Drowning in debt, please help with next steps.

Time2Go_25 · 8 January at 4:01PM

Either I am misunderstanding something or the figures are not quite correct.

At the start you say you've not missed a payment and have a few hundred left at the end of the month, but the SOA has you spending more than your expenses and secured debt, which would leave you with nothing to pay towards the CCs.

kimwp · 8 January at 5:14PM

ineedhelp_91 said:

[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.................... 1[b]

Monthly Income Details[/b]
Monthly income after tax................ 3000
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 400[b]
Total monthly income.................... 3400[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 1175
Secured/HP loan repayments.............. 92
Rent.................................... 0
Management charge (leasehold property).. 220
Council tax............................. 187
Electricity............................. 150
Gas..................................... 0
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 0
Mobile phone............................ 25
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 7
Groceries etc. ......................... 700
Clothing................................ 0
Petrol/diesel........................... 200
Road tax................................ 17
Car Insurance........................... 70
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 8
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 30
Entertainment........................... 100
Holiday................................. 50
Emergency fund.......................... 0[b]
Total monthly expenses.................. 3101[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 300000
Shares and bonds........................ 0
Car(s).................................. 10000
Other assets............................ 0[b]
Total Assets............................ 310000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 200000...(1175).....4.75
Secured Debt.................. 60000....(92).......0[b]
Total secured & HP debts...... 260000....-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
MBNA...........................21000.....580.......4.9
MBNA...........................18600.....550.......4.9
Lloyds.........................14000.....350.......5.9
Halifax........................2500......30........5.9
Virgin.........................5400......53........0
Natwest........................7400......74........0
Tesco..........................4700......46........0
Barclaycard....................7900......80........0[b]
Total unsecured debts..........81500.....1763......- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 3,400
Expenses (including HP & secured debts). 3,101
Available for debt repayments........... 299
Monthly UNsecured debt repayments....... 1,763[b]
Amount short for making debt repayments. -1,464[/b]

[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 310,000
Total HP & Secured debt................. -260,000
Total Unsecured debt.................... -81,500[b]
Net Assets.............................. -31,500[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

It's a great start, but really important that your SOA is accurate, sustainable and includes all your spends. For example, there is nothing for clothing or medical. With children, you must be spending on clothes and there will be some spend for clothes for even very frugal adults as clothes wear out. Also, you have put that you put £50 to a holiday fund, but have no cash.

It will take some time to go through your statements, but understanding your actual spending is key to addressing your current financial situation because the best next steps will depend on what the situation is.

Take your time, it will take a couple of hours at least.

Regarding your fluctuating income, put the average that you can reasonably rely on having in a month.

RAS · 8 January at 7:17PM

What is the £60000 secured debt costing £92 per month.

You need a budget that allows you to cover your costs in a normal month and either pay down debt or save for annual costs like holiday when you get a bonus.

If that can't be achieved there are other options besides bankruptcy.

enthusiasticsaver · 10 January at 12:04AM

Well that soa shows you unable to pay anything towards the debt. Bankruptcy will not help as you need to protect your home. A DMP will not help either as you do not have enough income to pay anything towards the payments. I would suggest as a first step you default and tell your debtors that you cannot afford to pay. Your credit record will be trashed for 6 years but borrowing more is not a good idea anyway. It is all unsecured debt (obviously carry on paying the secured loan) so there is little they can do. You need to live within your income. Your wife presumably does work and gets DLA for your son which needs to go towards the high grocery spends. I assume her income covers things like clothing etc or is her contribution that £400?

sourcrates · 10 January at 12:43PM

You are currently what`s known as insolvent, for all intents and purposes, as your debts far exceed your income.

You need to stop spending now, and realise how close to losing it all you actually are.

You may also want to consider affordability complaints against some of those credit card providers, together they have allowed you to borrow over twice your annual salary, MBNA in particular you are almost 40 grand in the hole to them, due diligence went out the window there me thinks.

The way forward is to cut back your spending to the bone, stop paying the unsecured stuff, and see if you can cobble together enough money to form a reasonable monthly offer of payment to the card companies.

What is the 60k secured debt all about?

The rest of your budget isn`t particularly extravagant, your food cost is high, for reasons already stated above, you have simply over extended yourself with the unsecured credit, so all you can do is offer them some kind of debt management based on what you can cobble together, for now anyway.

SpireCaptain · 10 January at 12:46PM

sourcrates said:

You are currently what`s known as insolvent, for all intents and purposes, as your debts far exceed your income.

You need to stop spending now, and realise how close to losing it all you actually are.

You may also want to consider affordability complaints against some of those credit card providers, together they have allowed you to borrow over twice your annual salary, MBNA in particular you are almost 40 grand in the hole to them, due diligence went out the window there me thinks.

The way forward is to cut back your spending to the bone, stop paying the unsecured stuff, and see if you can cobble together enough money to form a reasonable monthly offer of payment to the card companies.

What is the 60k secured debt all about?

The rest of your budget isn`t particularly extravagant, your food cost is high, for reasons already stated above, you have simply over extended yourself with the unsecured credit, so all you can do is offer them some kind of debt management based on what you can cobble together, for now anyway.

That sounds exactly the situation I find myself in too. I'll be following with interest how you proceed ineedhelp_91. Sending you all the best. You're in the right place and making the first steps.

elsien · 10 January at 11:10PM

You possibly need to go back through bank statements, et cetera, and fill in the gaps. You have an alleged holiday fund, but no holiday money put aside, no emergency fund, no children’s clothes, and with your son’s disability he must have higher expenses than just food? It’s really unclear what money your wife has and what it covers and I wonder in the circumstances if including your wife’s money and putting all the spending down might be more helpful.

No one gets an SOA right first time, but it helps if you know how you’ve up the debt - general overspending over a period of time, expensive toys/hobbies/holidays/gambling or simply life going pear-shaped? Knowing how debt arose can be important in working out how to get out of it.

MasterG83 · 12 January at 4:55PM

Well done for posting, this isnt a judgement on your SOA but a real aspect to helping find a solution, Don't put things in such as £50 a month for holiday if you are not doing that, just put down what youre actually doing.

EssexHebridean · 14 January at 1:42PM

The hardest step here is admitting that things have got away from you and you need help - and you've done that. Now, time to take a breath and work on the detail - so re read what has been suggested above regarding the completion of a full SOA, and then get cracking with that.

To be helpful - most importantly to you, but also to us in helping you with looking for solutions - an SOA needs to be accurate pretty much to the penny. You've said that your income "averages" £3000 a month but remember that means that some months it will be lower than that - so it's always best to base income on money that you are guaranteed to have. For some people that is just a basic salary, for others it might include bonuses that they are contractually entitled to. If you work out the sums based on £3000 a month and then only bring home £2500 though, can you see the problem that would cause in that month, particularly once you have stopped using any credit at all.
The second point on this involves the issues with rounding figures - so a bill that you know is actually £25.99 a month, but you round to £30 will leave you with £48 a year unallocated - that sounds like small fry, but if that is happening over several bills, it's all money that you need to have accounted for and working for you.

The SOA also needs to reflect your situation "right now" - it should be a snapshot in time. It doesn't need to show what you think you are doing, wish you were able to do, or what you think we expect to see, just what the situation is now. The adjustments to that happen in the fine tuning - and it will be the final version that you initially move forwards with that informs your ongoing budget.

It sounds from what you have said that the debts are household ones, and so the SOA needs to reflect that, and that means that you also need to count all other outgoings AND income as "household" as well.

You can do this - like I say, the hardest step is done, now you've had the lightbulb moment everything flows from that.

ineedhelp_91 · 16 March at 5:39PM

I have decided to go ahead and stop paying my credit cards, I will go ahead and wait for the default before I restart making any payments. In that time I will go ahead and build a buffer.
The only thing I wanted to ask if if have a credit card with the same company as mortgage provider, will there be any issues now or when I re sign a new deal?

Drowning in debt, please help with next steps.

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