Sally had a two
year old daughter and was not living with her partner. She was able to
manage a part time job at the local supermarket in the afternoons while
her daughter was looked after by her mother. Before her daughter was born,
she was working full time at the supermarket and bringing in about
£220/week. At this time she did not have much borrowing. She had a store
card account and a catalogue but the monthly payments on the balances were
easily manageable on the money she had coming in.
Things began to
go wrong when her daughter was born. She had to stop work altogether while
she took maternity leave and although she received statutory maternity pay
and child benefit, this did not replace the wage she was used to earning.
With the expense of the baby, Sally started to increase the use of her
store card and credit card. She also found that her bank overdraft started
to increase. In turn her monthly repayment amounts started to increase.
After 9 months,
Sally knew that she had to get back to work to try and earn more money to
meet her monthly repayments. When she calculated what she owed, the
balance was now more than £6000. She arranged for her Mother to look after
the baby during the afternoons and early evenings and managed to go back
to her job at the supermarket part time. She was now earning more money
but it never seemed to be enough to cover all the bills and the card
payments. As such she found that she was starting to rob Peter to pay Paul
– paying her bills but never seeming to be able to find just enough buy
all the shopping without continuing to use her credit card. As such her
debts continued to creep up until two years after her daughter was born
she owed nearly £8500. By this time she know that things were just getting
worse and worse.
Sally was able
to re-gain control of her finances by using an
informal debt repayment programme.
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Typical Debt Stories
Student
difficulties…
Robert, a student had used up his overdraft limit
of £1500 and as he had not had a grant or any help from his parents, he
had taken out various student loans, averaging £2500 per year over 3
years. He had also been given a credit card. He therefore had debts
of approximately £11,500. He didn’t think this was problem as he
expected to get a well paid job after his degree.
After
graduating Robert got a job (paying approximately £18,000 per year) and
moved into a shared house with his friends. He took out a small graduate
loan of £1500 to pay for the fees and deposit. His salary was enough to
cover this and the repayments towards his student loan. However, he also
found that he was spending more. He needed cloths for work which he paid
for with a store card and credit card. He was also spending a lot more
going out more with his new work friends. Gradually his store card
balances were mounting up, and his credit card was no longer being paid
off in full each month due to the high balance on it. Having been
out of University for 2 years, he suddenly found that his personal debts
had grown to approximately £25,000 and were out of control.
Without
professional assistance, Robert would have slipped deeper and deeper into
debt. However, he was able to get his debt problem under control using an
individual Voluntary Arrangement
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Typical Debt Stories
Young couple
with New Baby...
John and Anna were both working with reasonably
well-paid jobs. They were homeowners with 1 car and generally had 2
holidays per year. They considered themselves to have a good
standard of living even though they, like most people, supplemented their
lifestyle by using credit cards. They had paid for their car with a £7000
bank loan. Anna fell pregnant and although this was unplanned, they
were both delighted at the prospect of becoming parents.
John & Anna’s
debt problems began when Anna went on maternity leave. She received full
pay for 6 weeks but then this fell to the statutory amount. There was now
significantly less money coming in each month and they found themselves
increasing the use of credit cards and their overdraft facility at the
bank to maintain their lifestyle and pay for all of the things they would
need for the new baby. This was not too much of a concern, as they had
both decided that Anna would return to work and at that time they would be
able to sort out their debt.
After 4 months
maternity leave, Anna returned to work although they decided that this
would be part-time because of the expense of a childminder. This meant
that although Anna was earning again, the household income was still less
than it had been before she fell pregnant. In addition, the household
expenses were now significantly higher with the cost of the baby. John and
Anna realise that they would have to do something about their increasing
debts, which now totalled c£14,500. They first decided to take a £15,000
loan to consolidate everything which would reduce their monthly repayment.
Unfortunately,
John and Anna did not realise that although they now had just one loan to
pay, the monthly payment was to high for them to pay for without putting
pressure on their finances elsewhere. Therefore, although they kept up
their loan payment, they found that their overdraft started to creep up
again. They have also not cut up their credit card and this was used to
pay for general expenditure. The balance therefore started to increase
again. John and Anna had got caught in a ‘cycle of debt’. They were
continually ‘Robbing Peter to Pay Paul’ i.e. borrowing money from one
place to pay off debts in another. When they calculated what they owed
now, their debts were nearly £30,000.
They were able
to get their debt problem under control using an
individual Voluntary Arrangement
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Typical Debt Stories
Loss of
overtime…
Jean and Alex are a middle-aged couple with 3 teenage children living in
their home they rent from the local council. Both of them are
working and all 3 children are still at school. Alex is a shift
worker for a major company and Jean is a part time catering assistant.
They have managed well over the past few years as Alex’s job has paid on
average £100 per week extra in overtime. Without realising it, they
have taken this for granted and become dependant on it. Jean and
Alex between them have a variety of credit cards, a joint overdraft of
£600, an HP agreement on Alex’s car and Jean has 2 catalogue accounts.
Repayment for these has never been a problem with Alex’s overtime.
Unfortunately,
at the beginning of the year, Alex’s employer introduced an over-time ban
due to cost cutting. Alex suddenly found that he was loosing c£400/mth
in his take home pay. Alex and Jean therefore began to struggle to
maintain both their normal family living expenses and the monthly
repayments towards their debts. Before they know it they started to
falling behind on their accounts. Their first reaction was to take a
consolidation loan to try and reduce their monthly payments. They borrowed
£8000 from the bank and managed to pay off some but not all of their
accounts. Alex did not worry about this as he felt that the overtime at
work would be re-instated. Unfortunately this did not happen. This meant
that Alex and Jean continued to struggle to pay their loan and the card
balances that they had not repaid. In addition, to supplement
their income, they continued to use their credit cards. Alex also took up
the offer of an additional card which was sent to him through the post.
Before long, they were in a situation that the card balances and overdraft
were at the same level as before they had taken their consolidation loan.
Alex and Jean
found themselves in a cycle of debt which is not uncommon. Things seemed
to be getting worse and worse with no light at the end of the tunnel. The
problem got so bad that they knew that they had to do something. That was
when they learned about the
Individual Voluntary Arrangement solution. Now they have an agreement
with their creditors based on what they can afford and their debt will be
settled within five years.
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