Happy New Year!

My last post to this blog was almost 18 months ago...I am now DEBT FREE!!!!

How did that happen?...

My ex-wife and her partner of a few years decided the time had come to move in together.  There was talk of them moving into our house but understandably it proved to be too small for all of them along with his children and so they decided the best thing to do would be to sell the house and rent together.  My guess is that they either didn't want to commit to buying a house together or the cost of a property that would be large enough was out of their budget.

For anyone who finds themselves in a similar situation, you have my sympathy!

Put bluntly, any couple going through a divorce will find they have zero help from anyone in helping them agree on the split of assets and debt.

If you are unable to agree on terms between you then the only way forwards is to go to court and let a judge decide.  However, and this is the kicker, a judge will not entertain this until you have gone through  mediation...which cost money.

Having done some googling, I realised that most mediation sessions will cost around £150 and it's generally agreed that most couples will need "multiple sessions".  This can run up a few hundred pounds worth of bills quite quickly and while not a lot, if you have zero disposable income to spend on this, it's a non-starter.  Also, it's mediation - they won't tell you what is fair, they will try and get you to see the other person's point of view but they have no powers to make any decisions.

For my part, I found the internet a huge resource of information and help.

I managed to find out that basically there is no template that a judge will use to determine who gets what or how assets or debt are divided.  They will look at each party and the situation with the children.  They will take into account income and expenditure along with potential future earnings...when I start reading things that are very abstract like this, I know it's going to end up being a long, drawn-out process.

In the end, I agree with my ex-wife that the house would be sold and the mortgage and joint debt paid up.  Any proceeds would be split 70/30 in her favour.

Did I think this was fair?  No.  Did I think I was entitled to more than her?  No.  Did I think I was entitled to half then?  Yeah, I kind of did.  Why?  Well from my point of view I had always been the "bread winner" and my income had been our main income.  My ex-wife had always held part-time jobs with hours fitted around our children.  So while I provided the finances (I'd say 85% of our income was my salary) she provided the parental care - it's how a lot of families operate.  I don't believe that this entitled me to 85% of the house, but I don't believe it should only have afforded me 30%.

There was also the debt.  We had at one point in time approximately £60k worth of debt.  Because of my earnings I was obviously able to secure more lending than she was.  As a result, the majority of the debt was in my name.  This debt hadn't been accumulated on lavish holidays or expensive cars - to be fair, a large chunk of it had been spent on renovations of the house...a driveway, a new bathroom, a new kitchen, a conservatory and flooring for example.  There had also been the cost of paying for cars.  We never had a car that was younger than 8 years old.  Most of our cars were purchased for under £1500 and quite a few were much cheaper and turned into money pits!

So why in the world did I agree to a 70/30 split???...

Put bluntly I know what my ex-wife is like.  She's a lovely person and doesn't have a malicious bone in her body but she's a worrier and has absolutely no head for figures.  When you take this into account I realised she was insisting on 70% not to get at me, but because she was worried about her finances and how giving up the security of a home to move in with her partner would pan out.  Granted it was their decision, but I had been suggesting she sell the house for years - pointing out that the cost of the mortgage was crippling both of us and not allowing us to pay off our debts etc.

I saw this as a good opportunity for both of use to be debt free.  I knew that since we had separated we had both struggled financially and life was passing by, kids were getting older and the idea of being in debt for another 10 years each was horrible...and it was likely going to be longer than that if you add on the costs that come with being parents.

So, the situation was we either don't agree and go to mediation which neither of us could afford or we try to reach agreement so that we could both move on with our lives.  I knew she wouldn't budge below 70% through her own fears and I figured that at least if I got 30%, it would be enough to pay off my debts and leave me with a few thousand left.

So the house sold, I paid up my debts and treated my kids to some new clothes and a few lavish meals out which is something I had never been able to do.  I bought a few things for myself that I had wanted over the years but was never in a position to purchase.  In the end, my ex-wife ended up with around £10k more than she was expecting....say what!?  Well, remember I said she had no head for finances, well it turns out that despite me explaining how the sale of the house would pay off the mortgage and joint debts, she still assumed she would have to pay her half of the joint debt.  So perhaps if she was better with money and facts and figures she would have realised she didn't actually need 70%  :(

Am I bitter?  Slightly, yes.  However, it was my choice to agree to the 70/30 split and I am now debt free and I've loved that - Not having to check my bank balance before I put petrol in the car, or having to workout how to feed myself and my 3 kids for a weekend on only £8.50 (been there numerous times!)

In terms of paying off my actual debts, I had a choice.  I could just pay up the full amount owed or try and negotiate a reduced amount.  Now, if you have an account that hasn't defaulted then I would suggest paying up the full amount - this will go a long way to repairing your credit score!  But what if you already have defaults?  This point get's interesting.  Basically, when an account is defaulted it can only stay on your credit fiel for 6 years.  So I looked up my credit score via Noddle.co.uk and discovered that 2 of my creditors had defaulted my account over 3 years ago.  So even if I paid them in full, I would still have a rubbish credit score because of this.  If I made a reduced "full and final" payment then it would show on my account as being "settled" BUT with an outstanding amount.  Either way, it wouldn't affect my score as the accounts were already in default - so that's what I did.  I managed to reduce 2 of the payments after phoning them up.  I think I saved myself around £800.

So I've now been debt free for around 3 months.  My credit score has risen albeit only slightly and I'm still considered to have a poor score but this is purely down to the 2 defaults I have on my file.  These will both expire in approximately 2.5 years at which point I should have a nice healthy credit score again.

So what about the future?  Well, Unfortunately I can't see that I'll ever be in a position to get back onto the house ladder, but then a lot of people have never been a home owner.  I now have much more money each month, which means I can take my kids out, treat them to more and have a much, much better life myself.

I could hold on to my bitterness about the way the split worked out but at the end of the day, I like to believe in Karma.  I did what I did for the right reasons and money isn't everything.

18 months - time for a new update!

So, I've added a new list of my debts - these don't include my wife's debts any more as I can only guestimate what she still owes.

Reading back on my last update, I previously said that I had £14K of personal debt with an additional £24K of joint debt - so £38K of debt from the perspective of StepChange.

Well, 18 months on and my personal debt is now approximately £9.5K with joint debt of approimately £22K - actual total from the perspective of StepChange is just over £31.5K!!!

So...I've bought my own personal debt down by 1/3 in 18 months and between my ex-wife and I we have brought our joint debt down by 10% - This doesn't sound quite right to me but unfortunately I didn't make a list of my debts during my last update so I can only go by the overall figures that I wrote at the time.

So...what's my debt-free date now?  StepChange tell me that my date is in 10 years time.

Now, I have had to reduce my StepChange payments over the years as I got into a situation of using Wonga to help me get through the last week of a month before pay day - NOT GOOD!  This was due to poor budgeting on my part and after discussing it with StepChange we agreed on a more realistic amount.

Either way though, when I blogged 18 months ago my debt-free date was almost 20 years!

I'm still confident that both my ex-wife and I will be debt-free sometime in the next 5 - 7 years and I think we've both now got realistic budgets and payments set to allow us to keep on track.

If you found this blog through searching for information on Debt Management Plans (DMP) or StepChange then I hope it's been of help to you. If you are struggling with your debt then don't hesitate to contact StepChange - they are brilliant and life has been so much better since they helped me to get my debts under control.

Please feel free to subscribe to my blog for future updates.

WOW - 4 Years Later!!!!

wow...it's been a while since I updated this...in fact, 4 years to the day tomorrow :)

So, what's happend over the last 4 years and how have things changed...

Well, to start with, unfortunately my wife and I separated a couple of years ago - numerous reasons but I've no doubt the added stresses of being in debt were a factor.  As a result of that, my wife and I have had to start separate DMP's (more on this shortly).

The CCCS have had a rename/rebranding - they are now called StepChange but their amazing service remains the same, in fact better.  They have made some great changes to their website and DMP portal now so that most things can be done online - even the DMP review process is done online now.

When I started this blog, my Wife and I had combined debts of £60K - well, I can only guesstimate my wifes now but I believe her debt is around the £6k mark, my debt is around £14k and we have joint debts totalling approx £24k - so in total, we're now sitting at the £44k mark - so in 4 years we have managed to pay off a quarter of our debt.

I said I'd talk some more about the split DMP's that my wife and I had to take out.  So basically, when you separate, StepChange don't allow you to have joint DMP...or maybe they did but we opted to have separate plans, tbh I can't recall 100% but I believe it StepChange that insisted on it.

Anyhow, the interesting thing about separate plans where you have joint debts is that both plans treat the balance of the joint debt as each participant being soley responsible - so in our case, the £24K of joint debt is assumed to only being contributed to 100% by me and ALSO 100% by my wife - this basically means that for each payment that I and my wife make to our respective plans, StepChange make 2 payments towards the joint debt.  Depending on how much of your debt is joint and to who that debt is owed this may work in your favour - for us it does as it means that we're paying off the largest creditor faster (NRAM).

The other important point to remember is that when StepChange calculate your debt-free date based on the amount you pay each month, they do NOT take into account any payments from other sources (such as my wife's DMP) - what does this mean?...simple - I know that my wifes DMP contributes approximately the same amount to our joint debt as my DMP but that because she has lower personal debts, her debt-free date is a few years less than mine - so all of her debt including the joint debt will be paid up before mine.  Now, if you're following this, you'll realise that if her debt-free date is sooner than mine then logically that means that the portion of my debt that includes the joint loan will also be paid up in that period of time - so when you are quote a debt-free date by StepChange don't immediately worry - My current debt-free date is around 18.5 years!...but, with the divorce settlement that I have agreed, this will reduce to around 10 years and my wifes will increase to around 10 years also.  Obviously, it will be less than that though as StepChange are not taking into account the overlap of payments.  I have guestimated it will more likely be around 7 years for each of us.

So, that's my first update in 4 years over - phew!

Barclaycard accept CCCS payments on wife's card

Another update.  My wife had her latest statement through and it has the minimum payment the same as proposed by the CCCS and they have reduced the APR from approx 16% to 3%!

Another great result!

Lloyds TSB Mastercard - accepted and % reduced!

I had a statement from Lloyds yesterday.

My usual monthly minimum payment is around £265 a month and my anual interest is 22.9%.  My latest bill shows an expected payment of £179 (which was offered by CCCS) and the interest rate has reduced to 0.482% per month which equates to approximately 5.7% APR!

This is great news as they are my 2nd biggest lender after NorthernRock!

My wife and I are feeling so much better after starting our DMP and for our first month we've managed to stick to our budget.  Our budget is very tight but it's not impossible!

CitiBank refused DMP & Managed Loan offer from HSBC

Over the last week I've had 2 letters regarding my DMP.

The first was from HSBC who agreed to accept the reduced payment offer from CCCS providing we signed up for a Managed Loan @ 7%APR for a duration of 80months.

I was happy with this offer as we are currently paying approx 20%APR on our outstanding credit card and overdrafts.

I sent the details to the CCCS who advised me not to accept the offer though!  They explained this as saying that in their experience HSBC would pass the debt on to a debt collection agency (DCA) who would more than likely accept the offer and would mre than likely stop any interest or charges.  Far from me to question CCCS who have a wealth of experience in these matters so I did not take up the loan.

The other letter was from the CCCS themselves who have advised us that CitiBank have refused to accept the reduced payments.  The CCCS advised that they would continue to make the reduced payments anyhow but that CitiBank would also be likely to pass the debt on to a DCA.

The above is a little stressfull as we wanted to avoid DCA's in general as I'm not sure what their powers are in terms of recovering debt - but I guess we'll find out eventually!

That's it for now.  This is the first month of our DMP and so far cashflow has been so much easier.  I've opened a savings account where I can put asside the money for eveything that was agreed on the DMP such as £20 a month of car tax etc and so far it looks like being the first month in a long time that we will actually have stuck to our budget!

Next update as and when I hear anything.

HSBC response to CCCS

We had a very weighty pack from HSBC over the weekend regarding our debts with them and CCCS.

the CCCS had written to them with a combined monthly payment for 2 overdrafts and 1 credit card of £130.54p.

HSBC wrote to us and basically said that they would accept the payment in the form of us taking out a loan to cover the debts we had.  The loan would be over 80months and would be for just over £8k and would cost us just over £10k to repay with an APR of 7%.

I thought this was pretty good!

Our current overdrafts are changed at something like 18% APR and my wife's credit card is 21% APR!

I spoke with the CCCS this morning who suggested that we didn't take out the loan due to the interest being changed.  I pointed out that HSBC are entitle to continue charging us at the current rates while also charging us at least £25 a month on one of the overdrafts which is over the agreed limit!

The guy said the best thing to do would be to scan the offer from HSBC and email it to them and then call back in 2 days time when they have had a chance to have a read.  He said normally the would hope that thhe bigger lenders wouldlsimply stop interest and charges however this is not set in stone.

The other benefit of taking out the loan would be that for the next 80 months (6 years) we would have a good credit record rather than another creditor logging non/late payments.

I'll let you know what the CCCS say when I speak to them however I am very much of the opinion that HSBC are being as fair as they can while also enabling them to make some kind of profit.  I'm not opposed to my creditors making a profit at a fair rate (keep in mind at present the current Bank of England base rate is 0.5%).