Debt Management Case Studies

These example are based on actual cases, typical of the many people we have helped. In each case, some details and values have been changed to protect client privacy.

£58,000 of debt - but can't do an IVA.

Debt: £58,000	Was paying: £1267/month
	Now paying: £300/month
Client has £200,000 equity in his home & unsecured debts of £58,000. His assets are more than his debts, but he can't pay 11 creditors from a monthly income of £1,060. An IVA is not possible as his creditors would never agreed to forgive any debt when he could repay them in full by selling his property. The client does not want to remortage as he has recently become self employed and does not want to risk his home if that does not go to plan. Debt management will never pay off this debt, but it gives our client some respite from his creditors while he focuses on building his business without the fear or court action or losing his home.

CSA payments make creditor repayments unaffordable.

Debt: £28,000	Was paying: £850/month
	Now paying: £400/month
Client has an income £1480 per month, and was able to manage repayments on debts of £28,000 while living with his partner and child. The relationship broke down and the client was still able to afford repayments until CSA demanded over a 3rd of his income. Now unable to keep up with the repayments, debt management is the only option. An IVA is not possible as he has only 2 creditors. He is not a homeowner so can't get an unsecured consolidation loan for such a large amount.

Remortgage not a option for Pensioner with debt of over £40K

Debt: £42,000	Was paying: £910/month
	Now paying: £410/month
Client has debts of £42,000 with 8 creditors. He is over 65 years old with £1,270 per month joint income from his own and wife's pension. He was paying out £819 per month. He owns his home, without a mortgage, valued at over £400,000. He was refused a secured loan due to insufficient disposable income. We have reduced his payment to £420, with a view to getting a secured loan or downsizing his home in the future.

Debt management the only solution for a period of umemployment

Debt: £12,950	Was paying: £350/month
	Now paying: £180/month
This client had affordable credit repayments until her husband lost his job, halving the household income. Two months later their savings were running low so they decided to look for a consolidation loan to reduce monthly payments. Soon they would start to miss payments and needed a solution. The client looked at an IVA but her husband would be returning to work and an IVA would be too permanent as their circumstances would be changing. Debt Management was the right solution for them because the payments were flexible and could be increased when they were both working again.

IVA not a option due to unstable employment history.

Debt: £21,325	Was paying: £450/month
	Now paying: £300/month
Client lost his job and was out of work for several months. He began living on credit and the debt grew to £21,325. The client started a new job, but must serve a 3 month probation period. He has a value of debt that makes him eligible for an IVA. However, the fact that he had just started a new job and has recently had a period without work means this option is not currently available to him. Creditors need to be confident that IVA payments will be made at the agreed rate each and every month for 5 years. A Debt Management programme is more flexible in this respect and suits this clients situation.

Debts of £83,000 but not able to write off any with an IVA

Debt: £83,350	Was paying: £2300/month
	Now paying: £980/month
Client takes home £3,750 a month and jointly owns a property with her husband. These factors have enabled her to build up of £88,350 of unsecured debts. Due to the high debt, Client X contacted Abacus about an IVA. On speaking to one of our advisors it was explained that working within the guidelines of an IVA she would be paying back the full amount to her creditors. (60months x disposable income + £20,000 remortgage = the original debt). The client was not aware of Debt Management and on finding out more decided this was the best option for her circumstances.

Separation and pregancy make repayments unaffordable.

Debt: £19,139	Was paying: £534/month
	Now paying: £200/month
Client had separated from her partner and then found out she was pregnant. She was working but was still in her probation period so was not entitled to full maternity pay. Due to the two large changes in her circumstances coupled with the increase of expense of being a single parent with a new born meant that her finances went out of control. She knows this can't continue and this is a realistic option for clearing her debts. A consolidation loan is not an option as she has nothing to secure it against and the debt is too large for an unsecured loan.

Seperation leaves client to repay debts by himself.

Debt: £14,293	Was paying: £641/month
	Now paying: £300/month
Client X took credit while he was with his partner, and with both wages, they could maintain repayments. They have now separated and because the debts were taken out in just his name he has to make the repayments alone to 12 different creditors. Living just by himself, his living costs has also risen. To help make ends meet, Client X started a second weekend job, but is still struggling. The client wants to repay the debts but as things are cannot see an end in sight. On Debt Management his payments are affordable and his debts are reducing every month.

CCJ means a Debt Consolidation Loan not possible.

Debt: £2,370	Was paying: £445/month
	Now paying: £158/month
Client X had a dispute with her mobile phone supplier about her bill. She refused to pay it and it was referred to a debt recovery agency. She still refused to pay it escalated to CCJ. The client does not have a high level of debt but due to the CCJ she cannot consolidate her debts with a loan. She is paying £39.50 per week, which is the maximum see can afford.

Illness leads to reduced income and financial difficulties.

Debt: £36,500	Was paying: £703/month
	Now paying: £200/month
Client's difficulties began when he became ill. After 3 months his wages were reduced to statutory sick pay. The strain of the illness and financial difficulty resulted in the Client X and his partner separating, thus increasing his living costs. The Client continued to live on credit and fell further into debt. Now he has recovered from illness and is returning to work. His lengthy absence from work means an IVA is currently not possible. This is because creditors need to be confident IVAs payments can be made every month for 5 years. He is to continue with current repayments and will consider the possibility of an IVA in the next 6-12 months.

Self employed contractor gets nothing when owed £8,000.

Debt: £6,700	Was paying: £458/month
	Now paying: £200/month
Client X is a self employed and contracts work from another business, however, this business has gone bust owing him £8,000. The official receiver has advised Client X that he will not receive any money and this has caused him financial difficulty. 9 months ago he had no debts, now he's paying back 2 loans and making minimum payments on several cards. Debt Management allows him to start clearing this debt at an affordable wait without having to borrow again.

Income drop due to maternity leave makes credit repayments a struggle.

Debt: £11,000	Was paying: £502/month
	Now paying: £285/month
This a case of a joint debt management application. Mr and Mrs X are expecting their first baby. Mrs X is taking maternity leave. With the income drop and costs of having a baby, they know they will be struggling, even though they are not currently in arrears with any of their 8 creditors. They realise their circumstances will keep changing over the next few years and want a plan that will work with them to clear their debts.

Increased mortgage payments make unsecured debts unaffordable.

Debt: £5,667	Was paying: £225/month
	Now paying: £140/month
Client had completed the fixed rate introduction period to his mortgage and has been hit by larger than expected interest rates. He has equity in the property, but opted for debt management as he does not want to remortgage nor take out a secured loan as this would increase the risk of repossession if he could not maintain those payments.

Missed payments means debt keeps increasing.

Debt: £8,250	Was paying: £275/month
	Now paying: £120/month
Client's debts were not that large but frequently missed payments meant his debts were not getting any smaller. Debt Management allowed him too make the same reduced payments, but as we had agreed this in advance, he was not penalised for it. He can now see his debt reduce, month by month.

Debt Management prefered to an IVA as income expected to rise.

Debt: £27,650	Was paying: £701/month
	Now paying: £250/month
Client returned to full time education where her personal debts rose to over £25,000. Now back in full time work, she is unable to find the £701 per month demanded by her creditors. We advised here to consider an IVA as well as debt management as her circumstances made her a potential candidate. However, as she expected her income to rise over the next 2 years, she opted for debt management as its informal flexibility suited her short term needs.

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