First time taking the leap - can no longer afford my repayments - PLEASE HELP

Inavbigmess

Hi all,

My unsecured debt repayments have become unaffordable and I would appreciate your advice on next steps.

Background

I am a self-employed contractor which means I earn a good wage while I am working, however there have been lengthy gaps between contracts where I have earned nothing at all. This, paired with vital home improvement costs have led to me owing a large sum across multiple credit cards and 2 loans. I am currently earning £48,000/year however my current contract expires in 3 months’ time.

All of my debts are unsecured and up until now have been maintained with minimum payments. I have to borrow money however from family to make ends meet each month.

I’ve included a list of my creditors (in no particular order) below;

Creditor	Balance
MBNA Loan	£10,000
Santander 2204	£5,719
Santander 6491	£4,699
Barclaycard	£952
NatWest 4579	£2,100
NatWest 8035	£7,455
Family Loan	£17,014

Current Actions

Yesterday I cancelled all of my direct debits and will not be making any further repayments. My aim is to have all my creditors issue a default while I look into arranging a DMP with Step Change.

After reading through the helpful forums on here, I have set up a new current account with an unrelated bank and have had my salary and priority bills (phone etc) transferred over.  

This will be my first month of arrears, so I expect to receive letters/calls etc from all providers.

Questions

 

1.     Am I right in my approach to cancel all debt payments and save this money to create a buffer? If so, how long should I plan to do this before beginning a DMP?

2.     What communication, if any, should I have with the creditors?

3.     Should I be making complaints to my creditors for unethical lending?

4.     Is there anything else I am missing which could help me make the best of this poor situation?

Thank you in advance.

SOA:

Total income		£             3,173.33
Total spending		£             2,770.42

Mortgage payment		£                  822.76	Month
Buildings insurance		£                     20.32	Year
Council Tax or Rates		£                  193.00	Month
Gas		£                  130.00	Month
Electricity		£                  100.00	Month
Water		£                     86.00	quarter
Home phone and broadband		£                     24.00	Month
Mobile phone		£                     27.00	Month
TV licence		£                     13.50	Month

Grocery shopping		£                     75.00	Week
Takeaways		£                     10.00	week

Clothes

£                  240.00

Year

Hairdressing		£                     40.00	Quarter
Toiletries		£                     10.00	month
Eye care		£                  200.00	Year
Prescriptions & medicines		£                     10.00	Month

Bank account fees

£                     26.00

month

Activities & clubs

£                     20.00

Month

Loan repayment to family/friend

£                  347.45

Month

Petrol/diesel		£                     80.00	Month
Car insurance		£                  350.00	Year
Car tax		£                  200.00	Year
MOT		£                     50.00	Year

TV, music, media and gaming subscriptions		£                     40.00	Month
Hobbies		£                     45.00	week
Health & fitness		£                     55.00	2 weeks
Birthdays		£                  100.00	Year
Christmas		£                  200.00	Year

Spending breakdown		Totals per month	% of all expenses
Household bills		£                         1,340.62	50%
Living costs		£                            439.35	16%
Finance & insurance		£                              26.00	1%
Family & friends		£                            367.45	14%
Travel		£                            130.00	5%
Leisure		£                            380.03	14%

fatbelly

You are doing the right things for now

Review the situation in 3 months when hopefully a new work contract will be in view.

On q2,3,4 there is little point in engaging with the lenders as it just slows down the default process. There is no downside to affordability complaints. I can't think of anything else

Smudgeismydog

Comments on your SOA;

- your water seems high, how many in the household? are you on a meter?
- groceries at £75 per week, depends on how many people this covers, do you meal plan and batch cook?
- takeaways at £10 per week, can you ditch this and make your own ‘fakeaway’ for a while?
- clothes at £240 a year, can you try Vinted for purchases? And while you are at, is there anything you can declutter and sell? 

- activities and clubs, tv, music and gaming, hobbies and your health & fitness are costing you £4,490 each year. That is a lot of money, can you make cutbacks here? 

Inavbigmess

Smudgeismydog said:

Comments on your SOA;

- your water seems high, how many in the household? are you on a meter?
- groceries at £75 per week, depends on how many people this covers, do you meal plan and batch cook?
- takeaways at £10 per week, can you ditch this and make your own ‘fakeaway’ for a while?
- clothes at £240 a year, can you try Vinted for purchases? And while you are at, is there anything you can declutter and sell? 

- activities and clubs, tv, music and gaming, hobbies and your health & fitness are costing you £4,490 each year. That is a lot of money, can you make cutbacks here? 

Hi,  

1. Water is based on two adults and a newborn. I think we're on estimated readings but I'm not sure how to change that as the meters in the road and impractical to read regularly. 

2. The £75 includes most cleaning, toiletry and baby items like nappies etc. 

3. Takeaways are worst case scenario if we happen to be out and need a bite. Generally don't get takeaways when we're at home. 

4. £240 is based on the fact I'll probably need new office clothes/shoes for my new job. Currently selling as much as I can on vinted. 

5. The spending on hobbies/ health and fitness is for physio and training helping to rehabilitate to injuries. I could probably make some cut backs though yes. 

Thanks for the advice 👍

Inavbigmess

fatbelly said:

You are doing the right things for now

Review the situation in 3 months when hopefully a new work contract will be in view.

On q2,3,4 there is little point in engaging with the lenders as it just slows down the default process. There is no downside to affordability complaints. I can't think of anything else

Thanks for your message - what would you suggest I do when my contract comes through? I only ask because my I come will come down and that, of course, restricts my choices.

RAS

You need to budget for when your income comes down.

What can you actually afford when that happens?

Do you have any rainy day savings?

Inavbigmess

RAS said:

You need to budget for when your income comes down.

What can you actually afford when that happens?

Do you have any rainy day savings?

Hi RAS. Thanks for your message - as it stands I'll be able to afford very little when my income changes. I have done an estimated/preliminary SOA for that situation however I haven't posted it as anything could change between now and then. 

I do not have any savings/emergency funds. I'll try to build something from the money recuperated from the cancelled repayments until they default. 

EssexHebridean

In your shoes, as well as ring fencing the payments which would otherwise have gone to the debt you are no longer paying, I would also be posting that SOA to have an eye run over where else savings might be made that you might have missed. It's certainly a sensible plan to cut things to the bone now with a view to stashing as much as possible away for any lean months, and going forwards, you need a 6 month EF in place more than most. 

sourcrates

You won`t be able to use Stepchange for a DMP, as they don`t deal with the self employed, I believe Payplan do though.

Inavbigmess

https://forums.moneysavingexpert.com/discussion/comment/81852277#Comment_81852277

Ahh okay I forgot about that.

The way I'm employed is through an umbrella company so they act like my employer (sort out pension, tax etc) so I'm not sure if thats still considered self-employed? It's more like a fixed term contract thats definitely going to end.

Nonetheless I'll get onto Payplan. Thanks

Stateofart

Electric and gas should be more or less two-thirds of that unless you have an extremely drafty house or like the heating on a lot.

Water should be around £30 if you are on a meter. If not, get on one.