Case Studies Single Mother with 40k Debts

Scenario:

A single mother with debts of £39,000 needed urgent financial assistance.
Laura is 32 years old and has a 3 month old baby and unfortunately the father is in another relationship and will only help financially if he is given total control over the upbringing of the child. Laura has borrowed £39,000 on credit cards and loans, resides in rented accommodation and wishes to return to full time work soon. Although Laura can claim various benefits she will still need to pay around £600 per month for child care for the next 4 years. Understandably, Laura can no longer meet her commitments to the loan companies and credit cards and is under tremendous pressure and stress from the father and loan companies and was simply unable to cope, bordering suicidal.

Advice Given:

Laura was reassured and a meeting was arranged to go through her finances. Bankruptcy was discussed as there were assets for the trustee to realise, and we also discussed a Debt Management Company, DMC, as Laura could afford £298 per month towards such a plan or for an IVA. The DMC could arrange a plan for approximately 11 years but this could go on much longer if the choice of company charged a management fee, therefore an IVA was chosen as the best way to deal with her creditors.

The Outcome:

Creditors accepted the debtor’s offer of £298 per month to include an increase in contributions over the last year of a five year plan as her child care costs would be reduced due to her child entering schooling. In a bankruptcy scenario it was most unlikely that creditors would have received any return. Laura can now manage her finances and is seen as lawfully discharging her debts. The pressure has lifted and both Laura and the creditors are better off.