The Wilson’s were married 8 years ago. They had their first daughter 3 years after getting married. At the time they were both working. Mrs Wilson took 6 months maternity leave to look after their baby. They used credit to buy things for the baby and decorate their spare room, which they intended to use as a nursery. As a result, they had some credit card debt but the repayments were manageable.

After her maternity, Mrs Wilson returned to work part time four days a week. Her take home income reduced by c£400 per month, however, her Mother was able to look after the baby so here were no child minding costs. Mr & Mrs Wilson decided to have a second child 12 months later. They were living in a 2 bed rented flat and so decided that they would need more space. They were unable to afford the deposit to buy their own property and so decided to rent a larger 3 bedroom house. They took a £8000 personal loan to pay the deposit and carry out some decorations which the house was badly in need of. They also consolidated some of their credit card debt with this loan.

Just before their 2nd baby was born, Mr Wilson was unexpected made redundant from his job. He did not receive any redundancy money as his employer had gone bust. He was able to find another position within a month, but this meant that there was a month with only Mrs Wilson’s wage coming in. They supplemented their income through this period using credit cards. In addition, because the job was further away from home, Mr Wilson needed a more reliable car. He therefore traded in his old car and took a small personal loan of £3000 to make up the difference. By this time, their total debts with credit cards and personal loan had increased to over c£20,000.

After her maternity for her second child, Mrs Wilson planned to return to work as before. However, her mother had been ill and decided that she would find it too difficult to look after both a toddler and small baby at the same time. Mrs Wilson therefore reduced her hours at work to 3 days a week. Her Mother had the children for 1 day and she paid a child minder for 1 day a week. The combination of reduced income and the increased cost of two children and the child minder started to put a strain on the family finances and the Wilson’s started supplementing their income with credit cards. They carried on in this way for about a year.

Gradually the overdraft on the Wilson’s joint bank account crept up to over £1000. They knew that money was tight and they decided to try and consolidate their debt. Because they were both working, the bank was able to give them a loan and they consolidated most of their credit cards, a store card and overdraft. This helped as it reduced the monthly debt payments which were going out. However their living expenses did not change and with the new loan payment and the other payments (Mr Wilson’s car loan etc) money was still tight. They therefore found that they still used credit cards to pay for the weekly shopping and the balances started to creep up again.

By the time their first child was 5 years old, Mr & Mrs Wilson realised that they were really struggling with their debt repayments. Their bank account was up to its limit again and they were robbing one card to pay another. The debts were starting to have a negative effect on family life as they would regularly argue about money. When they worked out how much they owed they were shocked that the balance came to nearly £45,000. They did not want to borrow more and so considered different alternatives. At first they tried a debt management plan, which involved paying each creditor less every month. However. After 6 months, this solution was not working. Creditors continued to hassle them for money and interest was being added to their accounts. As such, they felt as if the problem was getting larger not smaller.

This is when the Wilson’s first considered an IVA. They were renting and so it was explained to them that Bankruptcy might be the fastest way to solve their problem. However, they felt responsible for their debt and wanted to pay as much back to their creditors as they could. The IVA has allowed them to take back control of their financial situation. They no longer argue as the creditors are no longer constantly demanding money. The daily collection leeters and telephone calls has stopped and are managing to live within a sensible budget.