Case study Large Personal Debt and Negative Equality - what are my options?

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Blinder

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Personal and income details
Net (i.e. after tax) Income self: circa 3600 per month
nature of income Self employed, I.T. contractor
Income history: Always being working, but varies from employee and self employed contractor. currently contracting.
Net income partner/spouse: N/A single

number of children : 0
Amount of Mortgage Interest Supplement received : 0

Home loan
Lender: KBC
Amount outstanding: 264K
Value of home: 200K
Interest rate: 5.15% SVR
Monthly repayment : 1769
Amount in arrears : 0

Summary of discussions and agreements with the bank
Haven't had any discussion with bank

Investment property -
Lender: KBC
Amount outstanding: 157K
Value of home: 90K
Interest rate: 1.75% tracker
Monthly repayment : 781
Amount in arrears : 0
Monthly rent received

Other loans and creditors - delete those which don't apply to you
Overdraft : Limit 2500, always in overdraft at end of month, have exceeded overdraft twice in recent months.
Credit Card : Credit Card 1 : 15K, pay back minimum each month, but use credit card when cash run outs ( 370 per month)
Credit Card 2 : 6K, (pay back 100 each month)
Family : currently 0. but regularly have to borrow from family, pay it back over the following months

NPPR : Haven't paid this since it came out, but know that were the local housing tax is passed over to revenue, that I will be flagged as having two properties and will owe a few grand
Possible Revenue fine looming : Recently got a warning letter from revenue that I hadn't completed tax returns since 2008. I was a PAYE employee for the time they reference.I have managed to gather all my P60's for then, and will fill out the returns this weekend, but i'm worried about any fines revenue might levy against me.

Other savings and investments : none


How important is retaining the family home to you?
I don't care about keeping the family home.



Any other relevant information

Currently have 2 properties, neither are rented out. both need work done on them before they could be rented out, if I decided to go that route, but finding money to do that would be impossible.
The house with the investment mortgage is my PPR. The other house was a long term investment, which I thought at the time, that I would be able to sell and clear the outstanding mortgage with savings if I needed to, but all savings has gone into renovation and so not in a position to sell it ,as have no way of clearing the negative equity. Living there is not an option. It's rural. I have had a break-in so I would need a good security system installed in order to sleep at night, and it needs plumbing work.
Even if I could manage that, it would increase my monthly spend as it a long way from any employment opportunities.

After mortgage and credit card debt I have about 500 for bills and day to day living. The majority of this goes on bills, and so I end up going further into overdraft, or using credit card,just to live.




What is your preferred realistic outcome?
Preferred outcome would be to be able to have a plan to see an end to my current lifestyle. Whatever about if my debt is sustainable or not, I know my lifestyle isn't.
I don't take days off, because I get paid a daily rate, and so I haven't taken a day off that wasn't weekend or public holiday on 18 months. Even when I was a paye employee, I was doing part time education, so holidays were used for exams.

So I'm tired.

I know I'm only in this situation because of bad choices I made in the past, but it seems never ending.
I'm a good take home rate , but i feel I'm living on the breadline.



My options at the moment, i think, are :

Approach the bank : but with what plan? even a temporary interest only would still end up at the same or greater repayments in the future.
My take home pay is unlikely to increase, and as it is contract, could end at any time. And there could be periods without any income.


Move: I could probably (maybe?) get the same kind of work in the UK. So I could move there with an outlook of declaring bankruptcy in the near future.
but would need some savings to do that, and currently my chance of saving is nil.

Continue as is : Well that's what I have being doing for the last few years. Hoping that the house price on either property will increase, and the sale price will eventually match the mortgage price, so I can cut my loses on it. But at the moment, that it 5-10 years away.

Edited to add : Had also looked at the PIA and bankrupcy here but this bit 'The bankrupt is discharged after 3 years and can resume normal business. But they may have to use their income to pay towards their debts for a further 5 years. If their income improves in that 5 years, the payment amount can be increased.' means that it might be 8 years until I can start to move one which seems like a long time at the moment.
 
Well to start with your contract rate is way too low! On a 21 day month that is about €171 per day, most of the agents I've spoken with recently in Dublin were talking at least €350 to around €400 a day. This is a common problem with many IT contractors - they don't charge enough for their services. Are you working via an agent or directly for the client?

And if you are going to go anywhere, then think mainland Europe and not the UK as the rates are much higher over here - more like €750 to €950 per day, with much more favourable taxes... For English speaking assignments look at the Benelux, Switzerland, Southern German or Austria.

Unlike many of the people seeking help here, you have the potential to substantially improve you income flow.
 
Thanks for the reply Jim. The take home pay I quoted is after tax and accounting fees. My actual rte is closer to the rates you quoted, but I am under the average contractor rate. I am contracting through an agency. I had applied for a increase, however recently I have heard that any increase is unlikely, which lead me to posting here. I have put feelers out for other contracts, but I know that the current stress means that I don't make a good impression as I should.

I hadn't considered other European countries , mainly because languages were never my strong point. Even if the business language is English, it can be very isolating and lonely when you can't understand the conversational language occurring around you at work.

The UK seemed like less of a challenge as it doesn't seem as much of a lifestyle change. Even if I had to declare bankruptcy and live on limited means
it's not going to be much different than how I'm currently living.

And also because there has being so much information available on bankruptcy there, it seemed like a solution.
 
After another sleepless night I have decided that for now, option 1, contacting the bank is the best option for me.
If they let me go interest only on both mortgages for a year, it would mean repayments of 1400 a month.
If I then pay 1200-1400 off the credit cards a month, it will leave me with 800-1000 a month for living costs. This will enable me to stop using the credit card to top up my income.

I have also applied for new contracts where a rate increase means that my income with increase. But applying and getting the contract are 2 different things.

How likely are the bank to let me go interest only on both loans giving my current financial condition?
If i do this for a year, and my income is the same next year, I'll be back in the same position, with less credit card debt. but still with no savings, and so my day to day living expenses might again exceed my disposable income when I hae to go back to capital + interest payments.
So am I just putting it off by thinking that this could work for me?
 
Jim2007 said:
Well to start with your contract rate is way too low! On a 21 day month that is about €171 per day, most of the agents I've spoken with recently in Dublin were talking at least €350 to around €400 a day. This is a common problem with many IT contractors - they don't charge enough for their services. Are you working via an agent or directly for the client?
Click to expand...

Just want to say thanks again Jim for replying to this last week. You got me thinking, and got me out of the rut that had me standing still.

During the week , I have being actively seeking a new better paid contract. I have 2 interviews lined up for next week. Initial contact with both companies is promising. both contracts appeal to me, one more than the other though. Either would see my monthly net income increase by about 700, which should put me in a good position to reduce my credit card debt while still paying both mortgages in full.

So for the moment, i have not contacted the bank, re interest only. Even if there it doesn't work out next week, I have seen this week, that I am definitely underpaid, and the market for my skills is very active atm.
 
Blinder said:
So for the moment, i have not contacted the bank, re interest only. Even if there it doesn't work out next week, I have seen this week, that I am definitely underpaid, and the market for my skills is very active atm.
Click to expand...

Good to hear you are in a better place this weekend! Under charging for your skills is a very common problem for freelancers. I've spent over 20 years freelancing & consulting and the one think I learned was never be afraid to ask for what you are worth! One of three things will happen:
- The client walks away: in which case they are probably not the type you wanted in the first place.
- You'll get what you asked for: in which case you'll be kicking yourself for not asking for more.
- The client recognises talent but can't afford your rate: Be open to negotiations and think broadly, often a client can't pay cash but can offer alternatives such as reduced hours, paid training courses, free subsistence, travel and so on.

Good luck next week.
 
Update

Update on my situation. It has improved since first post.

Managed to secure a new contract which means that net monthly income will increase by about 1K from september.

Which means will be in a position to pay both mortgage payments, cut out CC spending completely, and pay off about 1K off the CC debt a month.

When I wrote initial post, was feeling as if I was in over my head. Thankfully things are looking a lot brighter now.
 
Congrats Blinder, glad to hear things are lookin' for up for you and well done to Jim for the good advice :)
 
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