support myself while I recover and look for work? And if I start missing payments, would I even be allowed to keep any of it, or would creditors expect it all to go toward the debts?

I honestly don’t know what the best course of action is, and I’d really appreciate any advice or perspective from anyone.

Thanks

Grumpelstiltskin

OK You have come to the right place to get help.

The  first thing I will say is don't panic and don't rush into doing anything, debt collection is a very slow process and even if you stop paying all your unsecured debts tomorrow nothing terrible will happen.

At the moment you need to hang on and see if you are going to be made redundant. Have you been there long enough to qualify for a redundancy payment?

When you get the proceeds from the sale of the house don't rush in panic mode to pay your debts off.

ManyWays

It sounds as though a lot of this debt is very recent? Are you likely to get any redundancy pay? How long until your back surgery? 

horsey666

Grumpelstiltskin said:

OK You have come to the right place to get help.

The  first thing I will say is don't panic and don't rush into doing anything, debt collection is a very slow process and even if you stop paying all your unsecured debts tomorrow nothing terrible will happen.

At the moment you need to hang on and see if you are going to be made redundant. Have you been there long enough to qualify for a redundancy payment?

When you get the proceeds from the sale of the house don't rush in panic mode to pay your debts off.

Thank you.  I've been with the company for three years.  I will qualify for redundancy - from what I understand it will be slightly enhanced over statutory but not much.
I already have the proceeds from the sale of the house (£33k) and it's in my current account.  I also have a car that is worth around £8k (I had planned to sell this and just get a cheap runaround)

horsey666

ManyWays said:

It sounds as though a lot of this debt is very recent? Are you likely to get any redundancy pay? How long until your back surgery? 

I will get around £4k redundancy I think.  Not sure about the surgery - the procedure has been authorised by my workplace health insurer but if I lose my job, I may have to go back to my GP and get it done by NHS (if I am no longer with the company who provides the health benefit)

Grumpelstiltskin

Get what you can of your house proceeds into an easy access cash ISA not with any banking group you  owe money to, try a Building Society.

Then just hang on until you know if you are going to be made redundant.

badmemory

Read up on that health insurance today.  Some last for the year.  It may be better to actually pay for the op than to wait.  If you wait how long will any money you have last.  Yes you will have unemployment benefits, but looking for a job when fit would be much easier.

sourcrates

Hi, welcome to the forum, I sympathise with your situation, my marriage ended 14 years ago, and I went through similar issues you are now facing, including the back trouble (three herniated discs) although I managed to keep my job luckily.

There is absolutely no rush to repay your non essential debts here, tell me, and I want you to think about this, what exactly do you think your creditors can do to you, when (1) you have no home of your own, (2) you have no tangible assets, the money you have will be needed to live on for now, and (3) you are not working, what is it you think they can do to you?

The answer is absolutely nothing, they have no recourse whatsoever to recover this money from you as things are currently.

Yes they can waste their money on taking you to court, obtaining a CCJ and all that malarkey, but then what?

They can`t garnish your wages, you don`t have any, they can`t engage bailiffs, you have no formal address for them to visit, forget statutory demands and bankruptcy non of that is going to happen, most banks/debt buyers will have given up long ago, so what I`m trying to say is your debts are of little or no concern at present anyway.

Your priority is a place to live, sorting your health issues, obtaining benefits, if you can, and searching for new work, only once all of that is sorted can you even think of servicing your debts, you must get your priorities in the right order here.

RAS

Going to reiterate things said already but blunter.

You've got your priorities wrong. Forget about minimum payments. Cancel all the DDs apart from stuff like car insurance.

Your priority is to secured your money for housing and your future.

Get a new basic bank account unrelated to anyone to whom you owe money and ensure any redundancy goes into that. Move the money for the house sale into an instant ISA, also unrelated. 

Once you know about the redundancy, you can plan further. 

I'd add, hopefully you've already revised the Nomination forms for your pensions schemes? And your will? 

horsey666

RAS said:

Going to reiterate things said already but blunter.

You've got your priorities wrong. Forget about minimum payments. Cancel all the DDs apart from stuff like car insurance.

Your priority is to secured your money for housing and your future.

Get a new basic bank account unrelated to anyone to whom you owe money and ensure any redundancy goes into that. Move the money for the house sale into an instant ISA, also unrelated. 

Once you know about the redundancy, you can plan further. 

I'd add, hopefully you've already revised the Nomination forms for your pensions schemes? And your will? 

Thank you.  I need blunt advice.
I have around £33k from the house sale.  AFAIK I can only put in £20k to an ISA - should I do this now, and put the rest into a standard savings account with another (unrelated) bank?
I should find out tomorrow if I'm being made redundant.  But it's hard to know what to do - if I keep my job I could potentially pay all debt off within a year, but I could end up paying up as much debt as possible next week, then lose my job anyway after Xmas...  then I'd have nothing

horsey666

sourcrates said:

Hi, welcome to the forum, I sympathise with your situation, my marriage ended 14 years ago, and I went through similar issues you are now facing, including the back trouble (three herniated discs) although I managed to keep my job luckily.

There is absolutely no rush to repay your non essential debts here, tell me, and I want you to think about this, what exactly do you think your creditors can do to you, when (1) you have no home of your own, (2) you have no tangible assets, the money you have will be needed to live on for now, and (3) you are not working, what is it you think they can do to you?

The answer is absolutely nothing, they have no recourse whatsoever to recover this money from you as things are currently.

Yes they can waste their money on taking you to court, obtaining a CCJ and all that malarkey, but then what?

They can`t garnish your wages, you don`t have any, they can`t engage bailiffs, you have no formal address for them to visit, forget statutory demands and bankruptcy non of that is going to happen, most banks/debt buyers will have given up long ago, so what I`m trying to say is your debts are of little or no concern at present anyway.

Your priority is a place to live, sorting your health issues, obtaining benefits, if you can, and searching for new work, only once all of that is sorted can you even think of servicing your debts, you must get your priorities in the right order here.

Thank you.  I'll wait and see what tomorrow brings, job wise, and then go from there.
It's crazy....3 years ago I had a wife (of 16 years), 2 great kids, a nice house and a good job.  Now I'm effectively homeless, divorced and about to lose my job.  Life is crazy