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    • Skintnorthernmonkey
    • By Skintnorthernmonkey 7th Sep 17, 9:48 AM
    • 20Posts
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    Skintnorthernmonkey
    About to go bankrupt / IVA. Would like to know the differences?
    • #1
    • 7th Sep 17, 9:48 AM
    About to go bankrupt / IVA. Would like to know the differences? 7th Sep 17 at 9:48 AM
    Hello all! First time poster here...

    I suppose I best talk about my situation first.
    I own a home that is in negative equity. I am employed full time.
    I'm carrying a lot of debt after redundancy a couple of years ago, followed by a period of unemployment. I came from a well paid job, with a little debt but nothing that was worth worrying about at all. My redundancy, owed to a contract loophole in the way I was paid, was an absolute pittance (statutory redundancy, which amounted to about £1200).
    I spent the redundancy on some qualifications (electrical) so that, if I did not find work, I could trade as an electrician.
    I survived on credit cards (I took out an interest free card when I got wind of the redundancy as a parachute / means of funding a business if needed). Just as I was about to start trading, I was offered a job that didn't pay very well but it was enough to buy some time.
    I was keeping my finances under control by moving things onto interest free deals paying off what I could, in the hope I would land a higher paid job at some point and make better headway. However I am unable to move the debts further as my access to credit has dried up, and a higher paid job hasn't happened despite best efforts.
    Meanwhile my wife has just finished her post-grad degree, has taken on a very low paid job, and I cannot lean on her more than I am already.

    My problem is much worse than I first thought, total unsecured debts amount to something around £30,000.

    What brought it to a head is a serious structural issue that has just come to light in the house (lime mortar that has degraded completely, and despite lots of pointing done over the years, we have just unearthed a terrifying issue while I was trying to re-plaster a wall in which the mortar has just let go completely on, it looks like much of the house is the same. The bricks are literally not held together at all, I took the whole wall down by hand with no tools. Luckily, it's not supporting anything, but we have the same issue all over the house and some of it IS supporting the floor above / roof). I have a lack of funds or experience to rectify this. Coupled with this house being in negative equity (value was £20k short of mortgage last valuation when I tried to remortgage a couple of years back, I have someone coming to value it again tonight). On top of that neither of us actually want this house... Given I am sitting on a financial time bomb, and the house is worth buttons, its a situation that at best I will climb out of in many many years, at worst it all collapses soon.

    I've had debt advice from StepChange and the CAB, and their conclusion is either an IVA or bankruptcy. Given they are both insolvency options, and an IVA is aimed at keeping assets (which I don't have) and takes 5 years longer than bankruptcy to discharge with the same long-term effects, it leaves me to very seriously consider handing the property over to the mortgage co, walking away and starting afresh.

    I have already set up a new basic bank account with a provider that I have never been involved with before.
    My wife and I are financially completely separated, we have no joint debts, the house is in my name alone (bought before we even met), we have no joint bank accounts, no joint financial deals, no joint credit. The debts are mine alone.
    I am not presently in arrears with any lenders, and have not been for a good number of years.

    I would like to hear from people who have been through the system. What would your advice be in this situation? Obviously, the valuation tonight will have a some impact on the decision.

    What is the difference in terms of effects to me between IVA and bankruptcy?
    I keep hearing that an IVA is "better" but for the life of me I cannot see any beneft to ME with an IVA, the only thing I see is that creditors claw back some money, and someone (the IVA practitioner) takes a cut. A cynical view, perhaps? But one which I can't seem to shake. Stepchange recommended the IVA over bankruptcy, but again they have a vested interest since they will charge a fee in the IVA to do it.
    Going forwards, which is easier, and faster, to recover from?
    Bankruptcy seems to have a huge stigma attached to it, but I can't find a good reason for this?

    I wold really love to hear from anyone who has been through either process, who are willing to share their experiences, so that I can make more of an informed decision.

    Thank you in advance. I will keep posting about my experiences too in the hope it helps someone else.
Page 1
    • sourcrates
    • By sourcrates 7th Sep 17, 9:58 AM
    • 12,673 Posts
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    sourcrates
    • #2
    • 7th Sep 17, 9:58 AM
    • #2
    • 7th Sep 17, 9:58 AM
    Hi,

    My IVA lasted 6 years, was a long time, knowing what I know now, I would of gone bankrupt instead, as you say, it's over a lot quicker.

    I had no assets either, if your not bothered about the house, go bankrupt.

    IVA's are mainly recommended if you have a property you wish to protect.

    Talk through the pro's and con's with a debt advisor before committing to anything though.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File And Ratings, and
    Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.

    For free debt advice, contact either : Stepchange, National Debtline, or, CAB.
    For Legal advice see : http://legalbeagles.info/
    • debt doctor
    • By debt doctor 7th Sep 17, 10:42 AM
    • 4,177 Posts
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    debt doctor
    • #3
    • 7th Sep 17, 10:42 AM
    • #3
    • 7th Sep 17, 10:42 AM
    Hi,


    I think your thoughts on an IVA are absolutely correct.
    The only time I see an IVA is better for a client over bankruptcy is where they have an asset worth at least 10k to protect or they are in a profession where they cannot go bankrupt. Also possibly when they may wish to continue being a Company Director.


    I presume you are deemed to have some surplus income. The bottom line is you can pay your surplus income in to an IPA for 3 years or pay the same surplus income in to an IVA for 6 years.


    Also, your bankruptcy cannot fail - an IVA can and often does. It is perfectly possible to pay in to an IVA for several years only for it to all go wrong due to a circumstance change and leaving you in a position where the money paid all goes to the IP and back to square one with the creditors.
    DD
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
    • debt doctor
    • By debt doctor 7th Sep 17, 10:47 AM
    • 4,177 Posts
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    debt doctor
    • #4
    • 7th Sep 17, 10:47 AM
    • #4
    • 7th Sep 17, 10:47 AM
    If you decide to go bankrupt then the most important thing for you is finding somewhere else to live.
    You need to look for a rental property, suitable and affordable, and a reasonable price for the area you choose to live in.
    Think whether you need a bond and deposit and think about stopping paying the mortgage in order to raise such a deposit/ bond.
    A last point is that it is much easier to obtain a rental property (from a credit rating point of view) prior to bankruptcy than after.
    Likely to need more rent upfront after bankruptcy.
    DD
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 7th Sep 17, 12:04 PM
    • 20 Posts
    • 1 Thanks
    Skintnorthernmonkey
    • #5
    • 7th Sep 17, 12:04 PM
    • #5
    • 7th Sep 17, 12:04 PM
    I have already found a house that is suitable to move into. It's ideally sized, in a good location, we could afford it if I was debt-free... But, the rent is £300 month more than my mortgage, so we will still be hard up. That said, I suspect (correct me if I am wrong) that we may as well go for the best we can afford, since "surplus" money will be hoovered up anyway?

    I have three questions actually...

    1)If we end up deciding we would quite like to keep the house (for whatever reason), one of the unsecured debts is an account with the mortgage provider. If that unsecured debt gets cleared off, will that then affect the secured debts that the mortgage company holds over me? Will that then make them default the whole lot?
    So, it seems that an IVA is a bit of a waste of time in my position then, and bankruptcy is the lesser of two evils?

    2) I have already opened up a basic bank account in preparation for what was going to be a DMP but is now going to be either IVA or bankruptcy. The account has been open for about 2 weeks, has no overdraft facility etc and is simply there for my salary to be paid into. Will that account likely be closed as part of the bankruptcy? How do I then get my salary paid?

    3) If I am going to go bankrupt and decide to hand the keys back to the mortgage company, is it worth keeping on paying the mortgage until the bankruptcy kicks in, or is it better to just stop and scrape that money together to pay for a deposit and rent on the new house and live in the now-defunct house until we can move to the new one?
    Last edited by Skintnorthernmonkey; 07-09-2017 at 12:28 PM.
    • debt doctor
    • By debt doctor 7th Sep 17, 1:41 PM
    • 4,177 Posts
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    debt doctor
    • #6
    • 7th Sep 17, 1:41 PM
    • #6
    • 7th Sep 17, 1:41 PM
    I have already found a house that is suitable to move into. It's ideally sized, in a good location, we could afford it if I was debt-free... But, the rent is £300 month more than my mortgage, so we will still be hard up. That said, I suspect (correct me if I am wrong) that we may as well go for the best we can afford, since "surplus" money will be hoovered up anyway?

    I have three questions actually...

    1)If we end up deciding we would quite like to keep the house (for whatever reason), one of the unsecured debts is an account with the mortgage provider. If that unsecured debt gets cleared off, will that then affect the secured debts that the mortgage company holds over me? Will that then make them default the whole lot? Is it the Northern Rock Together Mortgage? Just wondered. I have never seen an unsecured element attached to a mortgage contract being used to default the mortgage.
    So, it seems that an IVA is a bit of a waste of time in my position then, and bankruptcy is the lesser of two evils? That's my view, yes.

    2) I have already opened up a basic bank account in preparation for what was going to be a DMP but is now going to be either IVA or bankruptcy. The account has been open for about 2 weeks, has no overdraft facility etc and is simply there for my salary to be paid into. Will that account likely be closed as part of the bankruptcy? How do I then get my salary paid? The OR will not do anything with that account - most banks these days allow bankrupts to bank with them. Talk it through with your bank prior and if necessary get another account.

    3) If I am going to go bankrupt and decide to hand the keys back to the mortgage company, is it worth keeping on paying the mortgage until the bankruptcy kicks in, or is it better to just stop and scrape that money together to pay for a deposit and rent on the new house and live in the now-defunct house until we can move to the new one? Why pay for something you are going to lose?
    Originally posted by Skintnorthernmonkey
    They are my views, hope it helps.
    DD
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 7th Sep 17, 8:26 PM
    • 20 Posts
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    Skintnorthernmonkey
    • #7
    • 7th Sep 17, 8:26 PM
    • #7
    • 7th Sep 17, 8:26 PM
    Excellent, that helps a lot. Yes the mortgage is Northern Rock / NRAM / whatever it is called this week. I was stitched up a kipper when I took the mortgage out, there's a long story there that isn't worth telling as it doesn't help, but yes. A stitch up.

    Just had the estate agent round to value the property. I am on or around parity with the mortgage, so not as bad as it could have been but not good either. Better than it was (though the last valuation was by a mortgage company).

    *Next door sold two years ago for almost exactly what my mortgage balance is.
    *Property prices have not moved in the area since the crash, indeed many have dropped in value.
    *I do not envisage any significant equity in the property in the foreseeable future.
    *There remains the money that needs to be spent on the house to put it right.

    A question: Can I make overpayments into my mortgage after being declared bankrupt? Or will I likely not be able to afford it as that would be considered surplus, and so be taken to pay off creditors during my bankruptcy?

    The place I would like to rent is £350 a month more than my mortgage would be once the unsecured part of the account has been written off. What I am getting at here is would it be worth using that £350 a month to create some equity in the property, or carry out the structural works required, or is that a fruitless exercise?
    • debt doctor
    • By debt doctor 8th Sep 17, 11:48 AM
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    debt doctor
    • #8
    • 8th Sep 17, 11:48 AM
    • #8
    • 8th Sep 17, 11:48 AM
    Excellent, that helps a lot. Yes the mortgage is Northern Rock / NRAM / whatever it is called this week. I was stitched up a kipper when I took the mortgage out, there's a long story there that isn't worth telling as it doesn't help, but yes. A stitch up.

    Just had the estate agent round to value the property. I am on or around parity with the mortgage, so not as bad as it could have been but not good either. Better than it was (though the last valuation was by a mortgage company).

    *Next door sold two years ago for almost exactly what my mortgage balance is.
    *Property prices have not moved in the area since the crash, indeed many have dropped in value.
    *I do not envisage any significant equity in the property in the foreseeable future.
    *There remains the money that needs to be spent on the house to put it right.

    A question: Can I make overpayments into my mortgage after being declared bankrupt? Or will I likely not be able to afford it as that would be considered surplus, and so be taken to pay off creditors during my bankruptcy?

    The place I would like to rent is £350 a month more than my mortgage would be once the unsecured part of the account has been written off. What I am getting at here is would it be worth using that £350 a month to create some equity in the property, or carry out the structural works required, or is that a fruitless exercise?
    Originally posted by Skintnorthernmonkey
    Was the estate agent aware that the brick mortar had perished to an extent that there was nothing bonding the bricks together? This would have a dramatic affect upon valuation.


    You would not be able to make overpayments to a mortgage whilst you were undischarged, and if subject to an IPA, 3 years.


    How much will these essential works cost?


    Only you can decide on whether you want to stay in the property. As an adviser, I have to strip out all of the emotion in any situation I am looking at, and look at cold hard facts. You have an emotional attachment to you house (like most people) and have to weigh up the overall position that will work out best for you.
    DD
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 8th Sep 17, 12:16 PM
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    Skintnorthernmonkey
    • #9
    • 8th Sep 17, 12:16 PM
    • #9
    • 8th Sep 17, 12:16 PM
    I pointed out the works that I was doing at the time, where the wall had come down and why. Without structural surveys I couldn't really say how far the problem has gone yet. As I said, much of the house has already been re-pointed, but what lurks behind the plaster I could not say.

    That does make sense about the IPA and over payments.

    I am waiting for professional advice on the mortar issue...
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 8th Sep 17, 12:51 PM
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    Skintnorthernmonkey
    PS

    FWIW, my emotional position on the house is rather simple:

    It can go F it's self. Would rather be rid of it but if I can milk some cash out of it later down the line then it serves a purpose.
    • ToxtethO'Grady
    • By ToxtethO'Grady 9th Sep 17, 2:04 AM
    • 80 Posts
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    ToxtethO'Grady
    I second what DD has said,BR seems your best option based on your situation. A survey is like an MOT of a car and a valuation is a private buyer kicking the tyres so your house valuation could change drastically.

    Maybe try to stay in the house during the BR as it doesn't look like it would be viewed as a realisable asset. And remember you can put essential maintenance on your SOA for the house during that time. Less hassle moving and finding extra money for rent.

    Best of luck with everything.
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 14th Sep 17, 7:06 PM
    • 20 Posts
    • 1 Thanks
    Skintnorthernmonkey
    Thank you for all the advice.

    So, today I "hit the button", pulled out a credit card, and filed for bankruptcy. I was absolutely honest on the paperwork, declared everything, it was quite hard remembering everything actually!

    When I filled in the budget form, it was actually quite frightening how close I am the the breadline anyway, even without the debts. I guess I always thought things would just magically get better somehow.

    I even declared the long-term classic car restoration project that, right now, is basically a shell worth about £50 in need of a LOT of work - I am really hoping that they will let me keep that because working on that is my "zen". I had hoped that, completed, it would be worth a little money and I could pay off some debts, but that pipe dream just kept slipping further and further away, every step forwards with the project meant three back. But it's a labour of love...

    Anyway, there is some good news, the issue with the house is actually fixable! So I can't get a surveyor to come and look (there are none available anywhere locally, it's crazy!!), so I pressed on with the repairs in front of me and found an apparent end to the damaged mortar. It looks like remedial wall ties and an exterior render might sure up the rest well enough, so while expensive, it's not the soul destroying nightmare I thought it might have been. I've started making repairs.

    What was interesting while I was filing for bankruptcy was the lack of emotion. I really didn't feel... Anything. I'm not in arrears so there's no phone calls that are going to stop, because I'm not getting any. There's no debt collectors that are going to stop hassling me. It's an odd feeling.

    So, lets see how things go from here... Typically, how long does it take to hear anything?
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 19th Sep 17, 8:53 PM
    • 20 Posts
    • 1 Thanks
    Skintnorthernmonkey
    Heard from the OR today. Was just a "touch base" phone call.

    I found her very direct, very blunt, and quite cold to start with. However, she listened to everything I had to say, answered my questions, and was really helpful. It was a fairly "clinical" conversation, but it was without judgement and very matter-of-fact which I found helpful given the circumstances.

    My interview is next week.

    Not feeling stressed or upset, it just feels like another financial transaction, numbers on a bit of paper somewhere. In terms of real-world effect, there's nothing at all.

    I explained to her why I "own" three cars... One is essential, and worth less than the sofa I am sitting on, one is identical to the essential one, albeit not roadworthy and is a parts donor for car number one and will be scrapped once I have harvested what I need. The third is a long-term restoration project, which is currently a few pieces of steel and nothing else. It is worth, at best, about £50, but I have a huge emotional attachment to it. There's a lot of blood, sweat and tears in it, and though I cannot afford to continue with the project, I would be heartbroken were this scrapped since the project has been my "Prozac for the soul" and a coping mechanism, finishing it one day is really, really important to me. But she said scrapping would likely happen to it.
    However, I have since read that I can offer the OR a token sum to keep the car, since it is not worth anything. I am hoping that I can do this to legitimately keep it. Lots of people have told me I should have "sold" it to a friend before hitting the button and hidden it, but morally I would struggle with saying that, I don't like weaving webs of lies one bit.

    Anyway, that's where I am up to now!
    • Skintnorthernmonkey
    • By Skintnorthernmonkey 30th Nov 17, 10:54 AM
    • 20 Posts
    • 1 Thanks
    Skintnorthernmonkey
    So a little while on, everything is fine.

    The interview was absolutely painless.

    The process has been easy.

    I bought the RO's interest in my life insurance (though need to actually send the cheque for that!), I bought the interest in the project car and scrapped the parts donor, and that's that. Creditors still send me post, Capital One were the worst, they sent me a letter saying that they would take me to court after the bankruptcy was discharged. I ignored it.

    So, life sort of potters along. I do have another question, but I will start a new thread about that one rather than ask here.
    • Butts
    • By Butts 30th Nov 17, 6:11 PM
    • 163 Posts
    • 52 Thanks
    Butts
    So a little while on, everything is fine.

    The interview was absolutely painless.

    The process has been easy.

    I bought the RO's interest in my life insurance (though need to actually send the cheque for that!), I bought the interest in the project car and scrapped the parts donor, and that's that. Creditors still send me post, Capital One were the worst, they sent me a letter saying that they would take me to court after the bankruptcy was discharged. I ignored it.

    So, life sort of potters along. I do have another question, but I will start a new thread about that one rather than ask here.
    Originally posted by Skintnorthernmonkey
    With regard to the Life Insurance you can pay online by Bank Transfer to the OR. (I did).

    Not sure if you have still got a cheque book after going belly up.
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