Will my creditors do a deal if I can sell my house?

Bassplayer

Hi All

I’ve been reading this forum for a while now and the experienced advice and heartfelt support have helped me come to terms with my own extremely ‘tricky’ financial situation.
So I just wanted to briefly outline my position and see if anyone can supply any advice!

Basically, I have a house worth about £230,000 with a mortgage on it of about £189,000. I have a further secured loan of £56,000 (First Plus) and additional credit card/overdraft debts of about £20,000. Outgoings on mortgage and debt repayments now total around £2,000 per month!

I’m a freelancer copywriter in the advertising/marketing industry and over the last few years have earned reasonable money, but with the recession (or whatever else the politicians want to call it!) my income has been in free fall for about the last year, and the prospects of getting a full time job are as bad! As a result, I continue to use credit cards etc to top up my falling income or dip into my meagre savings for tax to top up my income.

The stress is really beginning to tell - sleepless nights, ugly scenes with my kids and girlfriend, weight loss etc etc.

I haven’t yet missed any payments on anything, but that can’t be far away now. And unless I take some kind of action the situation can only get worse.

So these seem to be the options I face:

1) As per my original plan two years ago when I bought this place, hang on for a housing market recovery, build up sufficient equity and sell up to clear all debt. Buy or rent somewhere smaller/cheaper...especially as my kids should be at college/uni by then. Sadly, there’s about as much chance of a housing market recovery as there is my income recovering in the short term!

2) Talk to all my creditors and explain situation, hope they’ll let me reduce payments and maybe freeze interest while we wait for things to get better. This might work in short term but I can’t see it does anything but put off the inevitable in the long run.

3) Sell my house (IF I can!) now, use whatever equity I can get and make my creditors a one off, final payment of (maybe) around half of what I owe them. I’d include in this my secured loan, credit card debts etc etc.

4) Apply for Bankruptcy. Though I’d prefer step 3) I’m not afraid of Bankruptcy as long as I can keep my ex out of it, can rent a place afterwards with room to have my teenage daughters and am free to rebuild my life after it.

My ideal solution would be option 3) above but does anyone out there know if my creditors would accept this? That’s supposing I can sell my place anyway? After all, if I go bankrupt my building society would get their money back with first charge, second charge company might get some but rest are unlikely to get anything.

By the by, I’m 50 next year so time’s passing and retirement looms making some kind of action all the more urgent!

Look forward to your points of view

Cheers and keep up the good work everybody!

Bassplayer

PS: If anyone has any other suggestions I’d love to hear them!

Waspeze

Hi and welcome

Just one comment.. you say you haven't missed any payments, I wouldn't have thought your creditors would agree to a reduced settlement amount... usually these are accepted after the debt has been referred to a DCA as they have bought it for a pittance and so still make money.

Not sure if this is 100% true but it does seem to be what happens the most!


Have you spoken to one of the debt charities?

Annie_Johno

Hi just wanted to pop on.I lurk in this forum every day reading everything I can about BR etc.

Me too have not missed any payments to my creditors. I went into my Bank the other day to say that would it be possible to reduce my loan payments, she is a close friend also, she said are you in arrears? I said no, she said what happens is, you miss 3 payments, Barclays pass it to their DCA (or sell it I think she said) then you can negotiated reduced payments.
She basically said you have to start missing payments in order to negotiate lower monthly repayments.

Hope this little bit of info helps

LilyBart

Not all lenders require you to have defaulted before you negotiate lower payments. Some mortgage lenders will even allow payment holidays of about three months if you are experiencing difficulties, though the missed payments are then tacked on the total amount owed. It's not a long-term solution but can give you a little breathing space to consider your next move. However, a lot of finance companies seem to be changing their policies on the hoof these days, and some are more tolerant/flexible than others.
Lily

peachyprice

Hi Bassplayer,

TBH I doubt the secured loan company will accept a 50% full and final settlement, the unsecured might, but usually not until all else has failed.

With the secured loan and outstanding mortgage you are already in negative equity, if you sell the shortfall will then become an unsecured loan that you will be liable for and will have to negotiate with First Plus before the sale goes ahead. Also bear in mind that First Plus can stop you selling because they won't get all their money back.

mazzatee

Hi Bassplayer
Re option 1 - It depends how long the housing market is going to be slow but my concern would be that some creditors could go for a charge on the proerty to securre their debt on your house.

Option 2- You can try it but they will NOT be sympathetic.

Option 3 - If you sold the house would there be any equity? You say you owe £189K + £56 secured loan that makes £245K. You say the house is worth £230K at best so you are in "negative equity." You would then have sold your house but not repaid your creditors and have an additional debt for the mortgage shortfall.

Option 4 - If contemplating BR I would personally recommend you look for rented property b4 you file as most landlords/letting agents do credit checks these days and you would have to pay approx 6 months rent up front + a bond, whereas if you look now you may get away with 1 months rent + bond.
You can save for this by stopping paying your mortgage - it is unlikely that secured lenders would apply too much pressure for 3 months.


Ideally I would suggest you seek specialist advice from your local Citizens Advice Bureau (number in phone book), CCCS 0800-138-1111 or online at cccs.co.uk (use debt remedy) or National Debtline on 0808-808-4000 before you make a final decision.

Come back if you want any further help & good luck!