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  • FIRST POST
    • Techy_George
    • By Techy_George 14th Mar 18, 8:07 AM
    • 10Posts
    • 3Thanks
    Techy_George
    Debating Bankrupcy
    • #1
    • 14th Mar 18, 8:07 AM
    Debating Bankrupcy 14th Mar 18 at 8:07 AM
    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?
Page 1
  • National Debtline
    • #2
    • 14th Mar 18, 10:43 AM
    • #2
    • 14th Mar 18, 10:43 AM
    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
    Last edited by National Debtline; 14-03-2018 at 10:47 AM.
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
    • Techy_George
    • By Techy_George 14th Mar 18, 4:47 PM
    • 10 Posts
    • 3 Thanks
    Techy_George
    • #3
    • 14th Mar 18, 4:47 PM
    • #3
    • 14th Mar 18, 4:47 PM
    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
    • By TheGardener 14th Mar 18, 5:17 PM
    • 2,312 Posts
    • 2,205 Thanks
    TheGardener
    • #4
    • 14th Mar 18, 5:17 PM
    • #4
    • 14th Mar 18, 5:17 PM
    Can you clarify your living arrangements? Shared house? flat? parents? Do you share housing costs with someone else?
    • Techy_George
    • By Techy_George 14th Mar 18, 6:52 PM
    • 10 Posts
    • 3 Thanks
    Techy_George
    • #5
    • 14th Mar 18, 6:52 PM
    • #5
    • 14th Mar 18, 6:52 PM
    Apologies, I live on my own in a rented flat through a letting agency.
    • TheGardener
    • By TheGardener 14th Mar 18, 7:08 PM
    • 2,312 Posts
    • 2,205 Thanks
    TheGardener
    • #6
    • 14th Mar 18, 7:08 PM
    • #6
    • 14th Mar 18, 7:08 PM
    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.
    Last edited by TheGardener; 14-03-2018 at 9:05 PM.
    • Techy_George
    • By Techy_George 14th Mar 18, 9:04 PM
    • 10 Posts
    • 3 Thanks
    Techy_George
    • #7
    • 14th Mar 18, 9:04 PM
    • #7
    • 14th Mar 18, 9:04 PM
    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?
    Originally posted by TheGardener
    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
    • By John-K 14th Mar 18, 9:15 PM
    • 654 Posts
    • 1,016 Thanks
    John-K
    • #8
    • 14th Mar 18, 9:15 PM
    • #8
    • 14th Mar 18, 9:15 PM
    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
    • By Techy_George 14th Mar 18, 9:21 PM
    • 10 Posts
    • 3 Thanks
    Techy_George
    • #9
    • 14th Mar 18, 9:21 PM
    • #9
    • 14th Mar 18, 9:21 PM
    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.
    Originally posted by John-K
    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
    • By TheGardener 14th Mar 18, 9:26 PM
    • 2,312 Posts
    • 2,205 Thanks
    TheGardener
    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.
    Originally posted by John-K
    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
    • By TheGardener 14th Mar 18, 9:31 PM
    • 2,312 Posts
    • 2,205 Thanks
    TheGardener
    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.
    Last edited by TheGardener; 14-03-2018 at 9:35 PM.
    • KeepOnKnitting
    • By KeepOnKnitting 15th Mar 18, 10:54 AM
    • 155 Posts
    • 223 Thanks
    KeepOnKnitting
    It sounds like you want to avoid bankruptcy, so I have a couple of thoughts that might work. I know how stressful the ends not quite meeting is, so these are things I do myself to take the pressure off.
    - House share. A lodger, particularly if they work away or shifts can be really helpful, but can also be good company.
    - Move closer to work, so that you are spending less on commuting.
    - Trade in that car for something cheaper. Spend £1/2k on a runabout that has been owned by an OAP.
    - Work a Saturday job. You aren't out spending money, but instead can use the income. Pick something like bar work if you like socialising, or a supermarket that does a good employee discount.
    - Have friends over for dinner/coffee/drinks, as often as possible. You need to see people when you are freshly divorced/single.

    I know some of these might feel a bit student-ish for a grown-up, but I promise you that you aren't the first to need to scale it back a bit following a divorce.
    Save £12k in 2018 #62
    • LincsPaul
    • By LincsPaul 15th Mar 18, 11:31 AM
    • 131 Posts
    • 66 Thanks
    LincsPaul
    First, don't panic! Clearly you need to manage these £1200+ monthly repayments. However you are on a very good wage so I think BR can be avoided.

    Move the credit card debt onto new 0% deals. Massively do this!

    What was the personal loan for? Debt consolidation, or something nice which you can sell?

    Chuck the car - if you went BR you'd have to anyway. Buy a reliable runner for a couple of grand and there's £400 a month right there to attack your credit card balance with. Think you can't chuck the car? Tell the PCP company you are considering going BR. I bet they'll have the car back very quickly. If they don't... stop paying it and hand the car back (re-finance your credit cards first in case they mark your record - again, harsh but better than BR).

    Consider living somewhere cheaper as your rent it quite high. I'm not sure where you're based but even £150 extra a month will pay off those credit cards in a vastly quicker period of time.

    If you go BR on your wage, ALL your spare cash will go to the Official Receiver for 3 years so you won't be in a massively different situation. Yes, after that you can keep everything, but I think there's hope yet.
    • Tarambor
    • By Tarambor 15th Mar 18, 3:00 PM
    • 3,036 Posts
    • 2,194 Thanks
    Tarambor
    Apologies, I live on my own in a rented flat through a letting agency.
    Originally posted by Techy_George
    You can't afford it so move somewhere cheaper. Bin the gym and pay TV internet and phone can be done for under £20 a month. £180 a month on food for a single person is WAY too much, £100 a month is more like it. According to the ONS the average FAMILY only spend £54 a week on grocery shopping and that includes £4 for booze. No need to go BR but there is a need to get a grip on your spending.
    • Tarambor
    • By Tarambor 15th Mar 18, 3:03 PM
    • 3,036 Posts
    • 2,194 Thanks
    Tarambor
    Parking - everyone pays for parking somewhere - at least £20 pm
    Originally posted by TheGardener
    I don't. Most of the country doesn't. I doubt I spend £20 a year on parking. Last time I paid for parking was £3 6 weeks ago to go visit a relative in hospital.
    Dentist - £12 pm gets you 2 check ups and visit to the hygienist a year
    HOW MUCH? Two NHS dentist check ups a year, £40 or so.
    Food & Housekeeping - 300pm including work lunches etc.
    For a family maybe, for a single person that is about £150-£200 more than it needs to be. Why are you having spending money on work lunches? Take a packed lunch, it costs under a quid a day.
  • National Debtline
    Hi Techy_George


    Thanks for the extra information. What we can see is that you're just about managing at the moment, but that's not going to be the case when your pension contributions start. I'd say the biggest issue is your car. Needing a car for work is fine but needing a £35,000 PCP agreement is almost certainly not going to be seen as reasonable.


    You could see if it is possible to downsize the car and move on to a cheaper deal. That may then make your debts affordable. You could also consider terminating the PCP agreement, replace it with a much cheaper car, and include any remaining PCP debt with your other non priority debts. However as that new debt would be payable in full it's likely you would need to enter into a debt option.


    It's hard to calculate exactly at this stage as we don't know how much your net pay will drop to with the increased pension contributions, or how much debt you will be left with from the PCP, but it makes the options of self negotiating or a DMP much more feasible. As you'll be making payments in bankruptcy for 3 years anyway, it's a better option to go for a DMP if it's only going to last a little longer than the bankruptcy payments as you avoid some of the negatives that can come with it.


    As there are quite a few variables here it's certainly a good idea to talk it through with one of the debt advice agencies. I hope it all goes well.


    Susie
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
    • TheGardener
    • By TheGardener 15th Mar 18, 4:58 PM
    • 2,312 Posts
    • 2,205 Thanks
    TheGardener
    I don't. Most of the country doesn't. I doubt I spend £20 a year on parking. Last time I paid for parking was £3 6 weeks ago to go visit a relative in hospital. So far this month I've paid £2.50 to park in town on a Saturday - pretty normal I think? Plus I visited a relative in hospital and paid £3 and then waiting to collect DD from the airport - another £4.50 and I went to the cinema the other night and the multi-storey cost £2 ...nothing too strange there?

    HOW MUCH? Two NHS dentist check ups a year, £40 or so. Having checked the NHS price list its £22.60 for a check up and £56 for a filling - so I make that nearer £100 quid!! ? - and that's IF you can find a NHS dentist taking patients...then a prescription, maybe two? ...
    For a family maybe, for a single person that is about £150-£200 more than it needs to be. Why are you having spending money on work lunches? Take a packed lunch, it costs under a quid a day.
    Originally posted by Tarambor
    All your suggestions are fine - for a debt free wannabe post - the OP was asking about how an IPA might work - in which case your suggestions are missing the point
    Last edited by TheGardener; 15-03-2018 at 5:37 PM.
    • Techy_George
    • By Techy_George 15th Mar 18, 7:18 PM
    • 10 Posts
    • 3 Thanks
    Techy_George
    Firstly, thank you to all that have posted. There are a number of things that prevent me from doing some of the suggested points but will get round to addressing them all as soon as possible.
    • John-K
    • By John-K 15th Mar 18, 7:40 PM
    • 654 Posts
    • 1,016 Thanks
    John-K
    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.
    Originally posted by TheGardener
    I was suggesting ways that he could possibly avoid bankruptcy.
    • Windofchange
    • By Windofchange 17th Mar 18, 8:10 AM
    • 716 Posts
    • 828 Thanks
    Windofchange
    Assuming that the car and TV package and things like that are on set contracts with limited possibility of early termination without serious penalty, I think the way forwards is changing your living circumstances, and moving debt to 0% cards if not already done so. If you are paying £850 a month in rent for a flat, I am assuming you aren't in London? You should therefore be able to find a far cheaper place, or get into a very modest house share for a year or two. You could also potentially move closer to work so that you can walk or get the bus? You will then save on petrol and rent. Even better, do you have friends or family you can live with for free?

    The other thing to do as others have suggested is get a second job. When I got in a mess a number of years ago, I had at one point 4 jobs - my main one and 3 others. It's not something you can do forever, and I was permanently knackered, but it got me back on my feet. If overtime isn't an option at work, then what can you do? Your username suggests you are some sort of IT guy? Freelance programming at home? If that isn't possible, then see what is out there. Even if you are pulling pints or something similar you could bring in an extra few hundred quid a month. With halving your rent this could give you a good sized chunk to throw at the debts.
    Debt Free by Xmas 2018 21.51% (£350) of £1,626.91
    Save £6k by 31/12/2018 £2263 / £6000
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