£75k debt. Where to start?

confused_confucius

 I have ended up in a difficult situation. £71000 in debt across 8 credit cards, three loans, overdraft and store cards, PayPal etc. I was just about managing to get by until I was hit with £4500 HMRC bill and emergency tax code that swiped £1000 from my income until April.

I can post this all again with the SOA but having been through things with stepchange after April I would have around £900 to pay the debts but need £750 a month for the first 6 months to pay HMRC. Stepchange suggest calling all my creditors to ask for a payment suspension and then breathing space but is the end result the same as me not paying them and waiting for the debts to default?

Of course I wish this didn't happen but now I need to try to solve it. I think even if I can manage £1000 a month that'll have me done in 6 years and then I never want to look at credit again!

I suppose all I'm asking is whether I should follow stepchange from now or just take my own breathing space, deal with HMRC in the first instance, make token payments for the rest and then pick it up with stepchange once debts have defaulted. Any advice is much appreciated. Thank you

Smudgeismydog

My feeling is that a payment suspension and then breathing space is just delaying the inevitable, and not really helping in tackling this.

I’m sure others will agree, the HMRC debt is priority, so yes, I would agree let the others default and focus on that one first. You can use Stepchange, or self manage after the defaults.

Completing an SOA is always helpful, so we can see your overall picture and potentially offer some thoughts and guidance.

RAS

We can't tell you what to do. It is going to be your decision.

People will here may have different views at to what they would do in your situation, but they've limited information so far.

The SOA is important in working out how much slack you've actually got in your budget.

Of more importance is knowing how you got into this level of debt in the first place, and tackling the the underlying issues. How did you end up with an HMRC debt that you had not saved towards? Are you in a big hole with a big spade to resolve it or has a trowel?

You've HMRC debt, so presumably some income is self-employed, freelance etc? What plans have you to ensure that the same doesn't happen again next year? Have you got a good separation between business and personal finances or is one subsidising the other?

No absolute need to tell us but you need to be clear how the situation occurred and work out how to deal with it going forward.

confused_confucius

Thank you all for the replies. I mean it is kind of as I'd thought it would be and I'm going to prioritise the HMRC debt first.

I'll do a SOA later but to clarify the HMRC one. Yes it was from some freelance work, not massive earnings and they've since dropped significantly. I think I was using it too much as a buffer to pay the other debts that came first. But the HMRC debt is actually across two tax years. 23-24 and 24-25. Each one individually would have been below the threshold for collection by PAYE which is what I'd planned for, but after that 23-24 self assessment HMRC did not notice I'd asked for collection by PAYE and eventually admitted this mistake and have brought it forwards to be paid this January, which tipped me into having to pay HMRC myself rather than by PAYE. I guess it sounds like I'm making excuses and 100% I've been struggling for a while, but equally I might have tried to juggle things a little longer if it wasn't for the £4500 lump sum.

Any future freelance earning I would probably be in a better position to save rather than having to use to service debt in the distant future when I've cleared things. That's the plan anyway

ManyWays

I think a Statement of Affairs would be helpful.
Could you use the numbers that you put into the Stepchange budget and include the names of the lenders.
And add some notes at the bottom about any you think are too low or too high.