Help, £35,000 in unsecured debt and drowning

Tipper9242

So the internet, I've got a plan to reduce the bill by about £40/mo in february, as I'm coming to the end of a contract on something.

Home and pet insurance is already the cheapest I can make it - the home insurance is actually a joint home / car policy (so I've apportioned the budget equally) but it was the cheapest I could make both of them work out at together. Pet insurance I do shop around.

In summary, I have a plan for the next couple of months from what I've been advised here and also read:

• Open an account with a bank that I don't owe any money to / have credit with (I did this on Friday, I have a monzo account and a chase account, neither of which I have any credit with (and are not in banking groups with creditors)
• Speak to all the creditors to advise that I likely won't be able to pay for the next couple of months, whilst I sort out my finances and get a budget in order (is it worth starting a consultation with StepChange so I have a reference number?).
• If any of the 0% or 5% loans aren't willing to keep the promotional rate if I don't pay, make the minimum payments (max £365.69)
• Be mindful of my outgoings in Jan and Feb to have a sustainable, but cut back, lifestyle to look at revising my SOA in terms of the monthly costs to get them down - I've already identified some grocery savings I can make and cutting back on eating out. I have some things planned that I've already bought tickets for, so as long as I don't buy anything while I'm there I can still have some "fun" without needing to buy anything else.
• I can then look at a revised budget / SOA in march time based on a reduced set of costs.
• Review anything e.g. internet costs that I can also reduce - hopefully I can get that down by a significant amount in Feb.

I've just had a (somewhat rare!) bonus of around £1000 come in from some work I've done, so I've put that aside in a Monzo savings pot so I'm not stressing about car / home insurance in May and don't resort to credit.

Does this sound reasonable?

Tipper9242

kimwp said:

Hiya, in addition to the steps above, you need to understand why you have such a big debt. You have very generous amounts in your SOA for the various aspects of your life, so how have you built this debt? (You don't need to share why, but you do need to understand why in order to not build the debt again)

Thanks! if I'm honest, going through the SOA and looking at what I was spending on what was quite eye opening in the first place!

Brie

If you have any promotional rates like 0% or lower than average for some reason then you'll likely lose those rates with the first missed payment.  So think if you want to do that. 

As mentioned before pick one, or perhaps 2, of the cards that have low interest anyway and pay that off asap and use that for your daily payments.  The rest can just wait for their money.  There's no need to give them a reference number from StepChange. 

You can in fact self manage the whole process yourself (many people do) but if you think you will need help then do use a debt advice agency.  Certainly don't enter into any agreements about payments (aka any DMP) until a debt has defaulted.  StepChange has, with some, got DMPs agreed before debts have defaulted.  

itsthelittlethings

Is that your car at £400 a month? I think that and the entertainment are what's killing you. I guess you can't do much about the car.

fatbelly

itsthelittlethings said:

Is that your car at £400 a month? I think that and the entertainment are what's killing you. I guess you can't do much about the car.

If it's hp/pcp then you can do a voluntary termination.

Whether that's a good idea or not depends on various things.

Tipper9242

Not half way through total amount owed yet, but will be looking at that when it comes (and when I've saved up some for another car as I need one for work!)

kimwp

I'm not sure that talking to your creditors about a break is the best idea. From a look at your SOA, you have to cut back by £1000 to just be paying your minimums with no slack, which is possible, but there will be no slack to overpay and bring the debt down, before offers run out (unless you really slash your budget and live like a monk). If you tell the companies that you won't be paying for a few months, you'll likely get arrangements to pay or defaults and won't have any offers available.

I'll hop on to my laptop to go through the numbers...

kimwp

Monthly Income Details

Total monthly income.................... 3336.5

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 408.1
Rent.................................... 650
Management charge (leasehold property).. 0
Council tax............................. 104
Electricity............................. 63
Gas..................................... 63
Oil..................................... 0
Water rates............................. 33.14
Telephone (land line)................... 0
Mobile phone............................ 100.59 >> early note says in contract (but later, could reduce to £5-15)
TV Licence.............................. 14.54>> assume for calc, no iplayer/live TV
Satellite/Cable TV...................... 0
Internet Services....................... 80>> reduce to £40 (saving £40)
Groceries etc. ......................... 360 >> reduce to £200 (some spend less than this, but this gives some slack)
Clothing................................ 85 >> reduce to £10 (essentials only)
Petrol/diesel........................... 150 >> assume essential (can any savings be made eg is it for your entertainment?)
Road tax................................ 17.06
Car Insurance........................... 42.5 >> assume this is the cheapest and you have shopped around using the MSE guide
Car maintenance (including MOT)......... 80 >> seems high? But if it is what you spent last year, it is what it is.
Car parking............................. 35 >> assume essential
Other travel............................ 200 >> assume essential
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 1 >> seems low?
Pet insurance/vet bills................. 55 >> noted in another post that you shop around for this.
Buildings insurance..................... 0
Contents insurance...................... 42.5 >> seems very high, esp if it's only part of the total (which I think you said in another post) - for reference, mine was £210 for the year at last renewal, insuring 4 bed semi in Nottingham with £20k contents). But for this calc, assume it can't be reduced
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15 >> could go to zero, but assume no change for the calc
Haircuts................................ 16>>  assume this is the cheapest while still looking presentable
Entertainment........................... 447>> if you are super serious, this could go to zero, Assume £50 for this calc
Holiday................................. 0
Emergency fund.......................... 25
Eating / Drinking Out................... 190 >> if you are super serious, this could go to zero, Assume £50 for this calc
(Unnamed monthly expense)............... 0
Total monthly expenses.................. 3277.43


With the changes outline above, that only carves out £780, giving you a shortfall of £276 just to pay the minimums. Unless you can find room in your budget for that £276 plus another £100-200 to start reducing the debt, you are likely better to stop paying with no communications with your creditor to get defaults as soon as possible.

Tipper9242

So that makes sense, I think quite do-able. I'll work to that as a budget and see how I go over the next couple of months to build up an emergency fund. Is there any advice to dealing with the different creditors? I've particularly heard Amex aren't very nice following defaults?

MEM62

Tipper9242 said:

Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2836.5
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 500
Total monthly income.................... 3336.5

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 408.1
Rent.................................... 650
Management charge (leasehold property).. 0
Council tax............................. 104
Electricity............................. 63
Gas..................................... 63
Oil..................................... 0
Water rates............................. 33.14
Telephone (land line)................... 0
Mobile phone............................ 100.59. Too high.  Get a sim only deal for £10 - £15 per month.  
TV Licence.............................. 14.54
Satellite/Cable TV...................... 0
Internet Services....................... 80
Groceries etc. ......................... 360. For one person you should be able to do this for less.  You could              probably shave £100 a month off of that.  Bargain brands, batch cooking etc etc.... 
Clothing................................ 85
Petrol/diesel........................... 150
Road tax................................ 17.06
Car Insurance........................... 42.5
Car maintenance (including MOT)......... 80  
Car parking............................. 35
Other travel............................ 200  You are already spending £150 on fuel. What does this extra cover?  
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 1
Pet insurance/vet bills................. 55
Buildings insurance..................... 0
Contents insurance...................... 42.5
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 16
Entertainment........................... 447 A combined £637 a month on enjoying yourself.  I would suggest that, in your current situation, that really is not sensible.  You need to cut this drastically (To maybe £100 or so.) as this is just not affordable.     

Holiday................................. 0
Emergency fund.......................... 25
Eating / Drinking Out................... 190
(Unnamed monthly expense)............... 0
Total monthly expenses.................. 3277.43


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 10000
Other assets............................ 0
Total Assets............................ 10000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 20500....(408.1)....6.9
Total secured & HP debts...... 20500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
American Express CC............10104.....500.......33.5
First Direct CC................1295......36.4......18.9
Virgin Money CC (0%)...........2717......0.........0
Barclaycard CC.................6473.28...67.33.....0
V12 Finance....................455.63....26.23.....0
EE.............................392.87....18.71.....0
Paypal.........................2008.39...87.15.....0
MBNA CC (Standard).............7795.01...248.4.....30.83
MBNA CC (6%)...................2277.56...0.........5.9
M&S CC.........................1168.31...29.67.....21.9
Virgin Money CC................457.41....42.68.....20.01
Total unsecured debts..........35144.46..1056.57...-


Monthly Budget Summary
Total monthly income.................... 3,336.5
Expenses (including HP & secured debts). 3,277.43
Available for debt repayments........... 59.07
Monthly UNsecured debt repayments....... 1,056.57
Amount short for making debt repayments. -997.5

Personal Balance Sheet Summary
Total assets (things you own)........... 10,000
Total HP & Secured debt................. -20,500
Total Unsecured debt.................... -35,144.46
Net Assets.............................. -45,644.46

Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using Firefox browser.

Firstly, well done for posting.  You will get through this with some work and determination.  

My $0.02 worth above.  

Based on the information you have provided above, you have enough wiggle room to balance your monthly budget.   Also, do you have an understanding of how you got here?  That is a powerful tool in making sure that it does not happen again in the future.