Drowning in debt - any tips?

[MrsMcJnr]

DH and I are in a real financial mess . We both work full time and earn good salaries but we have a lot of credit card debt and high mortgage payments and it has got to the stage now with interest rate rises that our incomings are not going to cover our outgoings. We have been trying to sell our house for a few months now. The equity will help to clear some but not all of the debt. We want to move abroad to live but know that we cannot survive there if we have to service the debt. We are also expecting our first baby in January.

I guess for months now we have been robbing Peter to pay Paul and we just don?t know how to end the vicious circle. We have both tried to get consolidation loans and other 0% credit cards to get the debt onto more manageable interest rates but our scores are now too low. We don?t want to secure a loan on the house either as ideally we would want to use the equity to pay off other debt.

I?ve even considered thinking about bankruptcy. It is all so stressful and I can?t believe we?ve let ourselves get into this mess.

Does anyone have any experience of getting out of a rut like this or any advice for me? Anything greatly appreciated. Thanks

Sorry MrsMcJnr, I can't help, but have you looked at moneysavingexpert.com? There might be something on there that you can use, and there will probably be people who have been in a similar situation that may have some words of advice

Well, first things first. Don't move abroad until you've cleared your debts (obvious, I know).

I've no direct experience, but I've seen a few programmes on debt-management, and the advice always seems to be: clear one debt at a time. So, chose which debt you want clearing the fastest, and focus on that. Pay the bare minimum off the others, until the first debt is cleared, then move on to the next.

You could be in this for the long haul ... or it will seem so, but once you're all clear of debt, I doubt very much that you'll go down that road again.

I wish you the best of luck

I believe the Consumer Credit Counselling Service is the first port of call in these situations.

do not go bankrupt -- not a good solution long term and if you have equity in house, you are better worse case scenario doing an IVA...

talk to CAB -- they are fab and do not EVER use debt consolidation loands...unless you find the 1 in a million that is of a decent interest rate

MMJ I've been sat on here most of the day looking at ways of trying to juggle our finances. Dp is appalling with money. We have none. I have grand aspirations of a lovely pram and a second hand crib but just no money to finance it. I think we are going to get a secured loan which is giving me serious heebie jeebies. But I want to spend time with my children when they are young and not work full time anymore - plus with two children childcare just won't be affordable.

try this link here www.moneysavingexpert.com/loans/debt-help-plan If anything else I find martin strangely soothing so watch the video!

te cab ar wonderful in helping you straighten out the mess - hey have ap ack in wich you an send to your crditors ( all but prioriy debt such as council tax and students loans and somma else) but credit cards etc can b sent a letter saying you will only pay so much and they have to halt the interest.

the cab is the plce to go - act now get an appointment

You are better off reducing the price of your house a little to clear these debts quicker and stop paying the interest.Agree don't go anywhere until this is sorted and only consider bankrupcty as a last resort as it affects your future ability to get credit and your circumstances may change in the future.Ring the citizens advice as they are really helpful and have recently said that the rate rises are beginning to have some effect and they are getting requests for debt managemnet all the time so could help.Agree too re moneysavingexpert.com they have some good tips

sorry that sounds as though I just want to get a loan so I can get a crib and a pram! Its not that at all, more just a case as you say as putting money on CC's as fast as you clear money off them as no disposable income.

Also clear debts with highest rates first and then put all onto the card with the lowest rates.The cab can help you

Also clear debts with highest rates first and then put all onto the card with the lowest rates.The cab can help you

if you have bank charges - claim them back.

go on interest only wih the mortgage if you havent already

why not remortgage onto a fixed rate and draw down on the equity to pay off credit cards?

one easily managed payment and shop down the value - isle till things pick up

Anyway that you can reduce your mortgage payments? Speak to your mortgage provider, they may be able to help. If your house value has increased you may be able to get money out of your house to pay off some of your highest interest debts first. Then cut up your credit cards. In the meantime, write a clear and tight budget for EVERYTHING in your life, sell stuff on ebay, make your own lunches, address lifestyle issues that are "luxuries" - nice but unaffordable, like gym memberships etc.

If there is any way that you can increase your income to bring in some extra cash even for a few months, do it.

Good luck with your pg by the way !

Right, it sounds as if you are in a mess but you are not alone and thousands of people have been where you've been and got out of it. Quite often they become much better financial managers than the rest of the population.

CAB first, as custy says there's nothing like talking to someone face to face. And in the meantime, since you're already into forums, check out the Motley Fool's Forum Dealing With Debt. There are hundreds of posters on there who have been there, done that. They will talk you through the process of setting up your budget, paring away the excess, snowballing and coming to voluntary arrangements. If you need to seriously consider bankruptcy, they'll help you make the decision. Like Mumsnet, they're not always cuddly but they're always supportive.

Good luck

Thank you all for your advice DH and I had already considered CAB and he is meant to be arranging an appointment.

I also thought of calling the individual credit card companies and explaining the position to see if they had any suggestions or would that be a stupid thing to do?

I?ll also look into all the other things you have suggested.

The move abroad is meant to help us manage with a family. It is actually home for me and the plan is to be close to my family so they can help us with the baby and DH is going to be trained up in the family business whilst I get a job too. We certainly cannot afford child care here without any family assistance and we don?t have anyone to help us.

I like your idea Desiderata about hitting a debt until its cleared but at the moment, we have only just afforded to keep making the minimum payments on things never mind having any extra to hit one harder.

The house has been changed to new agents and we are trying a new way of marketing it. We live in Scotland and we have it offers over and we have just had the level re-assessed. Thing is, it is a big house and the market to buy it will be quite niche.

Flossy ? does this mean you have lovely news?

MsMCJnr

Yes, communicating with your lenders is a good idea. Depending on your level of debt, they may be very helpful, or possibly a bit rigid. It's often better to go to them with a proposed payment schedule, but it's vital that it's realistic. So get over to the Motley Fool site, draw up a budget and start learning about techniques for dealing with your lender.

Dh got himself into an awful mess and tried to solve it on his own which made things 100x's worse. The best thing he did was to talk to the credit card people, explain the situation and say you have 2 options, pay them a set ammount each month or go bankrupt. We did this after working out what was an afordable amount we could pay and stick to. They were fine with this (yes really) as they realised we were serious about the bankruptcy and would rather get a slow trickle of money than none at all. This is called an 'agreement to pay' (Ithink) but you do have to stick to this otherwise they get really unhappy and threaten your credit if you default.

Also we had great relatives who blaied my husband out though I do realise this isn;t an option for everyone.

Cut your cards up.

Work out what your budget is (the cab help you to do this) and then stick to it we used to draw out cash per week and this was much easier to handle as you can see what you have spent/got left.

I agree with whoever said drop the price of your house, whilst you can;t sell it you ar still paying the mortgage + the credit cards which you say you can pay most off once the house is sold. The stress you also don't need being pregnant.

Rent a house -we did- instead of buying.

Most of all check your credit file -experion or equifax, to see what your credit score is. Keep it good as this effects your ability to borrow in the furture.

And remember, this is a long haul situation (unless you win the pools) it has taken us 3 years so far and we will finish paying off the debt in july 2008.

Floss ? don?t worry got your meaning as to the purpose of the loan

Custardo ? mortgage is interest only and no bank charges to claim sadly

Apu ? we did this at the end of last year and re-paid a secured loan on the house. Idiotic when we think about it, we should have hit the cards but the 2nd mortgage terrified us

Rantmum ? thank you for the tips. I?ve sold a lot on Amazon recently and we do make our own lunches, no gym either but I am sure there is still a margin of luxuries we can cut out. Will need to assess. Thought about a second job but my main one is already high stress and long hours and I don?t think I can physically do it. DH is the same.

Gizmo ? thank you for the tip, I?ll join that forum.

Thank you Muppetgirl debt is hideous isn?t it?

We had 75K's worth to get rid off it that helps you gauge yours.

(yes my dh was a tw*t with money!)

I?ve made a list of all this advice to discuss with DH at the weekend ? thank you all. I feel so sick when I even think about it all but we must. Especially now we have a baby on the way.

I think our unsecured debt is about that level Muppet. I know it?s not worth looking back and we are where we are but our situation is a combo of extravagance (mostly on my part) and bad luck.

The thing that really crippled us was being unable to sell our last property in a slump 3 years ago. We didn?t pull out of the new purchase as we?d already spent a lot on the house and it was in a different city as we re-located due to my work. We kept the old property on the market for months on a bridging loan until we finally persuaded the Bank to give us a Buy To Let and we let the place out. We lost about £40k in bridging payments and whilst the property has been constantly occupied since, the rent doesn?t cover the mortgage so we supplement that by £250 each month too. We don?t want to sell that property as we will really feel that we?ve lost that £40k then. Hopefully soon it?ll pay for itself and will appreciate in value over time. I stopped paying into a pension to cut back on outgoings so that property is effectively that. For about a year we lived on cards alone and I got so worried and stressed that I actually got physically ill and was off work for 3 months. I?m determined not to let debt do that again.

Yes, I knew it was about 28K when we got married but he told me the full extent 6 days after having ds.

There is light at the end of the tunnel though take it from someone who really does know.
We have 'business' meetings now and decide how the wage needs to be spent. We agreed not to make purchases above £100 without consulting/agreeing the other first.
We dont' have credit cards as you have to be quite well off to run a credit card (!) otherwise it quite easliy gets viewed as 'extra' or emergency money.

You will get throught this especially as you have a dc on the way, time will fly. Get people to buy you stuff for the baby for your birthdays/christams presents. I kept asking for vouchers and saved them up and got loads of baby stuff that way!

oh i really feel for you. we had about £35,000 of debt. We set up and IVA to start with which was great, but then DH got made redundant and things went pear shaped. We ended up making our selves volunatarily bankrupt. We literally had no other option. Even the IVA place said we had no other choice really. We could have waited for the companies to start proceedings against us, but with a baby on the way I didn't want the stress of all the nasty letters and demanding phone calls, so I rang the courts and got the paperwork to fill in. I filled it in and rang them, 3 days later we were in court, and made bankrupt. There is such a stigma attached to bankruptcy. I felt so ashamed about it, but looking back now it is the best thing that we ever did. Because we weren't in a position to be able to repay any of the debts, we were discharged early. We were discharged about a year ago now and like I said, I don't regret it one little bit. I am still upset that we got into that position in the first place, but sometimes, it just snowballs and before you know it its out of control. Maybe you could set up an IVA? We went through debt free direct. they were very good. Had DH not lost his job then we would have carried on with that. It was a great solution.

AAW -sounds like you had a really tough time but you came through it
I think it's a 2-part thing debt. You have to adress the immediate problem of the debt, how to pay it back etc, but you also have to look how you got the debt in the first place. It means major changes in life, altering attitudes, marital problems (well, for us anyway!) telling family and friends...
I rememeber my mil phoning us the day after we told them we were considering bankrupty -'Oh iwas so worried i didn't sleep all night' i calmly had to remind her this wasn't about her !!!

Good luck MrsMcJnr

Haven't read the thread as am supposed to be working but 2 things leap to mind:

1. Keep creditors informed - tempting though it is to try to avoid them, they are much more likely to be reasonable if you are in touch.

2. Think about debt counselling to help you decide how to get yourself out of this.

I hope all the stress is not affecting your pregnancy. As for buying baby stuff, there is comparatively little stuff actually NEEDED for a new baby. I got most of mine either from friends or from Ebay. You will also get a lot of presents of clothes etc for the baby when it arrives.

I really hope you find a way out soon so that you can relax a bit and enjoy your pregnancy.

Best wishes X

Haven't read the thread as am supposed to be working but 2 things leap to mind:

1. Keep creditors informed - tempting though it is to try to avoid them, they are much more likely to be reasonable if you are in touch.

2. Think about debt counselling to help you decide how to get yourself out of this.

I hope all the stress is not affecting your pregnancy. As for buying baby stuff, there is comparatively little stuff actually NEEDED for a new baby. I got most of mine either from friends or from Ebay. You will also get a lot of presents of clothes etc for the baby when it arrives.

I really hope you find a way out soon so that you can relax a bit and enjoy your pregnancy.

Best wishes X