Michael and Laura took out a loan which was secured against their property. At the time it was easy to borrow more than the value of their property and this was used for general home improvements, as they had recently purchased their first home.
They also used credit for general living expenses and to supplement their income. They generally paid the minimum amounts due, this caused no issues for a while, however the level of interest and charges began to accrue and they found it increasingly difficult to maintain the minimum payments.
Despite paying £300 per month on their secured loan the balance did not seem to decrease. Along with their other credit commitments growing, they found it harder to make the minimum payments due.
Michael and Laura had been in a debt management plan for 7 years, however their house was in negative equity and the debt management plan did not seem to be decreasing the overall level of their indebtedness.
The situation was extremely worrying and the most stressful thing to endure. Their health was beginning to suffer, the relationship suffered and the stress effected Michael’s effectiveness at work.
To compound their situation further the business Laura was a director of a company that unfortunately had to be wound up. As such her income decreased dramatically, and she was only receiving job seekers allowance. Michael and Laura found that they were unable to make even the minimum repayments to both their secured and unsecured creditors. Between them they had around £40,000 unsecured debt.