Bankruptcy panic!

jacksdebts

I have had a look at the posts on this forum and am hoping that some of you may be able to offer me some advice.

I am married with two children ( a 2 year old and a 1 year old). I currently stay at home with the children but work for myself from home to fit around the kids.

Our combined income is £2100 per month and our expenditure is £2800 plus a further £1600 in payments to creditors. So we are a long way short every month. Our debts have just spiralled out of control in the last few years as i have borrowed from one to pay the other.....

We have a mortgage of £189K on a property which is currently worth around £210K.

Our unsecured debts total slightly in excess of £50K and i have just written to all our creditors advising them of our situation and offering them £1 a month. Out of 20+ one has accepted and the rest have issued default notices.

The £50K is split between myself and my husband.

We are now considering bankruptcy but are obviously extremely concerned about our house. My parents did make an original investment at time of purchase which was 1/13th of the value of the property so it would be fair to say that the equity should belong to them but we are unsure if we still have the documentation for this.

The only other asset is my car which is worth around £5K.

To be honest, if we could go bankrupt without losing our house I should welcome the chance for a fresh start and also be glad that credit would not be available to us.

Would the mortgage company be likely to re-possess the house if we went bankrupt? We have never defaulted on a payment, nor shall we.


I should be very grateful for your comments and advice.

Thanks

fatbelly

Whoa! You need to start at the beginning and work this forward to a strategy. Bankruptcy is not likely to be that strategy. You have good income and equity in the property. In bankruptcy the Official receiver takes the property, unless someone can buy the share that relates to the person going bankrupt. Not expressing myself well but you get my drift.

Ignoring the unsecured debts and the mortgage, how much do you need to live on? Now add the mortgage. Is there anything left to offer towards the unsecured debts?

If the answer is yes, more than £100 per month, try CCCS or Payplan for advice. If yes but less than £100 per month, try the CAB or National Debtline

If the answer is no then ... well we're not gonna give up. Post your expenditure details and we'll try to change that answer.

A debt management plan like the one you're trying to set up may be the way forward. But you will need to justify your offers with a Financial Statement and these organisations are used to putting them together and acting (free) on your behalf.

Incidentally, default notices always precede offers being accepted so you would have got them regardless of who was setting up the debt management plan.

Thefunkygibbons

Lets start from the beginning

This is a long road, and your goal is to protect the family and have somewhere to live

Post a detailed list of income and expenses and we will see what we can sugesst

Then we need the details of the loans, including APRs etc

Lets work through it rather than going straight to bankruptcy

Whilst we are doing that, book an appointment with CCCS

jacksdebts

Thanks for your replies. I have spoken to the CCCS and they have advised that I write to the creditors and offer them £1 each. Because we are £900 per month in deficit before we start making payments to our creditors they have advised that no voluntary arrangement would be possible. And they have stated that because we have some equity in our house (although this would be my parents share) bankruptcy is not an option. They have therefore told me that they do not have a solution for me!! Not reassuring!

I have this morning seen an insolvency specialist who has recommended that we do go bankrupt and sell our house to my parents who would then be willing to rent it to us for the cost of the mortgage.

Our monthly income breaks down as follows: Husbands salary £1500
My income £ 500 (varies but never much more)
Child benefit £123
Tax credit £61
Total £2184

Expenditure
Mortgage £1489
Water £ 25
Council Tax £80
Gas £55
Electric £80
Home insurance £25
Telephoone £100 (high for my business use)
TV licence £12
Sky £11 (no aerial signal at all here even with 20 ft aerial!)
Preschool £87
Life Ins £39
Health ins £63
Petrol £60
Tax, MOT etc £65
Grocerys £400
Clothing £40
Dentistry £10
Kids swim £36
Business Ins £252
Total exp £2929


Balances of debts:
Overdraft £2000
Personal Loan £13334
Visa £3000
Amex £300
Personal Loan £9415
Amex £1000
Visa £3500
Mastercard £3600
Visa £2400
Visa £2800
Mastercard £700
Mastercard £3200
Catalogue £800
Visa £800
Visa £900
british Gas £960
Overdraft £1000
OVerdraft £650
Solicitors £650
Total: £51009

I am not sure of the rates but will try to find them all out.

Hope this makes things clearer (or not?!?). Thanks so much for your help in this.

frugglewump

jacksdebts wrote:

Telephone £100 (high for my business use)

Is this paying standard rates for you phone calls?
Martin's article might help in getting this reduced:
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1095003038,99872,

jacksdebts wrote:

Grocerys £400

If you go over to the oldstyle board they should be able to help you drop this by at least £100 per month without eating rubbish or spending extra time in the kitchen - it's mostly to do with mealplanning.

in*the*red_6

Hi there,
TBH, looking at this is it the size of your mortgage that's caused the problem in the first place? - it's a huge amount every month (almost 3 times what mine is) and takes up your partners entire salary, no wonder you haven't had enough money left to live on. Would downsizing your property not be and option?
P.S. Sorry, hope this doesn't come across as rude, it's just I know a lot of our debt has come from overstretching ourselves somewhat with a house whilst having children so just wondering if this is the case as your mortgage payments look so big to me?

padders_2

Exactly, you are living in a house you simply can not afford. You either need a higher paying job or need a smaller house.

What is: Business Ins £252 for? Are you saying this is just for you, you spend £252 on insurance and £100 on phone and you are making only £500? ie, £150 a month profit?

All in all you are going to have to make some massivle lifestyle changes to be able to pay of unsecured debt equal to twice your combined incomes, not even counting the mortgage. Who even sold you a mortgage with the repayments as 75% of your combined income?

jacksdebts

It's only a 3 bed semi! i think the problem is that we live in an expensive area. So we'd have to move away from our friends and family to live more affordably which is obviously not something we would do lightly (particularly now that we have "the grandchildren"!)

padders_2

Whatever it is, you simply can't afford that house under any circumstances. Even if you didn't have all the unsecured debt you have you still couldn't afford it. Until you realise that and downsize you are not going to have any chance at clearing your debt.

Sorry to be blunt but your plan to have your parents buy the house and charge you the mortgage and go bankrupt won't help, you are still going to be in debt every month and will just start the process all again.

I still don't really understand what your income situation is, it seems to generate only £150/month. Perhaps you can get a fulltime job?

in*the*red_6

jacksdebts wrote:

It's only a 3 bed semi! i think the problem is that we live in an expensive area. So we'd have to move away from our friends and family to live more affordably which is obviously not something we would do lightly (particularly now that we have "the grandchildren"!)

I can understand that but even if you discount the debts and paid the £1489 a month to your parents in rent, what would you live on? You still wouldn't be able to pay all the other bills and food etc without running up further debts while you've got such a huge portion of your income going on housing costs alone.

jacksdebts

Nearly all of my income would be taken up with childcare costs as it costs around £40 per day per child (and i have 2).

Without the business insurance i cannot trade. I am working extremely hard at trying to build my business as this is something I can do in the evenings around looking after my children. Without the insurance and without making telephone calls this would be impossible.

And even though I am "only" making £150 per month that's £150 i wouldn't make if I didn't have the insurance.. so must be worth it!