Debating Bankrupcy

Techy_George · 14 March 2018 at 9:07AM

Hi all,

I spent some time last night looking over this forum and thought I would gauge some opinions.

I've come to admit that my amount of debt is a problem and will very soon approach the point that I cannot keep up with repayments on things. I'm on a good wage (£50k per year) but things have just spiralled out of control. With the change in workplace pension rules in the next couple of months (changes from 1% to 3% contributions) it will put me dangerously close to a zero balance each month.

Below is a summary of income and outgoings:

Income
Current take home salary: £3015

Outgoing
Rent: £850
Council Tax (Single person discounted): £105
Gas/Elec: £55
TV License: £12.25
TV/Landline/Internet Bundle: £65
Mobile phone: £25
Personal Loan (8 months into five year agreement): £460
4 x Credit Cards (Cumulative minimum payments, 2 of them also have 0% ending soon so it will increase): £470
Car payment (PCP Plan that is six months old into four year agreement): £460
Fuel: £200
Life Insurance: £10
Gym: £35
Food shopping: £180
Total: £2927.25

When the workplace pension rules change, I will be about £70-80 less in my take home pay each month as of April 2018.

I admit that this is way out of control and only have myself to blame. My marriage failed in late 2017 and I incurred a huge amount of costs in moving and getting where I live all setup etc and it just carried on from there. The car company wont do anything with the agreement as it is so early in the term and have calculated that taking public transport is actually about £200 more expensive than keeping the car going per month. The above figures obviously dont take things into account like yearly car insurance, servicing, potential future rent increases etc.

It's at the point where I am losing significant sleep over things and am not sure where to go. Can anyone offer any guidance?

National_Debtline · 14 March 2018 at 11:43AM

Hi Techy_George and welcome to the forum

There's not quite enough information here to advise you on your best option. You need to complete a statement of affairs (SOA) which provides a more detailed picture of your financial situation
http://www.stoozing.com/calculator/soa.php. It will take into account all outgoings, even those you only pay for annually, and tell us how much your level of debt is.

I'd advise you to post your SOA (you can format it for MSE) back on the Debt Free Wannabe board where you'll get a broader range of advice. Given that you want to keep your PCP car, bankruptcy is unlikely to be suitable. There's normally a clause that says you have to hand it back if you go bankrupt.

You may find that an IVA or a debt management plan (DMP) could also be options and they tend to have less serious implications than bankruptcy. This will of course depend on your SOA. You can also contact one of the free debt advice agencies for advice on all of your options. Good luck with it all.

Susie
@natdebtline

Techy_George · 14 March 2018 at 5:47PM

Hi there,

Thank you for replying, I've done the SOA and this is what I ended up with, it's made for scary reading if I'm honest.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 0

Monthly Income Details
Monthly income after tax................ 3013
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 3013

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 458
Rent.................................... 850
Management charge (leasehold property).. 0
Council tax............................. 105
Electricity............................. 35
Gas..................................... 30
Oil..................................... 0
Water rates............................. 10
Telephone (land line)................... 22
Mobile phone............................ 22
TV Licence.............................. 12.5
Satellite/Cable TV...................... 22
Internet Services....................... 22
Groceries etc. ......................... 160
Clothing................................ 10
Petrol/diesel........................... 200
Road tax................................ 15
Car Insurance........................... 44
Car maintenance (including MOT)......... 25
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 5
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 5
Life assurance ......................... 10
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 5
Entertainment........................... 15
Holiday................................. 15
Emergency fund.......................... 10
Total monthly expenses.................. 2107.5

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 35000....(458)......0
Total secured & HP debts...... 35000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Barclaycard....................8790......207.......18.9
MBNA...........................5877......59........20.9
MBNA...........................8905......108.......20.9
Personal Loan..................23903.....460.......0
MBNA (Virgin)..................7455......75........18.9
Total unsecured debts..........54930.....909.......-

Monthly Budget Summary
Total monthly income.................... 3,013
Expenses (including HP & secured debts). 2,107.5
Available for debt repayments........... 905.5
Monthly UNsecured debt repayments....... 909
Amount short for making debt repayments. -3.5

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -35,000
Total Unsecured debt.................... -54,930
Net Assets.............................. -89,930

Reproduced on Moneysavingexpert with permission, using other browser.

TheGardener · 14 March 2018 at 6:17PM

Can you clarify your living arrangements? Shared house? flat? parents? Do you share housing costs with someone else?

Techy_George · 14 March 2018 at 7:52PM

Apologies, I live on my own in a rented flat through a letting agency.

TheGardener · 14 March 2018 at 8:08PM

Ok - well with your income an IPA is likely so the object of the exercise now is to make sure its a small as possible. I'll have a look later and post but got to dash out just now...:)
PS - you need to be paying at least 6 to 8% into your pension for it to be worth anything when you start drawing it - if you were BR you could afford that - is there the option to do that?
EDIT
Ok well if BR is what you want/need then start with these basics:
Pension - as above, on your salary you should be paying in at least 6% probably 8% - all public sector workers have to pay at least that so its completely acceptable to the OR - get your contribution up asap
Parking - everyone pays for parking somewhere - at least £20 pm
Dentist - £12 pm gets you 2 check ups and visit to the hygienist a year
Optician - £22 for contacts/couple of pairs of glasses pm
Food & Housekeeping - 300pm including work lunches etc.

The car is a no-no. If you go BR the agreement will almost certainly be cancelled and BR usually allows for you to purchase one worth about £1000. If the car is really important then either someone else needs to own the car and give you use of it or you need to try a DMP.

Have you tried the debt remedy tool on the Stepchange website if you are not sure which route to take?

Im not convinced BR is the best route for such a high earner but keep looking for advice.

Techy_George · 14 March 2018 at 10:04PM

TheGardener wrote: »

Ok - well with your income an IPA is likely so the object of the exercise now is to make sure its a small as possible. I'll have a look later and post but got to dash out just now...:)
PS - you need to be paying at least 6 to 8% into your pension for it to be worth anything when you start drawing it - if you were BR you could afford that - is there the option to do that?

Thank you, the only issue is that due to where I live and the location of my office (as well as customer visits), I need to do my best to hang onto my car (or 'a' car) which to the best of my knowledge would rule out BR. You are right though, I'm not paying anywhere near enough to my pension, as of April my mandatory 3% is being matched by my employer though. This increase from my current 1% contribution is what will push me into a negative monthly figure.

I also went through the StepChage Debt tool and for some reason it is calculating the contractual monthly payments of my credit card balances to be higher than what is actually being requested. By the time that happens, they are suggesting a DMP with a figure that is basically what I'm already paying (well, shy by about a tenner or so).

John-K_3 · 14 March 2018 at 10:15PM

You!!!8217;ve got some expenses that you can drop there. Stop using the car and cycle, drop the TV package, cancel the no,day, and you are already looking better.

Can you get some overtime, or a weekend job?

I think with a bit of effort you should be able to get some headway made into the debts.

Techy_George · 14 March 2018 at 10:21PM

John-K wrote: »

You!!!8217;ve got some expenses that you can drop there. Stop using the car and cycle, drop the TV package, cancel the no,day, and you are already looking better.

Can you get some overtime, or a weekend job?

I think with a bit of effort you should be able to get some headway made into the debts.

Thank you for the reply, the amount allocated to fuel probably indicates how many miles I do between home and work (there's very little 'personal' fuel usage there) thus cycling is not really an option.

TheGardener · 14 March 2018 at 10:26PM

John-K wrote: »

You've got some expenses that you can drop there. Stop using the car and cycle, drop the TV package, cancel the no,day, and you are already looking better.

Can you get some overtime, or a weekend job?

I think with a bit of effort you should be able to get some headway made into the debts.

The object of this exercise in BR is to avoid a large IPA - so the OP needs to ensure as much reasonable expenditure as possible IS included, not to try and reduce overheads.

If however the OP decides to go with a DMP /repayment scheme - then your ideas on reducing his overheads would be great.

TheGardener · 14 March 2018 at 10:31PM

Basically with BR you would be paying an IPA for 3 years - then you are clear. If you chose an DMP then you pay for longer (unless you really put your back into it) but keep your car. So I guess its about whether you could clear the debts yourself in 3 years - or is an IPA a shorter/less expensive route?
If you decide to go BR then stop paying all debts immediately - save for the BR fees of £750 and for a cheap car to get you about for now...and get the pension contributions up - preferably a couple of months before you go BR.

Debating Bankrupcy

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