Topic: Paying out more than I'm earning

[Mr Kipling]

Hi everyone, I'm hoping someone might have a bit of advice on this......
 
Over the past few years I've really dug myself into a very large hole and there doesnt seem to be any way out. I have accrued debt on credits cards over a number of years and am paying minimum payment on all (4 in total). Myself and my partner also took out a big loan a couple of years ago to consolidate all our credit card debts and vowed never to use credit cards again. But now my card levels have slowly crept back up again. So now, I'm back where I started before I payed them all off. I'm stuck in a viscious circle because
I'm paying out so much every month, I dont have the money to pay for petrol/living expenses from my current account, so petrol/food etc. goes on plastic, which then in turn increases the debt. And the amount of interest I'm paying each month just makes me want to cry!
 
My partner and I are planning on buying a new house together sometime this year, and am worried how this will affect us getting a mortgage. With some of the money she'll make from the sale of her existing house is going to pay off the big loan so that will losen the noose a enough for me to pay a mortgage every month. But at the moment, I'm living on credit because I just dont have enough money month to month to pay for general living expenses (or to pay more than the minimum amount per card).
 
I'm worrying myself sick over this...and am really angry with myself for letting this happen. I work in IT and earn a fairly decent salary, I hate to see the majority of it going to paying the interest alone each month.
 
Any advice would be greatly appreciated. Thank you

[stephen735]

If your debts are that bad, you could consider an IVA.  Will take up to 5 years to clear your debts, but you may end up repaying less than the current outstanding balance, and will reduce your current monthly commitments.

[bankruptcy.co.uk]

Over the past few years I've really dug myself into a very large hole and there doesnt seem to be any way out.
 
1) Join the club!! 1 person goes insolvent in the UK every 3 minutes... You are not alone!
 
________________________________________________________________________________
 
Myself and my partner also took out a big loan a couple of years ago to consolidate all our credit card debts and vowed never to use credit cards again. But now my card levels have slowly crept back up again. So now, I'm back where I started before I payed them all off. I'm stuck in a viscious circle because
I'm paying out so much every month, I dont have the money to pay for petrol/living expenses from my current account, so petrol/food etc. goes on plastic, which then in turn increases the debt. And the amount of interest I'm paying each month just makes me want to cry!
 
1) You are in the same position as 33% of the public. Your outgoings are higher than your incomings and therefore you are unable to sustain your minimum payments. The interest levels on your debt is indeed emotionally hurtful, as it does in essence spoil any manner of sorting the problem. You are trapped.
 
___________________________________________________________________-
My partner and I are planning on buying a new house together sometime this year, and am worried how this will affect us getting a mortgage. With some of the money she'll make from the sale of her existing house is going to pay off the big loan so that will losen the noose a enough for me to pay a mortgage every month. But at the moment, I'm living on credit because I just dont have enough money month to month to pay for general living expenses (or to pay more than the minimum amount per card).

1) Get an experian credit report. Check your credit history. This would give you a good idea into whether or not you could get accepted on a mortgage.
2) I assume you are in positive equity, the basis of this assumption being that you are planning on using the profits generated from the sale of your current property to pay off the credit cards/loans. if this is the case, then I would suggest selling the property ASAP, using this equity to pay off the debt and moving forward with your life. The faster you do this the better, as prolonging this situation just allows more interest charges to occur and your credit rating to gradually be effected.
3) Bankruptcy would not be a good option for you... As your outline of your problem suggests your property has sufficient equity to consolidate your debts.
 
______________________________________________________________________________
 
My advice
 
1) Look into what you could sell your house for, find out its positive equity.
2) If the property is in positive equity, you would generate a revenue by its sale. This revenue could be used to arrange full payment settlement with your creditors for as little as 30p in the pound WITHOUT having to use an IP or an IVA. (You can even do this yourself at no charge). THis would save the fees associated with an IP and therefore would allow you to start saving again!
3) Consider moving into an IVA (I am only advising this as it seems you have a positive equity mortgage).
 
Best of luck.
Raphael Gilbert
 

[Mr Kipling]

Many thanks for the advice. The house we're in at the moment is my partners house, and yes there is a lot of equity there and should be enough for a decent deposit on our own and to pay off some outstanding debts (even after she's split the money with her ex). I think the best option is for us to move ASAP, and pay off as much debt as possible. We have been taking about renting rather than selling/buying at the same time.
 
I havent checked my credit report for about a year. I have never missed a payment on anything, and have only made one late payment. I'll check my report again, but there should be no blemishes on it. The only thing that would effect it is the fact that I have likely reached my borrowing limit. BUT, if things are paid off when the house is sold, then this shouldn't be an issue (fingers crossed!)
 
Thanks again for your advice.
 
 

[bankruptcy.co.uk]

Not a problem at all!
 
I'd just like to advise that many companies out there (you can do this yourself, which would save you more money) offer a service for arranging full and final settlement with your creditors. This could mean spending only 30% of your debt on ending them all. This would then allow you with the cashflow required to move into rented. (My advice is rented... there is no risk involved with the housing market gambling!)
 
From the heart, best of luck!!
Raphael Gilbert

[Debt_Solver]

What I can advise you would be to get debt advice about how to go about dealing with your finances. Firstly, you need to correct your spending habits by budgeting correctly and then eliminating your debt via a debt management program.

Please don't make any further debt like buying a house until you and your wife can budget correctly to have some spare cash to last you through the entire month, without having to depend on plastic. The main thing you need to learn here is healthy spending habits and then you can think about making more debt.

Hope that helps  

[bankruptcy.co.uk]

Fantastic Advice Debt Solver!!! Why didn't we all think of that!
 
There is your solution, if you cut down your spending to living on bread and water, you will increase the amount of money you can pay to your creditors! Who can then charge you yet more interest and a debt management company can take a percentage of every months payment and make yet more profit out of your situation!
 
Awesome advice
 
*sighs*

[Debt_Solver]

Fantastic Advice Debt Solver!!! Why didn't we all think of that!
 
There is your solution, if you cut down your spending to living on bread and water, you will increase the amount of money you can pay to your creditors! Who can then charge you yet more interest and a debt management company can take a percentage of every months payment and make yet more profit out of your situation!
 
Awesome advice
 
*sighs*

I think you got the wrong end of the stick here bankruptcy.co.uk...

My advice was not to cut down on living expenses, but to get advice on how to correctly manage their cash flow so they could live comfortably without having to depend on credit card debt which has the highest interest rates. Once they know how to properly budget, they have the option of partaking of a debt management plan. Debt managementis a solution to your debt problems whereby you reduce your monthlypayments to your creditors while you’re experiencing financialdifficulty. 

They can also plan how to pay your debts with the cash you set aside , but this is also of their own choice...although they need to know what options are available to them...

There are many shady debt management companies out there that will try to profit out of your situation, although the best is to check for a company that is registered with DEMSA or with the Debt Resolution Forum and abides by the practices as set out by the OFT.

[bankruptcy.co.uk]

Firstly, if you are thinking about debt management, don't look at DEMSA or any other DM organisation. Use a FREE DM service like Payplan or the CCCS. They do not charge a % of the monthly payments you make and therefore at least 100% of your money is going to your creditors and not lining a DM companies pockets through your misery.
 
You mention debt Solver, that they should look into DM to eliminate their debt. If you provide this as a solution, can you give us any idea how many clients you entered into Debt Management over the last 5 years, and how many are now debt free? I believe the percentage will be lower than 5%. The sad fact with DM is that interest cannot be guaranteed to be frozen. You make less than the minimum payments required to your creditors and therefore you are just funding the interest every month while your balance remains stagnant.
 
This person does not need debt management. They need to sell their property, use the revenue generated to pay off their debts through full and final settlement. Then with the leftover cash, move into rented and live a prosperous debt free life.
 
Giving advice on "you need to budget" etc, is judgemental. You are assuming they aren't already doing this and I am SURE they have already thought of "We're spending too much money, how do we cut it down". Your advice is purely created to generate profit through your hyperlinks.

Best of luck everyone!

[Mr Kipling]

Hi all. Sorry I've not responded in anyway to your help and advice (very ignorant of me).
 
Some really good advice from everyone and is giving me some hope for the future. I do understand the concept of budgeting, and am doing my best to do this at the moment, but it is very difficult to do successfully when your trapped in a corner with your outgoings higher than your income, and no immediate solution.
 
I have been reading a little more about full and final settlements, and am just curious about the success rate of going down this route? Especially for someone who has never missed a payment to any of the creditors I owe to, so in their eyes, I'm a reliable payer and there is no evidence of me struggling on a month to month basis. So, do you think an F&F Settlement would be achievable?
 
Cheers

[bankruptcy.co.uk]

Mr Kipling,
 
Full and final settlement is very achievable. In general, the costings are between 30p-60p in the pound depending on how good you are at negotiation and the stubborness of your clients. I would advise using a proffesional organisation to help with this as although it may cost a fee, but the money saved is greater than the fee charged and therefore you get immediate return on investment. Some companies charge an upfront fee for this service, others charge a % of the fee saved. I suggest never paying up front as it leaves no incentive to the company for providing a good job! For your records Bankruptcy.co.uk provide such a back end service.
 
What I would suggest however.... This will still cost you thousands of pounds? Go bankrupt, eliminate your debts... and then you have no need for this? (Im assuming your considering getting this money from 3rd parties). It just seems to be an unecessary expense.
 
 

[Sovereign]

Mr Kipling,
 
As Raph says, negotiated settlements are always acheivable and his post is quite correct. However, if you have assets or savings BR would not be an option. How are you proposing to raise the money to pay off your creditors? Remember also that a F&F settlement will be recorded on your credit file as a 'short' settlement and would result in your credit rating being adversely affected.
 
Steve

[Mr Kipling]

Hi Steve,
 
Thanks for the reply. I was planning on selling my car to raise at least £2500 and was going to use that to offer to settle one outstanding account in particular (an MBNA credit card balance of £8100). I've just recently had a letter from them advising that my APR will go up to 25% in June, unless I contact them to tell them that I will no longer use the card (which I havent for around 2 years anway). So this particular balance is my priority at the moment.
 
But, since reading your comment that an early settlement may effect my credit rating, I'm not so sure now. I'm really wanting to avoid anything effecting my credit record as me and my partner are looking to get a mortgage sometime in the next year. The house we are in now is my partners (and her ex's) property, and I have no assets in my name, other than my car.
 
Cheers
Paul

[Sovereign]

Hi Paul,


Just a quick question, how much do you actually owe in unsecured debt and is your car worth more than £2,500?


Steve

[Mr Kipling]

Hi Steve,
 
No, it is probably worth £3,000 at the most.
 
The total of unsecured debt is £21,000 in CC in my name (4 different cards and am only paying minimum on all), and a joint loan with £17,000 remaining. As I said, If I could just pay off one of them, that would reduce my monthly outgoings by at least £150 p.m, which, although sounds a small amount, would give me a bit of breathing space, and allow me to put more each month towards payments on another card, therefore paying less interest.
 
Cheers
Paul