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

Agree with getting some debt advice.

We were £29k in debt 3yrs ago, we had more going out than coming in. By going through debt management, we have managed to get our debts down to about £9k now and that will all be paid off in August, and i cant wait for the freedom it will bring.

I refuse to have credit cards/loans/overdrafts once the debts are paid, what comes in has to do, we cant spend what we dont have.

Its been a nightmare 3yrs, dont get me wrong, but it would have been so much worse if we had buried our heads in the sand and tried to carry on.

You also have to learn to live within your means, so out went takeaways, nights out etc, and shopping was done as cheap as possible, and for a long time out of the freezer and store cupboard as we couldnt afford fresh very often.

I sympathise with you, its a horrible place to be, but once you accept the situation and work with your creditors, life does get easier x

bloody well done jarm i am impressed

Thanks, but its not been easy. We have acheived a lot, but as I said, we have had no real quality of life.

Thanks to perserverance, that has now paid off, and August brings about a new start.

Good luck everyone. It can be done.

MrsMcJr, I see from your profile that you're a solicitor. Surely going bankrupt would be a problem for your job?

Although I understand what you're saying about the loss of extra money on the house you're renting out, I think you need to find out its value now. Is there any chance of increasing the rent, as £250 a month is money you can ill afford to be spending that way? If you sold it could that clear your debts? Having got into such debt, you're losing money in interest. Also, it might be better to choose to sell now than to be forced to do so. You can't go bankrupt and keep that house.

Sorry, I forgot the bit about having tried to sell the other house before and that you're renting it because of that. That puts a different slant on things.

That must have been a horrible shock for you Muppetgirl thank you for making me feel better with saying there is a light at the end of it all though I suppose the first step is confronting it and accepting that there is a problem and that spending even more is just going to make things worse. In the depth of the night I do get scared that most of the debt is my fault (which is probably irrational) and that I have made our married life so hard and that one day DH might just have enough of it all .. That?s not fair to him, he would never walk away, but debt is such a huge cause of marital strife isn?t it?

Anangelwithin ? thank you for sharing your story. It must have been awful for you . I?m being really thick but what is an IVA? My DH may be redundant by the end of the year too but we are seeing that as no bad thing as he has been there 8 years and would get a good pay out plus he can do contract work after that until we leave for Spain and that should bring in good money too (he?s in IT) I know it sounds irresponsible but I just feel I want to run away from it all and wonder if we did make ourselves bankrupt whether the implications would hit us so hard living abroad as they would if we lived here. What honestly are the implications aside from the shame factor which I imagine is a huge one for anyone to get through? Getting a bank account and a mortgage over there is going to be impossible for the next five years or more anyway. That said, I am not sure if it would have an impact on my professional status (as Elkiedee has very correctly pointed out) in which case it would be a disaster for us. The fact that we have the two properties puts me off too as once this house is sold and we have paid off the mortgage and the running costs stop, life will become a lot more affordable and as I?ve said previously, if we can just get through the pain, the flat that we rent out will be a real asset in the future.

Thank you DollyPopsOut ? My pregnancy is high risk anyway so I really am trying very hard to take it easy and cut down on stress but you are right, this doesn?t help! when we couldn?t sell the flat 3 years ago, I lay awake night after night trying to think of a solution (but there just wasn?t one that I could make happen) and I ended up physically ill as a result, I hope I?ve learnt my lesson from that.

JARM ? that must be a wonderful feeling that the debt will be paid off by August you must feel a huge amount of satisfaction in what you have achieved. Congratulations

Elkiedee ? that?s right, I haven?t looked into it but I suspect being bankrupt would cause me professional issues too. You are right, sometimes I think we should try and sell the flat we rent out again too but it caused such a lot of strife last time that I almost cannot bring myself to go through that again. That was 3 years ago though. Once the house we live in is sold, we?ll probably consider that again. That said there isn?t much equity in it and if we sell it we will really feel like we?ve lost all the money we spent on the bridging without any benefit at all. We considered upping the rent, I reckon another £50/month wouldn?t be unreasonable as I think we are currently charging less than the going rate but the fear is that we?d lose the tenants we?ve had in there for the last 2 years and that would end up costing us more. Hopefully interest rate will peak soon and then start to drop again, that would help!

Thank you all, it really helps to face it and talk about it and hear your ideas and thoughts

look at www.debtquestions.co.uk You will find lots of information on there.

An IVA is an Individual Voluntary arrangement between you and your creditors, set up by an Insolvency Practitioner (they charge for this). It is for people who can make regular contributions to their debts (or a significat lum sum payment) and want to avoid bankruptcy (for example, it could be for someone who worked in the financial sector who couldn't go bankrupt).

I can probably answer most questions on debt advice, feel free to ask away.

Thank you

Have you looked around your house to see what you could sell?

My husband and I moved from a large house to a small flat in February, so had to get rid of a lot of stuff that had just been building up in unused back rooms. You wouldn't believe what people will give you money for - old lamps, furniture that you don't use, clothes, appliances, I even sold all my old wedding magazines and a few little bits of jewellery that I never wore. We ended up making enough money from selling stuff that neither of us had to go to the cash point at all in December or January. It felt great to de-clutter as well, and we're much happier in our new less cluttered flat.

We used a local classified web site, so something like eBay or Craigslist would work well.

Good luck - we built up quite a bit of credit card debt when my husband was starting his business, but it does get better. It's just a matter of being careful, not panicking and accepting that it's a fairly long-term project to get out of debt.

NineDragons ? thank you! your sales sound really successful that must have felt great! I have been working on it too! We?ve had a car boot sale (made about £120) and plan to have another soon. We took along photos of the larger things like a cross trainer, furniture etc last time but that didn?t work so well so I have been trying to work out how to list them on Amazon without success I?ve sold a lot of books and CDs on there but cannot work out how to log individual things that they are not selling already ? any tips? I?ll have a look at eBay and Craigslist thanks

This was in Hong Kong, so I only used the local classified website and can't really help you with specific Craigslist tips.

In general, though, the key was to take really good, clear photos (in natural daylight if you can) and detail every dimension and every scratch so you don't waste your time staying in to show it to people who thought it would be bigger/smaller/mint condition.

I think there was a study by the University of Chicago that showed that the eBay auctions that did best were ones that started low with no reserve and ran for 10 days. People start thinking of your item as "theirs" and get competitive about being outbid.

It's like going on a diet. You don't put 10kg on overnight and it's not going to come off overnight. You just have to chip away at it a bit at a time, but you will get there.

It's a brilliant feeling going out for a night or going to the supermarket and not having to go to the bank first. The fact that you don't have to dip into your earnings for daily expenditure means you can raise your repayments and get the psychological boost from knowing that your debt is that little bit smaller.

I think there was an article in the Guardian or Observer a month or so ago about saving GBP1000 in a day by doing things like switching utilities providers, so I'll have a search for that in the archive.

I did wonder at the Triad name if there was an HK connection (I was born and raised there!) Those tips are really useful thanks

It may sound odd, but do you have a large teaching hospital near you? When I lived in London doing a stupid underpaid job many years ago, I volunteered for some non-invasive medical tests and it was quite a useful little occasional income. I got GBP100 for allowing some very nice medical researchers to shine a UV light on my bum once a week for about three weeks.

They're often looking for specific groups of people (I think in that case it was people with Celtic skin and I seem to remember, also a nickel allergy), so ask around.

I would agree with the people who have said money saving expert site, and also re debt management plans.
We are in a similar situation, but it now feels under control as we took all the advice from that website and got a DMP (debt management plan) set up. Depending on your level of debts you can do a version of this yourself by contacting the creditors, but someone like CCCS (i think that is their name) have MUCH more clout. Basically they will agree a set repayment amount every month, and negotiate with creditors to freeze or lower interest rates etc. We found certain card companies to be VERY VERY agressive so the advantage of getting a proper DMP set up is that trained professionals are negotiating for you.
Oh - word of warning - there are 2 main CHARITIES that deal with this - you should NEVER have to pay, don't get sucked in by companies offering secured loans etc.
Reading through here should help:
moneysavingexpert forum

How about taking a lodger into your house if its large?

I presume your house is on the market now - cos it'll be a bugger to try and sell in the winter when you plan to move abroad. Can you sell now and move back into your flat - or another smaller property. The you would have the equity from the house sale to clear some debts?