Julie-anne Wooder is, by her own admission, “up to her eyes in debt”. The
39-year-old from Tunbridge Wells, Kent, owes nearly three times her salary
to a variety of banks, building societies and card companies.
She has been able to keep on top of her repayments only by moving in with her
parents. Julie-anne says: “My parents have been hugely supportive and let me
move back in with them about two years ago because I was so broke. Even
though they have been lovely, it is very difficult because I really should
not be relying on them at my age.”
The assistant care manager's problems started in 1993, when she took out a
loan for £2,000. At the time she was working as an auxiliary nurse but was
in a difficult relationship and having to support her boyfriend. She was
struggling to keep on top of her daily expenses, including monthly mortgage
repayments of £150.
Julie-anne says: “From there my debts seemed to spiral until, in 1996, I
eventually had to sell my flat because I was struggling to cope. I do
realise that I have only myself to blame for the situation, but I have been
amazed at how easy it is to pile on the debt.”
Even though her debts far exceed her income, Julie-anne still found it easy to
obtain new loans. She says: “Until recently, lenders were practically
throwing money at me.”
Julie-anne took out a £15,000 loan with NatWest in May last year and borrowed
another £6,500 from Nationwide. She owes more than £8,000 on credit cards
and tries to keep down costs by shifting debts between deals charging zero
interest.
Most recently she moved £1,150 on to a Barclaycard. Although it charges 0 per
cent now, it will revert to the standard rate of 19.9 per cent after 12
months.
She is well aware that moving from one card or loan to another is not a
long-term solution - especially as card companies are now getting much
tougher with borrowers because of the current financial crisis - as
Julie-anne discovered when she applied for a new NatWest card recently and
her application was rejected.
Unfortunately, her debt problems do not end there. Julie-anne has three
current accounts - on her NatWest account she is £2,000 overdrawn, at Lloyds
TSB she is £300 in the red and at Nationwide she is £200 in debt.
Her only personal savings are the £45 she has in a Newcastle Building Society
Isa. She is also a member of the Kent County Council final-salary pension
scheme.
She says: “It will be impossible for me to pay off my debts quickly, but I do
want to put a plan in place to help me to work towards the goal of being
debt-free in the future.”
A shorter-term aim is to go to university to study for a degree in social
work. She says: “I enjoy working with the public and want to follow social
work as a career path, but that is going to require more study.
“I am not sure what, if any, financial support is out there to help me to go
to university. I had a student loan in 2000 when I studied for a psychology
degree, but I had to give up the course after 18 months because of my money
troubles and I am not sure whether that disqualifies me from further
government grants.”
Julie-anne would also like to find out whether it will be possible to get a
foot on the property ladder, so that she can move out of her parents' home.
Although she is well aware that her debts mean that she has no chance of
obtaining a mortgage deal from a traditional lender, she is interested in
finding out if she would qualify for a government-backed keyworker mortgage
scheme.
Although Julie-anne realises that she has some difficult choices ahead, she is
determined to leave as many options open as she can.
She says: “Some of my friends have advised me that my best option would be to
go bankrupt, but I have always rejected that idea because I do not want to
disqualify myself from ever being able to obtain a mortgage in the future.”
Julie-anne Wooder: What the experts say
FINANCIAL PLANNING
Frances Walker, Consumer Credit Counselling Service
“First, Julie-anne needs to open a basic account with a bank where she has no
debts and arrange for her salary to be paid into it. She should then
transfer any priority payments to the new account. She should also stop
saving into her Isa, as any saving is likely to antagonise creditors.
“She must then make a realistic budget, which shows accurately all her monthly
income and outgoings. Any disposable income can be offered on a pro-rata
basis to all creditors.
“Sometimes, if people have no disposable income and are unable to afford to
pay off their debts regularly, creditors will accept token payments as a
show of good faith. However, it is a matter that must be discussed with
creditors and Julie-anne cannot assume that she will be able to do this.
Token payments can be made only if the debtor possesses no assets, such as a
car, that can be liquidated.
“One possibility could be to ask her parents for a loan, which she could then
offer to her creditors as a full and final payment. Another is bankruptcy.
Despite her reluctance to go down this route, it is something that
Julie-anne should consider seriously, given the level of her debt relative
to her income.
“Although bankruptcy will affect her credit rating for six years, it does
offer the chance for a fresh start. If she goes to college, she is unlikely
to be in a position to apply for a mortgage for some time in any case.
“More than a quarter of Julie-anne's total debt is on credit cards. She must
stop using the cards immediately and cut them up.”
Action plan
Open a basic bank account.
Draw up a realistic budget, which can be shown to creditors.
Consider being declared bankrupt.
Cut up all credit cards.
PROPERTY & MORTGAGE
Richard Stone, SPF Sherwins
“The Government has a number of options available to those struggling to buy
their own home. First-time buyers who cannot afford to buy a suitable home
in the area where they work or live can apply for assistance if their
household income is less than £60,000.
“MyChoiceHomebuy is a shared equity scheme, with the Government providing an
equity loan of between 15 per cent and 50 per cent of the property value.
The equity loan has an interest rate of 1.75 per cent a year, which is paid
monthly. Mortgage lenders in this market will generally treat the equity
loan as though it were a personal deposit and will, therefore, lend 100 per
cent of the required amount.
“New Build HomeBuy allows you to buy a share of between 25 per cent and 75 per
cent in a newly built property. A cheap rent is paid on the remaining share.
This is generally charged at between 2 per cent and 2.5 per cent a year.
“However, Julie-anne should not be considering taking out any kind of mortgage
until she has cleared her other debts. Given the size of her debts, it is
unlikely that she will be accepted for a government-assisted scheme anyway.”
Action plan
Clear debts before applying for government-assisted homebuying scheme.
UNIVERSITY FUNDING
David Malcolm, National Union of Students
“Social work students have two principal sources of government support: they
can apply for the standard package of help for higher education students
from Student Finance England and, in addition, they can apply for a bursary
from the National Health Service (NHS).
“In most cases, students can receive support from the standard package for the
length of one full course, plus an extra year if it is required. Julie-anne
would appear to have received assistance for two years of a previous course,
and this will be subtracted from the support available for a second course,
unless she left the first course for ‘compelling personal reasons'.
“Assuming that this is not the case and that her new social work course lasts
three years, Julie-anne will not be entitled to a student loan for her fees
or a maintenance grant for her first two years of study. However, she would
be able to take out a student loan for her maintenance of up to £4,625 in
2008-09, or more if she studies in London. The other years of her course
would attract full funding.
“Social work students receive an extra bursary through the NHS, of £4,575 each
year (£4,975 in London), and Julie-anne could use part of this in the first
two years to pay her fees.”
Action plan
Contact Student Finance England to discuss what help is available.
Apply for a social work bursary from the NHS.
Julie-anne's verdict
The experts' comments were very useful and have given me a lot to think about.
Despite the advice from the Consumer Credit Counselling Service, I am still
very much against declaring myself bankrupt and will look at alternative
ways to reduce my level of debt.
I accept that it may be the only possibility and it is something that I will
consider when I review my finances. However, I feel that my financial
situation is under control and has improved significantly in recent months,
so I do not think it is necessary.
The response from the National Union of Students was particularly useful as I
really was not aware of the situation regarding funding another university
course. As a result, I hope now to return to studying in the near future.
The response from Sherwins was also helpful and I will look into the
possibility of buying a property on a shared-equity scheme once my finances
have improved sufficiently. All things considered, I now feel much more
positive about my financial future.
Would you like a financial makeover? Write to Money, The Times, Times House, 1
Pennington Street, London E98 1TB, marking your envelope Money MoT, or
e-mail moneymot@thetimes.co.uk. Please include current finances, short and
long-term goals and a daytime telephone number. You must be prepared to
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