Large debts, getting larger :( help needed

guinessboy

Ok, as you can see from my sig my debts are mounting. By no means the biggest debts on here but enough to cause me daily stress. Luckily I work for myself and can influence to a certain extent my earnings - i.e. the longer hours I work, the more I earn. For that I am grateful and I know i'm a lot more fortunate than some on here.

However I don't seem to be making headway into my debts. My current situation is thus....

I am working as a director of my own one man bad business. Cashflow is very very tight and poor trading over the last six months has put me behind on payments to some suppliers (see sig.), also i've been racking up credit card debt on things like Google Adwords trying to kick start my business, the result is now massive credit card debt.

On a personal level I have a number of high outgoings...

1. An HSBC personal loan which is £267 per month for the next 4 years.
2. A car loan of £167 per month which has around 16 months left
3. Various credit cards with even the min payment adding up to £400 per month for them all.
4. Add to this the regular household bills, mortgage, council tax, water, gas etc and it all adds up.

Now, I have had a big influx of cash in the last few days, around £5k. What i'd like to know is where is this money better placed in the debts (see sig.)? None of my debts are secured against my home, but both my business debts have sent me court letters today as I failed to keep to my repayment plans (poor cash flow meant I literally had NO money).

I need to ring fence £1k of it for mortgage and household bills at the end of this month. But I need to use the rest to get rid of some of the stress, what would you reckon is the best way to use this money?

Any help, tips or advice very gratefully received.

Thanks

StressedSteph

Hiya
You are not on your own here and I am sure someone wiser than me can help you.

If it was me I would try to spread that 5K over most of your big debts to try to appease them all abit in one go. No point paying a large chunk off just one debt and then going to court with two others.

Add up how much all the debtors who are shouting need to keep them quiet for a while and try to pay them the minimum they will accept. This will then gain you some time to try to earn another chunk by extra hours etc to knock the bills down some more.

Unfortunately I have also learnt the hard way, that is way way quicker to get the debts than it is to pay them off. :-/

If you were up to date with all your payments, I would suggest paying off the debt with the highest interest, but I think in your circumstances avoiding court by paying them all a little chunk is the best bet.

Good luck hun and stick around to join us on our long road to a debt free life :-)

xxxx

guinessboy

Thanks Steph

It's good to be in the company of others who understand what its like to be in this situation.

Thanks for the advice. Before these court letters arrived this morning I was going to use the money to send each of the business debts £500 to buy me some more time, then use £2k to pay off each of my HSBC credit cards with £1k debt on each, and then use the remainder to chip away at my other credit cards.

My priority is to get rid of cards as I pay them off. I've recently cleared off a Morgan Stanley card which I owed £6k, that has now been cut up and the account closed. So by paying off my two £1k debt credit cards I can shut them down and cut them up.

That's the theory anyway.

I want to avoid an IVA, as I think I can earn enough to get myself back to a manageable point, and then in the next two years to a point where i'm debt free.

Thanks again.

Steve

TotallyBroke

I'm not sure what I can suggest really without seeing the apr amounts etc. I'm sure others would like to know the same too.
At first glance I would consider using the £4000 to pay off the smaller ones then those monthly amounts that you will be saving can be used to either a) live on so no more debt is accrued or b) used to overpay on another debt.
But that's also dependant on the monthly apr as it could be cheaper to pay the sum onto a larger amount and save you interest

Maybe it would be an idea to do a SOA for both your home life and also your business. That way cleverer people caould advise on where to cut back.
I know the usual advice is to pay all bills like Council Tax and water rates over 12months instead of 10. Also switching utility companies. But you maybe able to save in other areas as well.
If you did that then it will be easier to find you extra cash each month to then snowball your debts.
Good luck

dancingfairy

Can't advise on how best to use the money etc but I would do as the OP suggested and see if you can cut down on your personal outgoings eg gas/electric/food/insurances etc and check you are on all the best deals.

It might also be worth doing this with the business - check you are getting a good deal from your expenditure etc.

GeorgeUK

It's hard to say without seeing a SOA, but in general it's usually best to pay off the higher interest first so you will be paying less in the long run.

That said, when you pay off a creditcard and try to close it a few weeks later, you will sometimes be offerred an incentive to keep the card open (such as a 0% on balance transfers for 6 months or a Life of Balance (LOB) low interest card). If you have kept the accounts in good order and don't have late payments etc this may be worth considering - based on the credit limits and APR's.

CLAPTON

I agree with SS ... I can see no purpose in your using the money to clear cards so you can close them rather than paying people who are threatening court action.

I would suggest
pay the minimum on all the bills
pay whatever is necessary to prevent court action
keep the remainder (if any ) to help you through the lean periods.

However, you also really need to consider whether your business is really viable.... if most of the 46k has been used to keep the business going then its clearly not making money.
Maybe you should set some sort of timescale for the business to really start paying its way (say 6 months).

dancingfairy

Can you get help from a business adviser? What are the realistic chances for your business?

guinessboy

Just thought i'd update the thread with my activities over the last week.

On Friday I received two court summons for the two large business debts. I can reply with an offer to pay and some money up front. So I will reply today with offering each of them £500 and an offer to pay in installments, hopefully this will be acceptable, but we'll wait and see.

Yesterday I chipped off £1k from my Lloyds TSB card and paid half (£500) of one of my HSBC Business Credit Cards.

I'm planning a car boot sale to help raise some extra funds, i've around 100 DVD's which can go and lots of other useless junk, I reckon this could raise between £200 - £400 which will go on debts.

I just want to keep the ball rolling on clearing off my cards as these will be the death of me in the long run (not literally!).

The business will survive as slowly its becoming more profitable as time goes on and to be honesty it HAS to work as its the only thing I know.

MinniMe_2

Just wanted to say well done and keep at it