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21/06/2017 11:05 am
This is a saga, for that I can only apologise. I've tried to include all the necessary information and may have overdone it!
Hello everyone, this is my first post. I’m 29, been in this debt cycle for approximately 8 years. My debt to income ratio has been similar throughout apart from 3 years when I was at university followed by 6 months unemployment when I racked up a lot of this. I lived at home and worked part time, but had to reduce my hours during placement blocks (unpaid, Mon-Fri 9-5) and never got them back again so I was limited to one 8hr shift a week at min wage. NHS courses are entitled to minimal student support because they somehow figure that not paying fees means you can magically use the nonexistent money (as almost everyone pays fees via a student loan, so nobody pays them upfront) to put fuel in a car etc.
I've always tried to overpay by credit cards, if only by £10, to try and claw something (anything!) back off the debt.
I recently sought advice for my crippling debt problem (I’ll give a breakdown at the end, along with a rough income/expenditure) but have been told that, here’s the kicker, *I’m not struggling enough*. I can meet minimum payments and haven’t defaulted, so their advice is to just keep doing this. I can only just meet my minimum payments because I haven’t maxed out my credit limit yet, so I spend my real money on card payments then have to accrue more debt on the same cards in order to live. I can just about afford to limp from month to month if nothing out of the ordinary happens, if nobody has a birthday/gets married/has a baby, if I don’t need to go home for any reason (I’m from NI originally but live in Glasgow), or if I don’t need the dentist etc. I don’t think there’s ever been a month where something hasn’t come up and I have no buffer to absorb this. I admit, in my darkest hours (of which there’s been a few), I’ve had moments where I’ve just been so defeated I’ve just went “oh what’s the point” and bought something I could probably have done without as a distraction, but when there’s no end in sight and it’s looking increasingly likely that I’ll live my entire life with debt…what’s the point in worrying about how much? I agree that's not a productive thought, but I assume it'll resonate with a few others.
It’s obvious that there will become a tipping point where my minimum payments will have increased (due to me accruing more debt) and I will no longer be able to meet them. Or when I hit my credit limits. It’s a race to see which happens first! This will definitely be before the end of the year: my best guess is around September.
I work in the NHS so my income is relatively fixed and I don’t have to do any overtime or shift work so it doesn’t fluctuate. I’m not eligible for another promotion for another 2.5 years, so I’m kind of stuck with my salary for a while. It’s not a bad salary by any means: if I was debt free I’d be able to live very comfortably while saving each month.
Another interesting thing to note is that I opted out of my NHS pension around 18 months ago, to try and free up some extra money in my net pay. Contributions are fixed at 9.5% so that’s a hefty chunk out of my wages. Truth is, if I hadn’t done this I’d have defaulted months ago. When I spoke to the debt advisor (Advanced Finance Solutions via the Scottish Trust Deed website) he said that opting back into my pension would lower my income enough to qualify me for a PTD (I almost wrote STD for Scottish Trust Deed and realised how it looks!) but after he spoke to a colleague it’s questionable if that would be allowed. I had hope that there was a solution for a mere 24hrs. Panic attack ensued, and here we are today.
I then stated that if I continued on as I am, paying minimum payments towards my credit cards, it would take me almost 11 years to clear them. This is assuming I don’t accrue any more debt, interest rates don’t change and that I ignore my other debt (overdraft and a store card). In the 11 years the overdraft will gather over 3k of charges, so I’ll be able to find myself in my 40s, free of credit card debt and able to start into the other stuff. By the time I’m in my 50s I should be able to think about opting back into my pension, going to the dentist, having a holiday, buying Christmas presents and generally living life.
I am a private tenant, so own no property. I drive but have always managed to get by without owning a car. I don’t smoke, don’t gamble/do lottery and have no children. I have a gym membership but that is set up as a payroll deduction of £22/month.
DEBT (rounded to nearest £10): £16490 and rising [xx(]
MBNA £8700 limit, using £7900. Min payment £177
Santander £5600 limit, using £4780. Min payment £155
Barclaycard £1200 limit, using £860. Min payment £36
Overdraft (Barclays): £2500, I live at the bottom of this. Charges come to £25/month.
Argos card: £449, interest free until Jan so getting ignored at the min.
Total contractual repayments (so CC’s only): £369
Topic starter
21/06/2017 11:09 am
Here's the income/expenditure I have:
Income (net): £1690 if not paying pension, £1550 if I opt in.
Monthly outgoings: this is what I was asked but if I missed any others just let me know:
Total: £1222.50
Rent etc: £502 (I split the flat costs 50/50 with my flatmate so my share is: £375 rent, £84 c.tax, £24 gas/elec, £15 internet (basic Virgin), £4 netflix).
Mobile: £40
Travel: £60
Car: £50 (I don’t own a car as don’t need one for work, but give my brother cash for insurance and fuel on his so I can use it when I need it, or hire one if it’s not available)
Gym: £0 (it’s a payroll deduction)
Work lunches: £40-£50 depending on how paydays fall (£10/week. Once my tenner is gone I don’t take out any more!)
Pets: £10 (my flatmate owns the cat and pays the insurance etc, I just get occasional food/litter)
Flights home: £60, 2-3 times a year (avg £15/month).
Haircuts: £40, 3 times a year (avg £10/month)
Clothes: £30
Hobbies: £10 (I generally hike/run or hang out with friends using food/wine already accounted for below)
Entertainment: £10 (Spotify)
Professional: £45 HCPC registration: paid Jan/July only (avg £7.50/month). Opted out of professional body and trade union (were £24/month).
Gifts etc: £30 (I’m 29. Even forgetting birthdays and Christmas, people get married and/or have babies every single month!)
Other: £13 newspaper subscription: an introductory offer that expires next month if I don’t renew. I won’t be (it was nice while it lasted but isn’t worth the full price of £29/month) and will go back to getting any papers out of my work budget.
£25 Barclays overdraft charges that I haven’t included in the above total, but if I follow the advice I’ve been given I will still need to find money for these each month.
Food: £400, but this is total supermarket spend so includes toiletries, household, alcohol etc. About £60/week of this is actually food. In that I’m also counting any as-and-when purchases like milk/emergency-PMT-chocolate. I could reduce this if needed, but given that I’ve already sacrificed so many other things this is my remaining ‘luxury’.
21/06/2017 11:40 am
Hi LouiseG
Always good to have as much info as possible, so no need to apologise for that!
I have no doubt whatsoever that you have options here which mean that you can put you debt behind you much sooner than you fear. A Protected Trust Deed looks like it could be one of those options, though a Debt Arrangement Scheme may also work.
To deal with the pension issue first. A pension is a justifiable and reasonable deduction from your pay and as such, if you were to opt back into that then it shouldn't cause any problem whatsoever.
It really boils down to what you can afford as to which option might suit you best. To assess that properly isn't really easy over a forum like this, but if you wish then either David or I would be happy to have a closer look at it with you and advise accordingly.
Scottish Debt Solutions Expert - Ask me for help setting up a Scottish Trust Deed or Debt Arrangement Scheme plan.
21/06/2017 11:43 am
Hi LouiseG and welcome to the forum.
Wow! I think this post might be the most information that anyone has every shared on the forum in their first post. As an advisor all this information is excellent – thank you.
You have done the right thing in reaching out for help and advice.
The positive here is that you have a number of solutions to help you deal with your debts. It’s just working out which one best suits your circumstances and which one you would prefer to do.
What you ideally want to do is reach out to an advisor to discuss things in person face to face. You want to ensure that ideally the advisor that you speak with is the same advisor that will handle you case from start to finish. Different firms handle cases differently and it can actually be the case that the firm you first speak with isn’t actually the firm that will handle your case.
When it comes to a Trust Deed, Sequestration or a Debt Arrangement Scheme we work out your payment the same was using something called the Common Financial Tool. Effectively we look at your income, take away all of your bills and whatever is left over is your disposable income and this is what you pay per month. There are maximum spending limits as to what you are allowed for things like food/housekeeping, Travel, Phone & All Other Expenditure so this can cap your spending and it can mean
A good knowledgeable expert such as Kevin or I could give you some one to one advice if you would like. That way you will have a better understanding of all of your options.
David is not currently posting in the Trust-Deed.co.uk forum
21/06/2017 11:54 am
Just had a closer look at the budget details you have given, LouiseG. It looks like you can afford around £325pm assuming you opt back in to your pension.
With debts of £16490, if further interest and charges were frozen via the Debt Arrangement Scheme then this amount could be paid off within 4 years and 3 months at that rate (though a little longer if via a fee-charging provider).
I think therefore that DAS is likely to be the most appropriate option assuming your figures are correct, as it would be unnecessary to set up a 4-year Trust Deed really. There would just be the danger that your circumstances would improve over the next 4 years and your payments go up, meaning you end up having to pay in more to your Trust Deed than your currently owe.
As I say though, the first step is to check your figures - it may be that there are one or two costs that you have forgotten to include which would mean that your affordability isn't as high as first thought.
Scottish Debt Solutions Expert - Ask me for help setting up a Scottish Trust Deed or Debt Arrangement Scheme plan.
Topic starter
21/06/2017 12:26 pm
Thanks guys. Well I figured too much information is better than not enough. I've read several threads that go on for ages trying to get all the info!
It's good to know I have options other than "soldier on until it gets worse, then come back to me".
How does a DAS/TD work with paying into an overdraft? I'm guessing that my current account would be frozen until it's in the black? Just so I know whether I'd need to set up a new account with no overdraft facility and use it for wages/essential direct debits.
I'm happy to talk to either of you and pick your brains: does it matter who? I'm based in Glasgow if that makes a difference.
The whole no-pension thing has been stressing me as much as the debt, especially as I can't afford to save anything each month. If I can sort my debt while paying into it then I'll opt in asap!
21/06/2017 1:21 pm
Hi LouiseG.
David and Kevin each cover the Glasgow area. If you'd like to speak with them you can click the contact button in their forum signature and submit the short contact form.
If an overdraft balance exists then this is a debt that would be included in a debt solution. Therefore it might be the case that you need to set up a new bank account with a bank that you owe no money to.
Banks are pretty quick to switch over standing orders and direct debits when people change to a new bank these days, so it's much less hassle than it used to be. The main thing will be to ensure that your employer has the new details for payroll purposes.
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds 
21/06/2017 1:49 pm
Hi,
You need to open up a new bank account as the bank you are with won't allow you to operate that account. It's nice and easy to open an account so don't worry about that. Kevin or I can talk you through this in a bit more detail.
Opting into your pension is a good idea and something I would recommend doing as you are allowed to make reasonable pension contributions. I recently dealt with a case whereby the client had a large disposable income but wasn't paying into a pension. We organised for the client to pay into the pension and it reduced the payment per month by around £250. The client was still paying an acceptable payment to the Trust Deed and also into the pension. A win win for the client.
Are you feeling a bit better about things now you have opened up and asked for some help and advice?
From what you have told us you have nothing to worry about and Kevin or I will be able to help with everything.
David is not currently posting in the Trust-Deed.co.uk forum
Topic starter
21/06/2017 2:12 pm
Hi,
Cheers for your suggestions. I'll opt in to my pension again, it might be too late for this month's pay but it'll definitely be sorted by July's pay. I'll open a new account online tonight, Barclays is actually a total pain for me to get to during branch hours anyway so if I end up permanently switching banks over the course of this it wouldn't be a disaster!
Yeah it would be good to go through my outgoings, because while I may spend more than average on food I'm aware that my transport costs are very low. I'll send you an enquiry via the online form.
Thanks!
21/06/2017 2:40 pm
On the subject of switching bank accounts, a couple of things to note:
- If you are likely to opt for a Trust Deed then you'd be best to ask for a "basic bank account" with your new bank as otherwise you might have to change accounts again once the Trust Deed is signed.
- Leaving it to the new bank to arrange the switch from your old account for you may cause problems as the old account has an overdraft. That bank may require that the overdraft is cleared before agreeing to allow the switch to happen automatically. I normally advise people to open the new account and then switch regular payments/wages etc by contacting the various companies with their new bank details themselves instead.
Scottish Debt Solutions Expert - Ask me for help setting up a Scottish Trust Deed or Debt Arrangement Scheme plan.
Topic starter
21/06/2017 3:06 pm
Thanks Kevin.
I've been through the official 'switch' process before and it was more painful than the root canal I had the week after it finished: Barclays managed to get my details stuck in a feedback loop that put 8 full credit searches on my file in a one week period, 4 of which were on 1 day! Thankfully the ombudsman was able to get them removed, but it took a further 5 months.
I'll just open the most basic account I can that has direct debit abilities, no overdraft and no fees.
