Wealth Check: Left struggling after a relationship breakdown

The patient

Helen Bott from Chilwell, Nottingham, is still struggling with the financial fallout from her marriage breakdown nearly three years ago, and desperately wants to get her finances back on track.

The 41-year old works as a civil servant and currently takes home around £1,680 a month. In her spare time, Helen is doing an Open University law degree which she funds herself with additional support from the OU.

She lives in a two-bed apartment which she bought in August 2005. "I bought this for an inflated price through a scheme run by Barratt Homes called Dream Start where 25 per cent of the cost was funded through an interest-free loan," she says.

The main issue now is the fact that her Santander mortgage on the property is still in joint names.

"This is what is trapping me," she says. "The mortgage was in arrears when he left in September 2009, but since then, I have managed to clear the arrears and now keep payments up-to-date on my own.

"Despite this, my recent application to Santander to remove my ex's name from the mortgage was turned down on the grounds of affordability – leaving me stuck."

There is currently around £116,900 outstanding on the 30-year mortgage.

"The fact that the mortgage is interest-only is compounding the problem," says Helen. "Further, as my ex has his own financial problems and may be on the verge of bankruptcy, I'm left worrying each day about what will happen next. The mortgage is the only financial tie, but as things stand, I can't get out of it."

Following the separation, Helen has also been left with hefty debts totalling around £16,000.

"Frustratingly, the debts are in my name, and most are now with various debt-collection agencies," she says. "I'm currently making monthly payments to six different companies, and hate the continual pestering on the phone."

Helen is desperate to be in a position where she has the mortgage to herself so she can feel secure in her flat. "This would enable me to get some kind of life back," she says.

"I hate the shame of having to rely on friends to help me out and want to be able to stand on my own two feet – no longer strangled by the remains of a relationship that ended a long time ago.

"I want to be able to live to enjoy life, maybe find a new partner, and actually see the benefits of working and studying as hard as I do."

While Helen has no savings or protection policies in place, she does have a civil service pension, and currently pays in around £90 per month.

She also makes purchases through Quidco whenever she can to benefit from cashback on her spending.

The cure

Our panel of independent financial advisers agrees that Helen has found herself in a very unfortunate situation, and urge her to get professional and legal advice as soon as possible.

They add that while it is healthy to come up with long-term financial goals when in a tough place, it makes sense to wait until the current debts are cleared before implementing these.

Avoid losing the property

Helen needs to get legal advice on her mortgage options, as she may be at risk of losing the property if her ex partner is declared bankrupt, warns Patrick Connolly from AWD Chase de Vere. "The creditors may start looking at his assets – including his share of the property," he says.

"If Helen can't afford to pay, charity Citizens Advice provides free, independent advice."

Review the mortgage

Lorreine Kennedy from CareMatters says she is seeing an increase in cases where a relationship breaks down and the lender won't agree to a transfer of equity based upon the single borrower's income – even when they have been making the payments themselves for some time.

"Lenders are reluctant to offer practical solutions and will only say the borrowers has the option of remortgaging or selling," she says. "However, it may be possible for Helen to remortgage in her own name given an estimated current market value of £142,300 for the flat, based on figures from property portal Zoopla.co.uk."

According to Ms Kennedy, in this scenario, Halifax would be prepared to lend up to £134,000.

"While this is not sufficient to clear the mortgage and all the other debts, it would simplify the situation and allow Helen to hold a mortgage on her own. That says, this would be subject to a satisfactory credit score."

Payments on a capital and interest basis would be about £700 per month, she added.

Look into renting a room

Ms Kennedy also suggests Helen could consider letting a room under the Rent-a-Room scheme.

"This would allow her to receive up to £4,250 tax free," she says. "This could provide Helen with much-needed income to clear her debts – and help her save for emergencies.."

Consider selling

Mr Connolly says Helen may need to think about selling her home.

"Helen may need to consider this – especially if she is able to walk away with any equity," he says. "She could then rent initially or, if possible, buy again at some stage."

Martin Bamford from Informed Choice agrees that Helen may have some tough decisions to make.

"Helen needs to get some peace of mind in respect of the various debts," he added. "The solutions are unlikely to be easy – or palatable – but she needs to address these issues, rather than deferring them."

Start building up savings

While it is no surprise that Helen has no savings or investments, Mr Connolly says everybody should aim to have at least some cash put aside for emergencies.

"Helen should still strive to achieve this," he says. "However, there is little point having cash savings if the interest she is earning is much lower than the interest she is paying on her outstanding debt. She really does need to address her debt problems before she can properly move forwards."

Once she's in a position to start saving, Helen should keep things simple and stick to cash – rather than investments, according to Mr Bamford.

"Getting the basics right is always more important than aiming for big returns from riskier investment funds," he says.

Pension and protection

Membership of the civil service pensions scheme is Helen's most valuable asset, according to Mr Bamford, as it is a final salary scheme.

"Helen should review the benefits expected to emerge from this scheme at least once a year, and should also consider her state pension benefits," he says. "Once she resolves her debt problems, it would be wise to create some additional savings, as this will put her in a stronger financial position in retirement."

Ms Kennedy added that while the need for life cover is minimal for a single woman with no dependants, Helen should ensure she is protected in the event of serious illness.

"It is likely Helen will benefit from life assurance and income protection through her employer, but she should speak with them to ascertain exactly what benefits are offered," she says.

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Write to Julian Knight at The Independent on Sunday, 2 Derry Street, London W8 5HF j.knight@independent.co.uk