Five Possible Solutions for Tackling Crippling Debt – Part Four: Debt Relief Orders

Debt Relief Orders - A bump sign on a road

Debt Relief Orders - Five Possible Solutions for Tackling Crippling Debt: Part Four - Bunchy the Budgeteer (Hand in the victory sign)

This series covers five possible solutions for tackling crippling debt.

Part one looked at Debt Management Plans, part two explored Administration Orders, and part three covered Individual Voluntary Arrangements.

In this post, I’ll explain Debt Relief Orders.

I’ll explain what they are and for whom they’re suitable. You’ll find out what you’d need to do to apply for one, and what having one may mean for you.

For a brief explanation of Debt Relief Orders, watch this video from debt charity Stepchange.

What Is a Debt Relief Order?

Debt Relief Orders (or DROs) may be suitable for people with total debts of under £20,000, with little chance of repaying them.

Although a Debt Relief Order is another form of insolvency and is legally binding, you won’t need to go to court.

Once granted, a Debt Relief Order freezes your debt for 12 months (known as the moratorium period). During that time, your creditors (people you owe money to) cannot take any further action against you. They can still add interest and charges. They shouldn’t contact you during those 12 months either.

Once the 12 months are over, if your finances aren’t improved, the debts included in the DRO get written off, cancelling them.

To be eligible for a Debt Relief Order, you must have little to no assets and little surplus income left over after covering your basic living costs.

There are other criteria to meet to apply for a Debt Relief Order.

Debt Relief Orders - Box files on shelves
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Full Criteria for Applying for a Debt Relief Order

To get considered for a Debt Relief Order, you must:

  • Not have debt above £20,000.
  • Be left with less than £50 a month left over after covering basic living costs.
  • Not own a property.
  • Have lived (or run a business) in England, Wales, or Northern Ireland in the last three years.

For people living in Scotland, look at the Minimal Asset Process (or MAP), which has different criteria and fees. You can read more on MAPs here.

  • Not have been involved in any other insolvency proceedings or applied for a DRO within the past six years.
    If any of your creditors have asked a court to make you bankrupt, you can ask the creditor if you could instead apply for a DRO.
  • Own less than £1000 worth of assets. Besides this £1000, you can also own one motor vehicle, as long as it’s not worth more than £1000. If the vehicle has been adapted for any disability of yours, then the cost of the vehicle doesn’t matter.

Assets that get counted towards the limit of £1000 include:

Jewellery (though not wedding rings).
Computers
Property/land.
Antiques
Savings and shares
Money owed to you (unless you’re unable to get it back from whoever owes you).

The worth of these assets is what you’d expect to get if you sold them, not the cost of what you paid for them.

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Assets that aren’t counted towards the limit of £1000 include:

Furniture
Bedding
Clothes
Items required for your job or business and essential household appliances you couldn’t manage without (e.g. a cooker).

A debt adviser will tell you which assets are or aren’t included.

Which Debts Can I Include in a Debt Relief Order?

Debts You Can Include in a Debt Relief Order:

  • Credit card debts
  • Store card debt
  • Catalogue debt
  • Loans
  • Overdrafts
  • Rent arrears
  • Buy now – pay later agreements
  • Business debt
  • Council tax arrears
  • Benefit overpayments (unless caused by dishonest behaviour)
  • Money owed to HM Revenue & Customs (e.g. National Insurance Contributions or Income Tax)
  • Utility bill arrears
  • Phone bill arrears
Debt Relief Orders - credit card
Photo courtesy of Dreamstime

Which Debts Can’t I Include in a Debt Relief Order?

Debts You Can’t Include In a Debt Relief Order:

  • Magistrate court costs
  • Student Loans
  • Child maintenance and child support payment arrears
  • Social fund loans
  • Confiscation orders
  • Compensation for injury or death
  • Television licence arrears

A debt adviser will tell you which debts are or aren’t included.

How Do I Get a Debt Relief Order?

Only an authorised debt-management adviser can organise a Debt Relief Order for you.

Only the Insolvency Service can grant Debt Relief Orders.

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Does It Cost to Set up a Debt Relief Order?

To get a Debt Relief Order you must pay a fee of £90. You may be able to get help from a charity to cover the cost.

Are Joint Debts Included in a Debt Relief Order?

On your application, you must include the full amount of any debts you share with another person. This will count towards the limit. Once your Debt Relief Order ends, your responsibility for the debt gets cancelled. The other person will still be responsible for the debt.

Can My Debt Relief Order Get Cancelled?

Your Debt Relief Order could get cancelled if your finances improve and you have more than £50 a month after covering basic living costs. There are several other reasons for having your DRO revoked, which you can find here.

Debt Relief Orders - Cartoon figure stood behind a large red x

Other Considerations Before Applying for a Debt Relief Order

There are restrictions you must adhere to while under the Debt Relief Order.

These restrictions mean you can’t:

  • get credit for more than £500 without telling the lender you have a DRO
  • act as the director of a company

For a full explanation of restrictions, look at this page by Citizens Advice.

During your Debt Relief Order, you still must pay your rent, bills and any debts not included in the DRO.

Your Debt Relief Order gets added to the Individual Insolvency Register. It’s removed three months after the DRO ends.

Your Debt Relief Order will stay on your credit record for six years. You may find it difficult to get credit during this time.

Citizens Advice have more information on DROs.

I hope this post was helpful for you. Is a Debt Relief Order something you’d consider? Have you ever been under a Debt Relief Order? What’s been your experience?
 
In the final part of this series, I’ll be covering bankruptcy.
Debt Relief Orders - Road sign with the word bankruptcy on it

Remember, the information on my blog isn’t financial advice.

You should consult a dedicated professional when making important financial decisions.

If you find yourself overwhelmed with money worries, please seek help from any of the following organisations:

Debt Advice Resources:

The Money Charity
National Debtline
Citizens Advice
StepChange

I love hearing from you and want to grow this community. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa aka ‘Bunchy’

Five Possible Solutions for Tackling Crippling Debt – Part Three – Individual Voluntary Agreements

Handshake. Five Possible Solutions for Tackling Crippling Debt - Part Three - IVAs

This series covers five possible solutions for tackling crippling debt. Part one looked at Debt Management Plans. while part two explored Administration OrdersIn this post, I’ll explain Individual Voluntary Agreements.

I’ll explain what they are and for whom they’re suitable. You’ll find out what you’d need to do to apply for one, and what having one may mean for you.

If you want a quick video explanation of Individual Voluntary Arrangements, watch this video by StepChange.

What Is an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement (IVA) is a form of insolvency. Due to this, it’s essential to get advice from an impartial professional beforehand. You can find resources at the end of the article.

An IVA is a legally binding agreement between you and your creditors (those you owe money to). You agree to make a complete or partial repayment of your debts via regular, affordable payments to a qualified Insolvency Practitioner (IP).

You pay 60 or 72 payments over five or six years. The IP divides the money among your creditors.

During this time, your debts get frozen. As long as you stick to the agreement, your creditors can’t contact you or take further action against you.

At your final payment, any outstanding debt gets cancelled. You’ll receive a ‘certificate of completion’.

Individual Voluntary Arrangements are only available to residents of England, Wales or Northern Ireland.

IVAs aren’t available in Scotland, but Scottish residents can consider Protected Trust Deeds. Although a similar alternative to an Individual Voluntary Agreement,  a Protected Trust Deed has its own pros and cons; and different fees. You can read more about Protected Trust Deeds here.

Question mark in lights - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Arrangements
Photo by Emily Morter on Unsplash.

How Do I Get an Individual Voluntary Arrangement?

An IVA can only get set up by an Insolvency Practitioner. You must prove to them that you have a regular and ongoing income and give them financial details such as your debts, your creditors, and any assets you have.

Your Insolvency Practitioner sees what debt payments you can afford to make and will help you compile a proposal. They then give the proposal to your creditors.

Two men at business meeting - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Arrangements
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What Happens Next?

The Insolvency Practitioner will contact your creditors with your proposal.

Your creditors may ask you to alter the proposal before they’ll make an agreement with you. If this happens, the meeting adjourns for 14 days, giving you time to decide. If you agree to the changes, the IVA will start on the date of the next meeting of creditors.

You can’t force your creditors to agree to the IVA. However, if the creditors that hold 75% of your debt agree with the plan, the IVA will go ahead. The IVA will apply to each included creditor even if they didn’t agree to the proposal.

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Which Debts Can I Include in an IVA?

  • Catalogue debts
  • Council tax arrears
  • Credit card debts
  • Debts owed to family and friends
  • Gas and electricity arrears
  • Money owed to HM Revenue & Customs such as Income tax and National Insurance arrears
  • Overdrafts
  • Payday loans
  • Personal loans
  • Store card debts
  • Tax credit or benefit overpayments
  • Water bill arrears
  • Any other outstanding bill, such as legal bills and veterinary bills
University graduate - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Agreements
Photo by Cole Keister on Unsplash

Which Debts Can’t I Include in an IVA?

  • Child maintenance or Child Support arrears
  • Court fines
  • Hire purchase agreements
  • Mortgages and secured loan arrears

Although you are allowed to include mortgage (and rent) arrears (and other secured loans against your property), your creditors must agree to it and they often won’t.

  • Rent arrears
  • Social fund loans
  • Some types of car finance
  • Student loans
  • TV Licence arrears
Man and woman holding hands - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Agreements
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Can I Set up a Joint IVA?

An IVA is an Individual Voluntary Arrangement, so can only be in one person’s name.

Things to Consider About Joint Debts:

  • Your individual IVA can include joint debts (debts that include both yours and another’s name).
  • Any joint debt included in your IVA will still need the other person to continue to make regular payments. If you have some of the debt written off, the other person must pay any outstanding debt.
  • Although a joint IVA isn’t possible, an Interlocking IVA might be suitable for you and any person you with whom you share debts.
  • An interlocking IVA involves you both having an IVA set up at the same time, with any joint debts listed in your individual proposals.
  • Between you, you make regular joint payments. When your IVAs have ended, any joint debts get cancelled.

To read more about interlocking Individual Voluntary Agreements, click here.

Hand holding bank card - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Agreements
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Does It Cost to Set up an Individual Voluntary Arrangement?

No matter who you set up your IVA with, you will need to cover fees. How much these are and when they’re payable depends on who you use.

These Fees Are:

  • a nominee fee, for setting up the IVA.
  • a supervisor fee, to cover the on-going administration costs of the IVA.
  • disbursement fees, which cover expenses paid to third parties during your IVA. These cover such things as the cost of insurance to protect money paid to your IVA and for the registration of your IVA with the Insolvency Service.

Depending on who sets up your IVA, you may not have to pay any fees in advance, but instead, have them deducted from your monthly debt payments.

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Can I Cancel an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement is legally binding. Once made, neither you nor your creditors can cancel the agreement. Get professional advice to check that an IVA is right for you.

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What Happens If I Don’t Keep up with My IVA Payments?

If you don’t keep to your repayment schedule:

  • your Insolvency Practitioner may cancel the IVA and make you bankrupt.
  • your creditors might backdate any frozen interest on your debts.

If you find yourself in altered circumstances that make it difficult to make your repayments, you can ask your creditors to review the terms you’d agreed to in the original proposal.

Hands holding chocolate coins - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Agreements
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What Are Lump Sum IVAs?

Lump sum Individual Voluntary Arrangements may be a choice for those who have a lump sum of money to pay towards their debt. This may be money from:

  • a friend
  • an employer
  • a relative
  • the sale of a property
  • an insurance claim
  • a redundancy settlement

An available lump sum of money might enable you to agree to a much shorter IVA. (A typical lump sum IVA lasts for six months, but this depends on individual situations).

You may either be able to pay one ‘full and final’ settlement amount or part lump sum with several payments thereafter.

The lump sum IVA carries the same risks and benefits as a regular payment IVA.

Two front doors on a British terrace - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Agreements
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Will I Have to Sell My Home?

As long as you keep up mortgage payments and any other loans secured on the property, you won’t be forced to sell your home. However, if there’s any equity in the property, you may be requested to re-mortgage six months before your IVA is due to finish. If re-mortgaging isn’t possible, you’ll get asked to make a further 12 payments.

Monies received from a third party may be used to make a lump sum payment equal to the value of any equity in the property.

Re-mortgaging may mean a higher interest rate.

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Will I Have to Sell My Vehicle?

As long as your vehicle make and model is a reasonable price, you should be able to keep any car or motorcycle, etc, when setting up an IVA.

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Will an IVA Affect my Job?

Although unlikely, it’s possible that having an IVA could affect your job. It’s more likely for those in senior roles, such as:

  • Company directors.
  • People in certain professions, such as accountants.

If this concerns you, it’s best to check with any professional membership body, HR department or union.

Other Considerations Before Applying for an Individual Voluntary Arrangement

  • Your IVA gets recorded on the public Individual Insolvency Register. It’s removed three months after the IVA ends.
  • Your IVA will show on your credit file for six years after the date the IVA begins.

While your IVA remains in either of these two places, getting credit may be difficult.

  • Throughout the duration of your IVA, you’ll undergo yearly reviews. If your finances improve, you may get asked to increase your monthly payment.
  • At your last payment, any remaining debt included in the IVA gets cancelled.
  • Only the debts included in your IVA will get written off at the end of the agreement. You must repay any other debts you have.

For more information on IVAs, check out this webpage by Citizens Advice and this handy PDF by StepChange.

 

Please remember that the information on my blog doesn’t constitute advice. Important financial decisions should follow a consultation with a dedicated professional.

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If you find yourself overwhelmed with money worries, please seek help from any of the following organisations:

Debt Advice Resources:

The Money Charity

National Debtline

The Money Advice Service

Citizens Advice

StepChange

I love hearing from you and want to grow this community. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa aka ‘Bunchy’

Five Possible Solutions to Crippling Debt – Part Two: Administration Orders

Chain link fence

Last week I posted the first in a series of five possible solutions for tackling crippling debt. If you’re having debt problems, read that post too. In this post, I will show you another possible solution for getting debt under control; Administration Orders. I’ll explain what they are, what criteria you’d need to meet to get one; and what to expect if you’re granted one.

What Is an Administration Order?

An Administration Order is something the County Court grants, to give you a way of handling debts you’re having trouble repaying.

An Administration Order is legally binding. Once it’s set up, your creditors (people you owe money to) won’t be able:

– to contact you or take any further action against you (unless the court gives them permission).

– to add any more interest or charges to your debt.

The Order involves your debts being dealt with as one. Instead of you paying your creditors, you’ll pay the court a single monthly payment; which they’ll then split between your creditors.

How Do I Get an Administration Order?

For the court to consider you for an Administration Order you need to say yes to the following questions:

– Do you live in England, Wales, or Northern Ireland? Administration Orders aren’t available in Scotland.

– Do you hold debts with at least two creditors?

– Has at least one of your debts involved a County Court or High Court judgment being made against you?

– Is the total of your debts, including the interest and charges under £5,000?

– Can you show you’re able to make regular payments?

If you said ‘yes’ to the questions above, then you have to fill out an N92 form (which you can view and download from here) and send it to your local court. On the form, you must give details such as your income, your outgoings, a list of your creditors; and how much your debts are.

bird's eye view of somebody working at a desk.
Photo by William Iven on Unsplash.

What Happens Next?

Once the court receives your N92 form, they’ll review it and decide whether they’ll grant you an Administration Order. A court hearing might be necessary. They must look at things such as how much you can afford after paying for your basic living costs.

Depending on whether the court grants you an Administration Order, you’ll get told:

– if every one of your creditors is included in the Order (certain creditors might ask that they’re left out. If this happens, the judge might order a court hearing to decide. Sometimes council tax arrears and criminal fines get left off the Order too).

– whether you must pay all or only part of the debts listed in the Order.

-how much you must pay the court every month (it can sometimes be as little as £1 per debt).

– how long the Administration Order will last.

Hands holding bank notes
Photo by Niels Steeman on Unsplash

Will It Cost Me to Set up an Administration Order?

It won’t cost you to set up an Administration Order, but for every payment, you make to the court, 10% gets deducted as a court fee. However, the total fee across the whole Administration Order isn’t allowed to be over 10% of your debt. So, for example, if you owe £4000, the court can’t take any more than £400 in court payment fees.

Can I Cancel an Administration Order?

You can ask to cancel your Administration Order or to change your monthly payments, by writing to the court. You might have to attend a court hearing.

Composition Orders

A Composition Order sets a date for when your Administration Order will end. This is usually after three years. When you get to this date, your creditors cancel any debt you still have with them.

The court might consider a Composition Order if:

– you can only afford to repay a small sum towards your debt each month.

– your payments won’t settle your debts within a reasonable time.

If a Composition Order isn’t granted by the court, then your Administration Order will run until you’ve repaid your debts.

Calendar

What Happens If I Don’t Keep up with My Administration Order Payments?

If you don’t make your regular payments, then the court could:

– cancel your Administration Order.

– order an ‘Attachment of Earnings Order’.

An Attachment of Earnings Order is a demand the court makes of your employer, to take money out of your wages to repay your debts. If this happens, your employer could take a £1 administration charge each time they do the pay deduction. The court sets a ‘protected earnings rate’ for you. This means you’re guaranteed a set amount of pay before any money’s taken out by your employer.

Attachment of Earnings Orders only apply to residents of England and Wales and don’t apply if your debt is under £50 or if you’re:

– unemployed,

– self-employed,

– in the Armed Forces,

– in the Merchant Navy

Businessman working on his tablet
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Other Considerations Before Applying for an Administration Order

– when your Administration Order starts, it’s recorded on the Register of Judgments, Orders and Fines. It’s usually taken off after six years.

– your Administration Order will be on your credit file for six years too.

– during the time that a record of your Administration Order remains in these two places, you’ll find it harder to get more credit.

– if you pay your debts in full, your record gets marked as ‘satisfied’.

– if you want to, you can pay the court £15 to get a ‘certificate of satisfaction’.

While researching Administration Orders, I discovered that they’re not often used anymore. I found that Debt Relief Orders are often more suitable and affordable. I’ll explain Debt Relief Orders in part four. If you want to research them now, have a look at this.

I hope you’ve found this information helpful. Is an Administration Order something you would consider? Do you think they’re a good solution for tackling crippling debt? What do you think is the best way of dealing with debt? Or are you living a debt-free life? Was it always that way? If you know of anyone who could benefit from reading this post or any of the parts in this series, then please feel free to share the post with them.

Debt Advice Resources:

The Money Charity

The Money Advice Service

Citizens Advice

StepChange

I love hearing from you and want to grow this community. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.
 
Lisa aka ‘Bunchy’

Our January 2018 Budget Report

Our January m Monthly Budget Report Bunchy the Budgeteer

It’s time again for me to share with you our monthly budget report. Can you believe it’s now February? I’m sure time moves faster as we get older! 

From a financial point of view, January can be a difficult month. Excesses in Christmas spending and a spike in credit card borrowing can leave many people feeling the pinch when January arrives. You can change this, though.
 
By designing a realistic budget focused on careful spending and saving, you’ll find that one month holds no more money stress than any other. Make sure, if you can, to make some room in your budget for some of life’s little pleasures too!
 
You can’t protect yourself from every unexpected expense (just look at our miscellaneous category!) but by making and following a budget, you can really reduce your money worries.
 

Here’s Where January’s Income Went…

For new readers: I use percentages, instead of monetary amounts. This is both to respect my husband’s wish to keep our income private and in case you want to compare how much of your income goes to your own categoriesAs your income will be different to mine, me using percentages should be more helpful to you.
 

Our January Income Had a 3.6% Boost Because We:

  • sold our old car for scrap.
  • accumulated Nectar points (which we put towards our grocery shopping, enabling us to use the cash we saved, to treat ourselves to a takeaway pizza!).
takeaway pizza image
Photo by Kristina Bratko on Unsplash

January’s Outgoings and Our Monthly Budget Categories:

 
(Shown in percentages of January’s total income, rounded up or down to keep things simple)
 

Mortgage: 25%

Council tax: 6.7%

Gas and electricity: 3.6%

Water: 2.5%

Groceries (Includes food, toiletries, and household needs): 8.7%

We have a tiny sum left in our grocery budget. As this category is tight, we’ll roll the surplus over into next month’s grocery budget.
 

Internet and landline: 1%

Life assurance: 1.4%

Mobile phone bills: 0.5%

My dental insurance: 0.6%

Mortgage overpayment: 0%

Pensions (besides to the small automatic deduction from Mr B’s wage): 0%

calculator and paper with monthly budget report

Sinking funds: 14%  

From these sinking funds, we spent 9.3% of our total January income on:

– our annual VPN subscription.

– unexpected dental treatment for Mr B.

– a new light bulb pack for our car and sealant to try to repair where water is getting in.

– birthday and late Christmas gifts (and experiences) for family members.

– a second-hand window vacuum.

Holiday savings: (‘vacation’ ) 7.2%

We’re excited because it’s the first time in a few years that we’ve been able to save towards a holiday!
couple sat on boat deck
Photo by Evren Aydin on Unsplash
 

Emergency fund savings: 18%

This month we completed our goal of having six months of expenses saved in our emergency fund! It’s been a hard slog. Yes, we’ve gone without, but the peace of mind is worth it. I’d be more secure with more put away, but if we don’t switch to investing soon, we’ll be looking at a difficult retirement.
 

Personal spending money (which has to cover clothing, haircuts, makeup, and gifts for each other on special occasions): 8.6%

I haven’t written about where our personal allowances go every month, but tell me if you want me to show you how I spend MINE.
 

Petrol: 1.4%

Miscellaneous buffer: With January’s income, our total miscellaneous spend was 3.4%. That’s  four times what we set aside for unplanned expenses! This was due to paying for:

– the final vet bill for the cat we cared for.

– taxis to work for Mr B.

Mr B cycles to work in the finer weather and I drive him during the colder and wetter months. This week, though, I’ve been ill with yet another cold and complications of Crohn’s disease.
 
bicycle propped up against settee
Photo by Yulia Chinato on Unsplash
When we ran out of money in the miscellaneous category, we covered the overspend from the grocery and household categories. Not ideal, but no debt incurred.
 
When looking at how much and where you’re spending money each month, remember that your life and requirements will be very different to ours. Sharing our budget gives you insight into how we budget and may give you ideas for your own.
 
So, how was January for you? Are you experiencing the post-Christmas pinch? My waistband is pinching! How do you divide up your money each month? Do you need to make a budget?
 
I love hearing from you and want to grow this community. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.
 
Lisa aka ‘Bunchy’

Five Possible Solutions to Crippling Debt – Part One: Debt Management Plans

Five Possible Solutions to Crippling Debt - Part One

We’d all prefer to live without debt, but for most Brits, it is not the reality. When debt repayments become difficult to make that’s when disaster can strike. In this series, I will explore five possible solutions to crippling debt, beginning with Debt Management Plans. 

According to their latest research, Comparethemarket.com says:

‘The average person with debt is in the red by over £8,000 (excluding mortgage repayments)..’

Today, debt is widespread. Years ago, people were very ashamed of having debt. Now it’s unusual not to carry any (non-mortgage) debt.

The effect of having challenging finances and spiralling debt can be profound. If you find yourself overwhelmed, please seek help from any of the organisations listed at the end of this article. They are there to help you.

Not all options in this series will suit your circumstances. Please seek professional advice.

Five Possible Solutions to Crippling Debt - Part One
Photo: Ben Rosett on Unsplash

Part One in This Series Looks at One Possible Solution to Crippling Debt – Debt Management Plans

A Debt Management Plan (or DMP) is an agreement made between you and your creditors to repay your debts.

You pay the organisation one monthly payment who then apportion it among your creditors.

The debt-management organisation calculates what you must pay. They base this on what you can afford.

Once a DMP is in place, most debt management organisations will continue to communicate with your creditors so you need not do it. This may be a great relief to you if hearing from creditors is causing you stress.

A Debt Management Plan may be useful to you if what you can afford to pay each month is less than what you’re paying now.

Five Possible Solutions to Crippling Debt – Part One
Photo: Michal Jarmoluk

DMPs Aren’t Suitable for Every Debt

A Debt Management Plan can only include ‘non-priority’ (less urgent) and unsecured debts, e.g.:

  • Credit card debt
  • Overdrafts
  • Home catalogue debts

It cannot include ‘non-priority’ (more urgent) debts, e.g.:

  • Mortgage arrears
  • Council tax arrears
  • Energy bills.

So you need a separate plan to tackle any ‘priority’ debts before setting up a DMP.

Five Possible Solutions to Crippling Debt - Part One

Are Debt Management Plans Free to Arrange?

You can pay a company a fee to set up and manage a Debt Management Plan for you. Sometimes, they’ll take part of your payment as a handling fee each time they pay your creditors. There are money advice organisations and charities that will take care of this for free. By talking to an experienced debt adviser, you can also get help to see if you’re entitled to any benefits or allowances. If you pay a company to manage your DMP, please make sure they are Financial Conduct Authority (FCA) regulated.

You will give the debt management organisation information about:

  • what you owe and to whom,
  • your income,
  • any assets, etc.

They will then contact your creditors and see if they’ll agree to the repayment plan. Even if they agree, unless it’s stipulated in the agreement, your creditors could demand full payment of the debt at any point.

Five Possible Solutions to Crippling Debt - Part One

If You Have Joint Debts

When you have a joint debt with somebody, you can include that debt in the Debt Management Plan. If you’re both having trouble repaying your debt, then you could consider setting up a joint DMP. Couples each with individual debts can include these too.

If you don’t keep up your DMP payments, the plan may be cancelled. Therefore, it’s important that you understand what you will be committing to paying.

Five Possible Solutions to Crippling Debt - Part One
Photo: picjumbo.com from Pexels

Other Things to Consider Before Setting up a Debt Management Plan

  • Your creditors don’t have to agree to a DMP, (though many often do).
  • As you’ll be paying a lower amount each month, the total debt will take longer to repay.
  • Your creditors may decide not to freeze the interest or charges on your debt. This means it’ll take longer to clear.
  • The Debt Management Plan will show on your credit record. This might mean getting future credit more difficult.
  • DMPs aren’t binding, so you can stop it at any point.

If you’d like a video explanation of Debt Management Plans, this short video by debt charity StepChange explains.

Five Possible Solutions to Crippling Debt - Part One
Photo: Negative Space on Pexels

Debt Advice Resources:

The Money Charity

The Money Advice Service

Citizens Advice

StepChange

I’d be very interested in how many people know of Debt Management Plans. Had you heard of them before this? Is it something you would consider? Ever used a DMP yourself? Was it helpful? If you’re not comfortable leaving a public response, then you can send me a private message here.

I love hearing from you and want to grow this community. Don’t be shy! Comment, contribute to the Facebook page, send me a message, or all three! I will always try to help you.

Lisa aka ‘Bunchy’

The Difference between ‘Saving’ and SAVING – How We Lie to Ourselves

The Difference Between Saving and SAVING

Ok, so what IS the difference between ‘saving‘ and SAVING?

At first, you might think, ‘What the hell? There isn’t a difference!’, but there really is.

There’s a lot of ways that we can ‘save’ (definition No 1) money, and by that, I mean saving money on purchases.

For example:

  • Using coupons and vouchers.

  • Buying things on sale instead of full price.

  • Lowering your thermostat.

  • Going to cheaper petrol stations.

All those sorts of things.

So, the aim is that you’re either saving on what you would have paid, or you’re abstaining completely.

For example:

Previously, you might’ve gone out every Saturday and bought new clothes. Now, however, you’ve decided to only buy clothes as and when you need to replace things.

So that’s the first definition of ‘saving’ money. It’s really just spending less.

The second definition is SAVING money (definition No 2). What I mean by that is actually putting money into your bank and leaving it there for an extended period of time. This could also mean investing it.

The distinction is important because, oftentimes, we lie to ourselves. We feel good because we’ve:

 
  • Bought a ‘two for one’ offer in the supermarket.

  • We’ve cycled instead of driven to work all week.

We’ve all ‘saved’ on things in this way and we’ll say to ourselves, ‘I’ve saved money!

While that’s great, and I’m not knocking it (I loves me a bargain!), we also need to ask ourselves:

‘Have I actually done something with the money that I would’ve spent?’
‘Have I spent my ‘savings’ elsewhere, instead?’

So, for example, let’s take the coffee drinker, who spends, let’s say, £5 every day on coffee.

She’s gone through Monday to Friday and she’s not spent any money on coffee. By the end of the working week, she usually would’ve spent £25. On Saturday, she thinks, ‘I’ve been so good this week, I haven’t bought any coffee! I’m going to treat myself to a takeaway pizza tonight.’

That’s great (no judgement made), but all she’s done is exchanged one purchase for another. She’s not actually saved any money. If, however, she said to herself, ‘Great! I’ve saved £25 this week on not buying coffee! I’m going to put that £25 in an interest-earning savings account.’ Then that gal has actually SAVED money.

The Difference between 'Saving' and SAVING - How W
Photo: Tom Sodoge on Unsplash

I know it sounds so obvious to point out, but in daily life, our buying behaviour isn’t always so apparent to us.

So, there is an important distinction. The first way of saving is, (the way I distinguish it), ‘money-saving‘. To recap, to me, that means:

  • Getting deals/bargains.

  • Paying less for goods or services than usual.

  • Getting something for free, whereas before I might’ve had to pay for it (like finding a free book to download).

To me, these are all money-saving tactics, but SAVING is the actual physical act of adding money to a bank account.

It’s a simple thing, but it can often trip people up, so that’s why I felt it was important to talk about today.

It’s all very well being frugal, but if you’re not actually doing something with that saved money, whether it’s:

Moving some money from your current account into a savings account,

or

Putting money you normally would’ve frittered away on sweets or chocolate into a jar,

then you’re not actually benefiting yourself at all.

It’s important, on a psychological level, to make that clear in your head. Being aware of these small behaviours will give you your best chance of succeeding at saving in 2018.

The Difference between 'Saving' and SAVING - How W
Photo: Aris sfakianakis on Unsplash.

What I’d like to know from you guys is:

Have you ever found yourself thinking that you’re doing well at cutting back on spending, or finding deals in the supermarket, etc, only to think:

‘Well hang on a minute, I haven’t actually got any more money!’

or

‘I’m still struggling at the end of the month!’

If so, I hope this post helps to bring this savings issue to the forefront of your mind. What I want for you is that each time you make a ‘saving’, that you think:

‘Right, I saved that on my shopping, I’m actually going to physically move that money over into SAVINGS.

Although I haven’t used them, there are apps that will ’round up’ your purchases to the nearest pound. The spare change is then sent to savings or investments. Do you use them? Do you think they’d help you to save money? Let me know!

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me an email or all three! I will always try to help you.


Lisa aka ‘Bunchy’

Our December Budget – How Did We Do? – Christmas Edition

Hands holding smartphone by laptop - Five Possible Solutions to Crippling Debt – Part Three - Individual Voluntary Agreements

Christmas is over for another year but now is actually a good time to touch on Christmas budgets.

It feels like ages since I’ve written a proper blog post. Like many people, I took advantage of the Christmas period by spending quality time with family and relaxing.

I have lots of blog posts in my head for 2018 but first wanted to share how our monthly budget went. This is for your entertainment, encouragement, (or to compare with – and be glad that you’re doing better!).

For anyone who celebrates any of the winter festivals (be it Christmas, Hanukkah, Eid, etc,) you no doubt encountered costs that fell outside your typical monthly budget. We’re no different, How we all manage those additional costs will vary, however.

For new readers, you’ll see that I use percentages, rather than monetary amounts. This is both to respect my husband’s wish to keep our income private  (it’s a low income) and to give a better comparison, per category, for whatever size budget you’re working with.

Christmas Budgets
Image by Bunchy The Budgeteer

Here’s How It Went for Us

Mr.B’s wages were on the lower than usual side, due to him having some sick days in December.

December’s Outgoings and Our Monthly Budget Categories – (shown in percentages of December’s net/after-tax income) :

  • Mortgage: 23%
  • Council tax: 6.3%
  • Gas and electricity: 3.4%
  • Water: 2.4%
  • Groceries: (Includes food, toiletries, and household needs) 8.8%
  • Internet and landline: 1%
  • Life assurance: 1.3 %
  • Mobile phone bills: 0.5 %
  • My dental insurance: 0.6%
  • Mortgage overpayment: 0%
  • Pensions: 0.3% (In November 2017 Mr.B was been enrolled in his workplace pension. The amount taken from his wages is the compulsory minimum required. The percentage we’ll be adding when actively investing in our pension funds will be higher).
  • Holiday savings: (‘vacation’) 0%
  • Emergency fund savings: 31%
  • Personal spending money (has to cover clothing, haircuts, makeup, and gifts for each other on special occasions): 8.1%.
  • Petrol: 1.3%
  • Miscellaneous/unexpected buffer: In relation to December’s income, our total miscellaneous spend was 0.8%.
  • Sinking funds: (the linked article explains these): 12.5% allocated to our short-term savings.
  • 7.5% of our total December income was then spent from the sinking funds on the following:
    1. Some Christmas and January birthday gifts.
    2. A new hot-water bottle and cover!
Our December Budget – How Did We Do? – Christmas Edition
Image by Bunchy The Budgeteer

Now, I have to say that the percentage we spend on Christmas gifts is much lower than your average family. That’s due to:

 

  1. As a couple, we don’t celebrate Xmas, yet have felt obliged by our family to get involved, even on a small scale.
  2. The gifts we buy for each other come from our individual ‘allowances’, so that doesn’t show up in the figures.
  3. My mother-in-law puts together the most amazing hamper for us each year. While it’s not food for ‘proper’ meals, it’s packed with ‘naughty’ food and plenty of booze!
  4. I’d predict that we spend less than half on gifts for people than what the average person spends. We only buy for parents/step-parents, my grandmother, and our 10 nephews and nieces.

December 2018 will be different. We’ve decided that December 2017 was the last year that we celebrate Christmas at all. We haven’t yet told all the family. My mother-in-law has insisted that she still wants to give us a hamper because it brings her joy. I’m not going to rob her of that. We aren’t doing it for monetary reasons. The money we would allocate to the people we buy gifts for will go towards their birthday instead. This means we’ll be spending the same amount on each person, but yearly rather than twice yearly.

How was December for you? How do you divide up your budget? Do you need to make a budget? Did you spend more than you’d intended? If so, why? I’d love to know how everyone else did.


You may also be interested in reading: ‘How to Save Money on Christmas 2017‘, ‘A Peek into Our Monthly Budget‘, which is the template we use each month, ‘Are You Within The Recommended Guidelines For Your Monthly Expenses?‘, and ‘Money – Where On Earth Should I Begin?


I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.


Lisa a.k.a ‘Bunchy’

Happy New Year! Better Money Habits for 2018

Happy New Year budgeteers! Are you ready for some better money habits for 2018?

There’s nothing like a fresh year to form new and healthy habits. That includes your financial health.

What new habits do you want to form? Are there some less-than-helpful money habits you’d like to get rid of? How about making 2018 the year you finally commit to:

  •  Getting out of debt?
  •  Saving a percentage of your income each month?
  •  Making and FOLLOWING a realistic budget?
  • Cutting back on unnecessary retail therapy?
  • Cooking at home more and ordering fewer takeaway meals?

Whatever your financial goals for 2018, I’m here to encourage you along the way and share MY wins and fails too.

I’d like to thank everyone who has supported me with the Bunchy The Budgeteer blog in 2017.  I have exciting plans for the blog in 2018 and shall strive to offer you valuable content over the next 12 months.

Normal blog posts shall resume on Thursday the 4th of January.

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa a.k.a ‘Bunchy

A Quick, Easy, and Effective Homemade Deodorant Recipe

A Quick, Easy, and Effective Homemade Deodorant Recipe

If you’re looking for a quick, easy, and effective homemade deodorant recipe that really works, then you’ve come to the right place.

But first…I had a deodorant DISASTER recently. The reason? I decided to try a different recipe, which was more complicated, involving the use of a bain-marie.

Imagine my horror when I discovered, part-way through the day, that I had the dreaded ‘B.O’! Ugh, I was so embarrassed and gutted. Plus, what a waste of time and effort!

I persevered for a few days, but no, I still smelt after doing housework or by getting a bit sweaty. Not a nice situation.
Now, partly due to being perpetually unwell and partly due to feeling lazy, I did the unthinkable. I bought a shop deodorant!

So now I’ve decided that, as with most things in life, it’s best to stick with simple. Following the old adage of ‘if it ain’t broke, don’t try to fix it’ is also sound advice.

So without further ado, below is the recipe that REALLY works (at least for me). I’m certain it’ll be effective for everybody, so give it a try (it takes mere minutes to make) and let me know how you get on.

Ingredients:

  • 6 tablespoons of coconut oil
  • 4 tablespoons of bicarbonate of soda
    (sometimes known as baking soda, NOT baking POWDER)
  • 4 tablespoons of cornstarch

Method:

  1. Mix together the bicarb and the cornstarch
  2. Add the coconut oil and stir/blend until completely mixed.
  3. Pop it into a small jar.
  4. Apply with fingertips.

(Tip: If you shave your arm-pits, then wait awhile before applying, or it can irritate the broken skin. I try to shave at night and leave off the deodorant, preferring to use after my morning shower).

So, I’m going to put my ‘sell-out’ deodorant in my bathroom box, (where we keep ‘extras’) as my ’emergency deodorant’. The failed homemade deodorant? I’ll dig it out of its pot and chuck it in the compost. It’s all natural after all.

You may also be interested in reading ‘A Fistful of Frugal – Beauty Edition‘.

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

Lisa a.k.a ‘Bunchy’

Our November 2017 Budget – How Did We Do?

Our November 2017 Budget - How Did We Do?

It’s a little late, but I said I’d show you how our November budget went and how we did, so here it is!

November was an unusual month. We’ve been looking after a neighbourhood cat whose owners were unable to pay his vet bills. The poor cat had been wanting to spend a lot of time at ours. With me being a qualified Veterinary Nurse, I was quick to see that something was wrong with him. Three vet visits, medications, sedation, and blood tests revealed that he was F.I.V positive. and he had to be euthanised at the beginning of December. It broke our hearts, but we don’t begrudge paying the bills.

We can’t afford to have an animal of our own full-time. Our income will reduce in April unless I can make a success of a home business I am working on. It’s important to us to have our animals insured and to have the best food and veterinary care. With this in mind, we’re not yet able to fit this into our monthly budget. Others may think we were mad to use our Emergency Fund savings on an animal that wasn’t even ours. There wasn’t a moment of hesitation for us though and we knew that it wasn’t going to be an ongoing cost. it highlights what I’ve said before, that personal finance is personal.

 3.1% of our November income was extra income from selling some stuff from around the house. One of the items sold included our secondhand PlayStation. We’d bought the PlayStation by selling our secondhand Wii. We’d bought the Wii from selling other household items. You get the picture of how we usually manage to buy ourselves ‘new’ things!

Our November income was also bumped up 9.9% above the usual amount by receiving an ‘extra’ government payment. This was because one of the two months of the year when, due to receiving my payments fortnightly, I receive three instead of the usual two payments per month.

Our November 2017 Budget - How Did We Do?
Image Photo by Volkan Olmez on Unsplash

 

November’s Outgoings and Our Monthly Budget Categories – (shown in percentages of November’s total income) :

 

  • Mortgage: 20.3%

  • Council tax: 5.5%

  • Gas and electricity: 3%

  • Water: 2.1%

  • Groceries: (Includes food, toiletries, and household needs.) 10%

This was more than we usually spend on groceries. We had some money left over from October’s grocery budget and spent that. If we’d have been frugal and used the usual amount, we could’ve put the extra amount to our Emergency Fund savings. Yet, we’re human and it was a tough month. I was ill with a cold (which I’m still fighting and now Mr.B has gone down with it). So we were lazy and treated ourselves to a couple of takeaways. We also threw some of the cat products we had to buy into our grocery bill, rather than take more from our Emergency Fund.

 

  • Internet and landline: 0.9%

  • Life assurance: 1.2%

  • Mobile phone bills: 0.5%

I went over on my mobile phone bill and so covered the overage with my personal allowance.

 

  • My dental insurance: 0.5%

  • Mortgage overpayment: 0%

  • Pensions: 0.9%

Mr.B has now been enrolled in his workplace pension. This is the compulsory amount that came out of his wages. The percentage we’ll be adding when actively invest in our pension funds will be higher.

 

  • Sinking funds (the linked article explains these): 11% allocated to our short-term savings.

5.8% of our total November income was then spent from the Sinking Funds on the following:

  • Our six-monthly dental check-up. I will get back half of what we spent, as I have dental insurance.
  • Some winter car items and we got a punctured repair on one of our car tyres.
  • A couple of Christmas and birthday gifts.
  • Some new and second-hand items for the office and kitchen.
  • Holiday savings: (‘vacation’ to U.S. readers) 0%

  • Emergency fund savings: 34%

  • Personal spending money (has to cover clothing, haircuts, and makeup): 7.1%

  • Petrol: 1.1%

  • Miscellaneous buffer: In relation to November’s income, our total miscellaneous spend was 4.5%.

4.5% is almost seven times the amount we usually allocate for unplanned expenses! This was due to caring for the cat. We added to the miscellaneous category from our Emergency Fund as the expenses arose.

 So there it is! Not a typical month by any means, but we managed. We were still able to put a decent amount towards our Emergency Fund. This was mostly due to November’s income being higher than average, thank goodness!

How was November for you? How do you allocate your budget? Do you need to make a budget? I’d love to know.

You may also be interested in reading: ‘A Peek into Our Monthly Budget, which is the template we use each month, ‘Are You Within The Recommended Guidelines For Your Monthly Expenses?,  and ‘Money – Where On Earth Should I Begin?

 

I love hearing from you and want to grow this community that is gradually getting bigger. Don’t be shy! Comment, contribute to the Facebook page, send me a private message or all three! I will always try to help you.

 Lisa a.k.a ‘Bunchy’