Debts, Assets, and feeling scared

searchingforlight

Hi,

I'm still working on expenditure and APR's but will post it as soon as I can this week for those who feel they can look at and give some advice - thanks for taking the time on this. To answer your question, we have £79k equity in the house and our relative has lent us £1k to clear the oustanding arrears on the mortgage (we're 1 month behind, £790 per month). Because our mortgage is so high it will be cheaper for us to rent (we live in a relatively cheap area to rent).

searchingforlight

Thanks to everyone who has replied so far. You asked for details of my essential expenses, so here they are... any tips on what we could save/improve on would be really helpful. We sat down at the weekend and used the budget planner from this site which really made us stop and think about what we are spending on food, petrol etc. From this week for the next month we have allocated ourselves a cash budget each week for food and petrol and sundries (e.g. paper, coffee etc.) and are both keeping a note of where the cash is going and plan to spend an hour each Saturday going through to see what we are spending money on and if there are ways of cutting back. As we now have only a basic bank account to operate from where we can only work in cash, this seemed like a good approach to take - hope you all agree! So, you know about all the creditors, here is essential stuff (all monthly):

Income: £1600 (husband), £400 (my business - see note below)

Expenditure:

Mortgage £790
Electricity £24
Gas £95 (this is really high as we have LPG and can't afford to switch to oil - there is no mains gas where we live)
Water £16
Telephone £35
Council Tax £72
Car Insurance £45 (for 2 cars)
House Insurance £22
Mortgage Payment protection (accident, sickness etc.) £25
Dentist £15 (for 2 people)
Life Insurance £7
TV licence £10.81
Mobile Phone (2) £60 (some of this is claimed back for business)
Petrol (for 2 cars) - £200
Food - £200

In addition, I live and work away from home during the week and pay out £595 per month on rent plus all other costs associated with another home (utilities, tv licence, council tax etc. - most of this comes out of my business which is why I am left with so little to put in to our private account, but this situation is changing in 2 months time when I will move back home so I will be able to put more in).

You will see from previous posts that our debts are around £90k and just trying to make minimum payments each month costs over £2k.

On a different note, we still haven't contacted our creditors yet. We have the CCCS session on 12th October and thought maybe it would be best to wait until after then so we know what we are doing, e.g. DMP or IVA and can then contact them accordingly. I know people here have said don't delay it because it's going to have to be done sooner or later anyway and so far we are not behind with any payment but we will be by 12th. Given what people have said about harassment of calls, do you think it's best to write to them all or should we take a deep breath and call them? Are we right to hang on until after 12th until we know which route we're going down?

Thanks again to everyone. I don't feel I'm in a position to help anyone here yet (other than moral support) as things feel such a mess but I hope I will be able to soon.

no_control

Hi searchingforlight,

I'm sure someone more experienced than me will be along soon to offer advice on your expenditure, I just wanted to offer some moral support as I'm in debt myself and understand a little of what you must be going through.

I hope you're coping OK and trying to stay positive. You've done really well so far and you're in the right place for lots of good advice and help.

Good luck with everything and keep posting!


no_control

benjamin_4

A few things that jump out (sorry if I've missed anything.)

- Is there any way you could get out of the extra £500 for rent on the second property ASAP? For instance, couldn't you get tenants in for the last few months of the contract and have a nightmare commute?! Or is there an extra room in the flat you could let out?

- I disagree with the idea that you will be 'defaulting soon anyway.' If you have juggled it so far, couldn't you manage to get through a few more months until you get rid of the extra £500 rent and sell the house? Once you trash your credit rating your options will be reduced.

- I know it sucks about the car, but that is one obvious way of releasing a good chunk of cash without too much hardship. You could still buy a nice modern reliable car for 5k, and have 7k left to cover your debts for the say, the next six months until you sort something else out longer term. Again, it will be depressing for you, but I would be working on this from first thing tomorrow as you are now at financial breaking point.

- Do you need to use 2 cars? If you are insisting on keeping the flat which is close to work, why not lose the car altogether and just get the train to wherever you work during the week? Sacrifices, but not the biggest ones in the world.

- Could you get a job near to your home? That way you could lose the extra rent and the car and possibly earn a lot more short term. Can always try the business again when you are out of debt - and perhaps it has some realisable assets associated with it? Running a business must be a nightmare when you are worrying about serving your personal debt as well as the business cashflow.

- Is the house on the market yet? £69k would be a very nice chunk away from that - and most of that money probably came with house price rises which, if you can handle going back to rented accomodation, is a nice return which you would otherwise be unable to realise. If you are happy selling it, then get moving on that as soon as possible. Hopefully by the time you are looking to buy again, prices will be cheaper.

- I wonder if there is any form of secured loan or equity release that you could use to buy yourselves more time. Again it seems that if you had fairly fast cash injection then things WILL be improving for you in a few months.

So yeah, I have also heard good things on these boards about CCCS and other options, but I look at your situation with the equity in your house and car, and see that you could be out of debt within 1 year without trashing your credit rating or defaulting on anything. Suck it up. Sell the house and car and possibly wrap up the business and get a job. That way you would be left with around 15k of debt and substantially higher incomes with less outgoings. Get your head down for a year to get that paid off, take a huuuuge holiday, and start afresh!

(PS I'm just going on what I read here - I'm sure there are issues also that Im not aware of. I really and genuinally wish you the best of luck getting this straight - I just think you need to go through with some tough decisions.)

withabix

I once owed over £30,000 unsecured, so I think I'm allowed to comment.

So, a couple of comments:

Turn your heating down. £95 is a lot even for LPG. Do you have a tank or cylinders? If you have cylinders, get FOUR, then you will be put on a much lower price per cylinder.

A warning one here: You say you're only paying £45 per month insurance for TWO cars. You say you do 'a lot of travelling'. Do you use your car for your business? If so, I suspect that you haven't got Class 1 Business Use on your insurance, as it appears to be way too cheap. If so, that £12,000 car of yours ISN'T INSURED. So you need to get that sorted out ASAP.

Do you really need a £12000 car? Three year old good quality cars with high mileages on cost peanuts. You could get some money back here towards your debts.

Who's name are all of the debts in. Who's name is on the house deeds? This would be worth knowing for each debt and the house, as it MAY be better for one of you to go for bankruptcy. I'm only saying MAY.

Is continuing your business REALLY worthwhile? You are only effectively making £400/month due to your expenditure on another property. Even after you've moved back home, I still only make that £1000/month nett, which equates to a £16000/year salary or about £8/hr. Can you get a job which pays that?

Debt_Free_Chick

benjamin wrote:

A few things that jump out (sorry if I've missed anything.)

- I disagree with the idea that you will be 'defaulting soon anyway.' If you have juggled it so far, couldn't you manage to get through a few more months until you get rid of the extra £500 rent and sell the house? Once you trash your credit rating your options will be reduced.

Surely this won't work?

Income is £2000

Bills are £1616.81

Minimum repayments £2177.70

I rather suspect that some bills e.g. food & petrol have been going on credit cards in the past few months, leaving income to pay the minimum repayments. But the cards are now at the limit and the minimum repayments are more than they were.

As the minimum repayments now exceed income, no amount of juggling is going to result in those payments being met.

Agree with your suggestion however, which is to sell the house and use the equity to pay off the debts.

Need to factor in selling, buying & moving costs ... which could take a good chunk out of the equity. Still seems the best option, though.

Regards

Debt_Free_Chick

searchingforlight wrote:

Hi,

I'm still working on expenditure and APR's but will post it as soon as I can this week for those who feel they can look at and give some advice - thanks for taking the time on this. To answer your question, we have £79k equity in the house and our relative has lent us £1k to clear the oustanding arrears on the mortgage (we're 1 month behind, £790 per month). Because our mortgage is so high it will be cheaper for us to rent (we live in a relatively cheap area to rent).

Even before you see CCCS, start to look for suitable rented properties and begin the preparations for putting your house on the market. Have a clear out and patch up any areas that need attention.

Start to speak to estate agents about fees. DO A BUDGET FOR MEETING THE COSTS OF SELLING - very important this, as it will need to come out of any equity.

Be sure what you can get for the property - ignore what others are putting their properties on the market for .... what have similar houses actually sold for? Factor in some contingency in case you don't get the price you ask for.

Undercutting the price, which you may have to do to sell, plus all the costs could wipe as much as £20k off that equity figure :eek: I don't want to put you off, but you do need to be prepared.

Check & double-check your budget - you will get a quicker response from CCCS if your budget (including debts) is completely up to date. Have something you can post or email to them, if needed.

Download this pack from the National Debtline. It's the same system as CCCS use and it has loads of other information too, especially about what your creditors are likely to do. It has useful strategies for dealing with your creditors .. what to say, what to offer, what NOT to do etc. You're likely to need this over the coming months.

HTH