Debt Advice Needed!

Southernmissy

Hi all, I'd really appreciate your advice. My best friend has just fessed up to me that he is in debt by 50k-60K. I knew he had debts but he'd always told me they were under 20k. He bought a house with his folks (they bought it with the equity in their house he pays the mortgage) about 8mths ago but now he is on the verge of bankruptcy. He really doesn't want to go down that route. I am trying to advise him as best as possible but it seems he is running out of options. He owes 50k over various credit cards (all maxed out, 1 over the limit) and a couple of loans & overdrafts. He cannot get credit as he has tried switching to 0% cards.

He has been looking into IVA. Does anyone have any experience of this? Apparantly it's not like going fully bankrupt and all the information off the net seems like it's too good to be true, call me cynic but I am looking for a catch! Can anyone give me a brief procedure of going bankrupt and what the pitfalls are afterwards. Will he loose his house? He can't release any equity for 5 years.

It has taken me a month to extract this information out of him as he is deeply embaressed but I hope this is enough for you to advise me. I am a debt-free wannabe and have already helped him cutback, earn some extra money & prioritise his debts but it just seems like it's such a big debt to tackle.

Sorry if this post is too long but I fear for my friend as he is on the brink of loosing it and I don't know what to do. :eek:

Magentasue

There are so many factors here like his earnings for a start. The CAB, CCCS and National Debtline all have websites (links in the blue banner at the top). He would be well advised to look at the websites and contact one of them. Meantime he should be drawing up a Statement of Affairs listing all income/outgoings/debts/ APRs etc.

Magentasue

Here's a link that explains about IVAs

http://www.nationaldebtline.co.uk/england_wales/factsheet.php?page=26_individual_voluntary_arrangements

Southernmissy

He earns 16k a year through a fulltime job but also has a 2nd job and although the earnings can be random they average about 1k a month. I keep pressurising him to do a statement of affairs but he keeps shutting me out when I say that. He thinks if he has the debts on paper it will push him over the edge although he knows that going the IVA/bankruptcy route he will be forced to really face up to them. It's all a complete mess, he has just told his parents today but backed out of telling them the real amount of debt he is and said it was 25k. I will make him check out those websites, thanks.

Southernmissy

thanks magentasue

Magentasue

Well, he's lucky to have you as a friend! Good luck and keep coming back!

Southernmissy

He is! Thanks, I will the website is very informative and everyone is so supportive of one another.

Addicted2Chocolate

OK if he goes down the bankruptcy route:
Ih he has assets of over 5K approx, the Official Receiver (OR) will call a meeting of creditors, for the creditors to vote on who they want appointed to administer the estate : ie who will be 'Trustee in Bankruptcy'. An Insolvency Practitioner, if there is a resolutio at the meeting, will become the Trustee , its the Trustee job to relaise assets and turn them into cash for the benfits of the creditors. If there is no resolution at the meeting the OR will become the Trustee. And if no meeting is called the OR is Trustee.
I need more info about his assets:
The Property: What was the purchase price? How much depsoit was put down? How weas the deposit funded? If it all came from the parents, have they got legal documents shpwing they have an interest in the property? How much mortgage was taken out and what is the balance outstanding on the mortgage? The Trustee will have 3 years to wait for equity to arise, they must either take action to relaise their interest within 3 years, if they fail to do so the proprty will revert back to the bankrupt. Why can he not realease any equoty for 5 years? the trustee woudl not be bound by the mortgage they can sell whenever they want.
The procedure oif quite straightforward, he must complete a Statement of Affairs (Form 6.26 avalable from https://www.insolvency.gov.uk) and the Debtors Petition form, then go to his local county court with bankruptcy jurisdiction. He woudl have to attend court for the bankruptcy hearing, usually about 1-5 minutes where judge satisfies himself the person is unabel to pay their debts, and declares the person bankrupt. The papers then get sent or faxed to the OR, and someone from the OR wil be in touch by telephone or letter to inform them of interview date time...... during interview he wil be asked how debts have been buolt up what he has spent money on...he should get together allnhi bank and credit cards statements going back up to two years, the OR may require he send them to the OR office. After the interview the OR draws up a Report To Creditors stating the assets, debts and cause of bankruptcy, it gets sent ot the creditors within 8 weeks of the bankruptcy.
The whole process is explained in the 'Guide To Bankruptcy' which is also on the Insolvency Service website.

The catch with IVA's in my opinion, is they expect the debtor to pay the whole of any money left over each month to the IVAeg income £1400 outgoings £1000: £400 payments each month for trm of IVA (usually 5 years) . So if they have unexpected expenses (eg expensive dental work, car breaks down ......) they cannot afford the payments, miss 2 payments and the IVA fails and either the supervisor of the debtor petitions for bankruptcy.... also with IVA's the main winner is the supervisor, they take most of the money paid in with their costs....the creditors actually get back very little compared to the amoutn paid in....

jenevieve

Hi Southern Missy
Has your friend got access to a computer so he could look at this site?
I know I read loads of the posts and threads before I posted my own debts and reading other peoples stories helped me accept my own problems, made me realise I am not alone in this, and made me realise that although my own debt is huge by some people's comparisons, it is small by others.
This site is just so valuable and the people who post on it so fantastically supportive to everyone who posts. The fact it is all so anonymous means that everyone can be more open about their situations.
I guarantee that if he came on here, he would get lots of constructive advice and emotional support.
The hardest thing is admitting the problem definitely!

He sounds like he has got an absolute gem of a friend in you though. :beer:

Keep in touch and good luck

Jen
xx

Southernmissy

Hi addicted & jenevieve :hello: Thanks for lowdown on both iva & bankruptcy. That was really invaluable. Not sure now if IVA is the best route because he basically doesn't have enough money from his monthly wage to cover his debts. He has to work cash jobs to make up the shortfall. The mortgage was quite complicated. His parents released equity in their property and paid for the house that way. He paid £97k for it and the house next door to him has just sold for 115k (a much shabier version) but when he spoke to his dad about releasing the equity he said their was a clause in the mortgage then forbid them to do this. I will get more information off him about this.

I am going to give all the information I've collected from this site and talk to him. I have tried to get him to look onto MSE because I think the site is fantastic & so welcoming to people in crisis. Perhaps my nagging over the passed week he has looked on here without my knowledge, I hope! At the moment he is in panic mode and thinks he can be sent to prison for making a mess of his finances! I am just glad he has opened up to me, and you are right. It is the hardest thing. Thanks to all of you for your support :grouphug: and i'll keep you informed! I am a gem - I remind him of that weekly!! If all else fails he always has my sofa to kip on!

Thanks xxxxxxxxxxxxxxx