True story – different names.
Rodger’s case is a typical instance of snowballing debt; once debt has reached a critical mass, the snowball effect occurs and this accelerates the debt mountain.
Rodger’s first major debt was a loan taken with MBNA in 2004, for the sum of ₤10000. This money was used for the purchase of a scooter for his son, and also to fund a holiday. He was working at the time as a Production Manager at Sheikh Homes, and bringing home around ₤2000 a month. This meant that this was a comfortable debt and the repayments were not a problem.
Around that time he also had around ₤3500 on his Barclaycard, which demanded an ₤80 per month payback. This felt comfortable and did not present a problem. He used it simply to supplement his income.
Everything was fine until December 2004 when he was made redundant from his company. He didn’t have any savings and although he received ₤11000 redundancy money, he found it difficult to find another job. He had about 8-9 months of unemployment, and during this time he lived off the redundancy money and found himself robbing Peter to pay Paul.
During this period Rodger exceeded his ₤2000 overdraft limit at Barclays. They froze his account, which meant that none of his bills were being paid. The unpaid creditors reacted badly to this. His Barclaycard balance was ₤5000, and he had also taken an Egg card with a balance of ₤6000. He had his MBNA loan at that time as well.
In order to get out of this situation, he borrowed ₤12000 from Direct Line. This was in September 2005. This money was used to pay off other creditors, pay mortgage arrears and get himself functioning again. His Barclaycard balance reduced to around ₤3000. His Egg card had been frozen so he was unable to make any payments towards it. Rodger also paid off his Barclays overdraft (₤2000). ₤2000 was spent on mortgage arrears. Unpaid household bills amounted to ₤1500, and this was paid out of the loan as well. The remaining ₤4500 was gradually spent on living expenses, including meeting monthly payments to creditors.
When Rodger found a job, in October 2005, things were looking up. However, the take-home money was less than his previous job, and his debts were substantially higher. Thus his wages were not enough to cover all his debt repayments. This meant that he turned to his credit cards again. His Barclaycard balance rose to around ₤5000, and he started using a Capital One card, the balance rising to ₤4000. He realised that the situation could not continue and proposed an IVA, which was accepted. He now feels more in control of his life and is looking forward to being debt free.