I think there's only one option...

sieve

Hello everyone - I've been lurking here for a while and have come to the conclusion there's only one option for me, but I'd like to run it by you first to see if you agree with me.

Here's the lowdown:

Income (self-employed): £2603/month before tax
Tax savings pot: - £650

Total income £1,953

Outgoings:
Mortgage £1150
Council Tax £90
Electricity £60
Internet/line rental for 2 lines: £60
TV license: £13
Water: £5
Food: £200
Fuel & Travel: £200
Phone costs: £100

Total outgoings: £1878

Remaining disposable: £75

Debts:
HMRC £15000
Halifax £8600
MBNA £6500
Citi £3000
NatWest £8700
Capital One £400
Misc Suppliers £3000

Total debt: £45200

I own my house. It would likely be valued at £170k currently, and as of Jan next year it would cost me about £160k to clear the mortgage (currently got a £10k redemption penalty if I do it now).

I own a car that I need to run my business. It's nothing special but it gets me around reliably - probably get £3k tops if it was sold.

I'm also aware other figures look unusually high - phone bills (on the phone to clients all day) and internet/broadband. I run my company from home (I am a sole trader) and I need two broadband lines as if one goes down (it has happened) I am totally stuck. I also have a fax machine attached to the second line so phone charges aren't really cuttable.

Working with the £75 surplus, it would take me 50 years to clear that list, even without interest being charged. So it looks like bankruptcy is my only viable option.

Questions:

1) Do you think I might be able to keep my house? I can't redeem the mortgage for another year anyway, and it serves as my place of work too so moving to anything smaller isn't really an option (it's a 2 bed mid terrace, the 2nd bedroom is converted into my office and there is lots of critical business equipment cabled into the loft). I live in the house on my own - it is just me responsible for the mortgage payments.

2) Would it affect my car? I would be totally stuffed without it as I do a lot of travelling to and from clients where I am often carrying a lot of kit around with me so public transport is simply not an option. It's not expensive by any means so would I be safe assuming I would be able to keep it?

I would really like to be able to wipe this slate clear - essentially there are two reasons it has got this bad. First, a few clients have gone bust on me in the last few months, wiping out a total of about 15k. Second, I have been reckless with my spending in the last few years, especially when it comes to travel - hands up, I will admit that. Eg I flew to Australia to be with someone - the old love thing makes you do stupid things - so my judgement lately has not been good...

I also realise that I have a really good thing going with my self-employment and the worry of these debts are starting to prevent me from pushing this further. There is usually a few hundred more coming in but it is irregular so to be on the safe side, I have done the SOA above as a worst case scenario and not included it.

I should add that I have been nearly £50k in debt before and managed to pay about £35k of that off over the course of a few years so I am not someone who would choose to simply walk away from my debts, but situations and circumstances have changed and this situation isn't the same as the last one I found myself in, except for the level of debt, and this time I really don't have the disposable to be able to get rid of it in a sensible time frame.

Please could I have your thoughts as to whether you think this would be a wise move for me to make and whether you think I might be able to keep hold of my house & car?

Thanks very much to all of you in advance.

ATB,

Sieve.

skylight

sieve wrote: »

Questions:

1) Do you think I might be able to keep my house? Possibly - are you in arrears? Is there any equity? Do you have of those debts secured against the property?? If no to each of those, then you stand in good stead. ORs do not want to kick you out unless its necessary.

2) Would it affect my car? I would be totally stuffed without it as I do a lot of travelling to and from clients where I am often carrying a lot of kit around with me so public transport is simply not an option. It's not expensive by any means so would I be safe assuming I would be able to keep it? Never assume anything in BR! Depending on the value, you may be able to keep it. As you need a car for work, you are allowed to have one, but the limit is usually £2k in value. Technically anything over this should be sold and you are given a sum to replace the vehicle. As I said, technically, as a nice OR may let you keep a £3k vehicle essential for business but a jobsworth is another story. And you wont know what until the interview after BR.

I would really like to be able to wipe this slate clear - essentially there are two reasons it has got this bad. First, a few clients have gone bust on me in the last few months, wiping out a total of about 15k. Second, I have been reckless with my spending in the last few years, especially when it comes to travel - hands up, I will admit that. Eg I flew to Australia to be with someone - the old love thing makes you do stupid things - so my judgement lately has not been good... You do not have to justify yourself to us!

Hope this helps.

sieve

That's a great help, thank you Skylight. No my mortgage is up to date - currently because of the redemption penalty I have I am leaning towards negative equity - once the RP period has ended I will be looking at maybe £10k of equity as long as its value doesn't fall. Who knows these days? None of those debts are secured on it - just the single mortgage.

Yeah the car's value isn't set in stone - that was a bit of a guess really. It's a six-year-old Polo diesel with 80,000 on the clock so whatever they go for these days. It feels funny hoping your assets aren't worth anything.

Thanks again for the response.

sieve

An update to the story. Just spoken to Payplan and they were great. They went through my income and expenditure and helped me adjust it according to 'creditor's guidelines'. At the end of the day they said I had a £458 surplus that I could use in an IVA and over 5 years that would mean I was paying back £27,480 - about 55p in the pound.

They also looked up my house on some kind of property register and apparently I am about £38,000 in negative equity :eek: So they said that if I went the BR route, I could sell my 'beneficial interest' in the house to a friend for £1 so that I got to keep it. Is this true? What I also didn't understand is what would happen with this after I was discharged - could I buy my beneficial interest back from said friend for £1? Assuming my friend didn't try to stitch me up...

Car-wise, they think in a BR I would be able to keep my car as it is actually crucial for my job and not worth more than £3k.

So it is very tempting to go down the BR route as £27,000 is a lot of money - plus it could potentially be a lot more if my earnings increase or I get equity back in the house - possible over 5 years.

My main concerns are about the house and the car. It looks like I could keep the house and all the stuff I need to do my job. And anything in it worth less than £500 each - right? But I'm more concerned about the car - this sounds silly but if I start changing my car my clients and, more worringly, my parents would notice and since my Dad has just had a stroke, if they knew I was going through this it might well finish one of them off

So as the thread says, I really do think there is only one option right now, but I'm scared and need a bit of wisdom I think... please help!

skylight

Beneficial Interest does not mean that anyone else owns the property. They are separate and they are not. (Confused yet??) I cannot word it correctly without it sounding gobbledegook so I wont. As its a friend with the BI and not a spouse, I would discuss sorting this out afterwards with a solicitor.

Payplan used the creditors guideline to work out a surplus. BR guidelines are far more generous. Have you checked the Parkers guide and Autotrader for what value your car is actually worth?

So what if someone notices about the car?? You tell your parents that you are cutting back - with the credit crunch you never know whats going to happen so just covering your back, every one is doing it these days. And then change the subject.

If its urgent for work, then you would be allowed to keep it - a nice OR will let you at £3k. As mentioned, the limit is £2k, so a mean OR could be trouble. But this is something you are never going to know until you take the plunge.

blossom53

Just to add, I went bankrupt 5th Dec, OH 12th Jan.
I had phone interview, OH f2f .
You never know what will happen or what questions you will be asked.
Take a good look at your situation and then you will realise that you could pay for the rest of your life and not make a dent in your debts.
You only live once and there are not many situations in life that we can't overcome. With the support and advice from the wonderful people on this forum we did it. So can you !
Good luck
Blossom:T

tigerfeet2006

sieve wrote: »

An update to the story. Just spoken to Payplan and they were great. They went through my income and expenditure and helped me adjust it according to 'creditor's guidelines'. At the end of the day they said I had a £458 surplus that I could use in an IVA and over 5 years that would mean I was paying back £27,480 - about 55p in the pound. Pop up your SoA as it stands for an IVA and we will do a BR for you to compare.
http://www.makesenseofcards.co.uk/soacalc.html

They also looked up my house on some kind of property register and apparently I am about £38,000 in negative equity :eek: So they said that if I went the BR route, I could sell my 'beneficial interest' in the house to a friend for £1 so that I got to keep it. Is this true? What I also didn't understand is what would happen with this after I was discharged - could I buy my beneficial interest back from said friend for £1? Assuming my friend didn't try to stitch me up... It is actually a £1 plus approx. £250 ish legal fees. When you are discharged you can buy it back but you will have to use your own soliciter, which will cost more. I am guessing that you sign a contract so you can't be 'stitched up'. Make sure it is someone you trust implicitly.

Car-wise, they think in a BR I would be able to keep my car as it is actually crucial for my job and not worth more than £3k. They can't say for definate. Usually it is £2000 for a car but some OR's are more lenient and some are not. It is a suck it and see situation I am afraid. You will have to present a good case on why it is not a luxury and is a nesecity.If they do take the car then they will usually give you some for a new one if needed for work.

So it is very tempting to go down the BR route as £27,000 is a lot of money - plus it could potentially be a lot more if my earnings increase or I get equity back in the house - possible over 5 years.

My main concerns are about the house and the car. It looks like I could keep the house and all the stuff I need to do my job. And anything in it worth less than £500 each - right?yes! But I'm more concerned about the car - this sounds silly but if I start changing my car my clients and, more worringly, my parents would notice and since my Dad has just had a stroke, if they knew I was going through this it might well finish one of them off

So as the thread says, I really do think there is only one option right now, but I'm scared and need a bit of wisdom I think... please help!

Hope that answers some of your questions. Have a read through the Bankruptcy Help sticky as there is a link about cars and houses and lots of other useful info.

Richard_S

Hi Sieve,

I've only got time for a quick post.

You can purchase the B.I yourself; indeed we both did. As for the car, a six year old Polo diesel with 80k on the clock isn't worth anywhere near £3k at the valuation the O.R would put on it, so you've got nothing to worry about there.

Bankruptcy is never easy or straightforward, but on balance, it would almost certainly help your situation as you've detailed it so far.

Best regards

Richard

sieve

Thanks everyone for your responses. It's great to know that I'm not alone walking this path...

OK so the SOA for the IVA they suggested I submit is here:

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2300
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2300

Monthly Expense Details
Mortgage................................ 1150
Secured loan repayments................. 0
Hire Purchase (HP) repayments........... 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 90
Electricity............................. 60
Gas..................................... 0
Oil..................................... 0
Water rates............................. 5
Telephone (land line)................... 0
Mobile phone............................ 40
TV Licence.............................. 11.75
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 180
Clothing................................ 20
Petrol/diesel........................... 80
Road tax................................ 20
Car Insurance........................... 23.33
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 15
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1725.08

Monthly Budget Summary
Total monthly income.................... 2,300
Expenses (including HP & secured debts). 1,725.08
Available for debt repayments........... 574.92
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 574.92

There aren't any debts listed here obviously - they're in the top post, but you can see what Payplan suggested. How does it compare with what I'd be allowed for BR? My fuel and internet charges are a lot higher but they disguised them as medical bills and extra on the car tax.

Richard - that's great to know you can buy the BI yourself (so to speak!) - they may have said that to me at the time too but there was just so much information to take in... for some reason Parkers doesn't have my car - it has what it thinks is my car, but it isn't - so we shall see what they say when it comes to it.

I think I am more or less set on this now but it's really good to hear everyone's input - as I am notoriously good at making bad decisions - hence why I am here

Thanks again,

S

peachyprice

sieve wrote: »

Thanks everyone for your responses. It's great to know that I'm not alone walking this path...

OK so the SOA for the IVA they suggested I submit is here:

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2300
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2300

Monthly Expense Details
Mortgage................................ 1150
Secured loan repayments................. 0
Hire Purchase (HP) repayments........... 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 90
Electricity............................. 60
Gas..................................... 0
Oil..................................... 0
Water rates............................. 5 This seems way too low
Telephone (land line)................... 0 £20
Mobile phone............................ 40
TV Licence.............................. 11.75
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 180 £200
Clothing................................ 20 £50
Petrol/diesel........................... 80 Put what it really is
Road tax................................ 20
Car Insurance........................... 23.33
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 15
Pet insurance/vet bills................. 0
Buildings insurance..................... 0 £20 You should have both of these
Contents insurance...................... 0 £20
Life assurance ......................... 0 £20 get a policy once you're BR
Other insurance......................... 0 £20 breakdown cover
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0 £10
Entertainment........................... 0
Holiday................................. 0 £40
Emergency fund.......................... 0
Total monthly expenses.................. 1725.08

Monthly Budget Summary
Total monthly income.................... 2,300
Expenses (including HP & secured debts). 1,725.08
Available for debt repayments........... 574.92
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 574.92

There aren't any debts listed here obviously - they're in the top post, but you can see what Payplan suggested. How does it compare with what I'd be allowed for BR? My fuel and internet charges are a lot higher but they disguised them as medical bills and extra on the car tax.

Richard - that's great to know you can buy the BI yourself (so to speak!) - they may have said that to me at the time too but there was just so much information to take in... for some reason Parkers doesn't have my car - it has what it thinks is my car, but it isn't - so we shall see what they say when it comes to it.

I think I am more or less set on this now but it's really good to hear everyone's input - as I am notoriously good at making bad decisions - hence why I am here

Thanks again,

S

That'll do for starters, and don't forget dry cleaning
Why is your income £2300? Shouldn't it be £2600 less £650 for tax?

tigerfeet2006

sieve wrote: »

Thanks everyone for your responses. It's great to know that I'm not alone walking this path...

OK so the SOA for the IVA they suggested I submit is here:
Sorry if it is mentioned else where but are you single?


Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2300
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2300

Monthly Expense Details
Mortgage................................ 1150
Secured loan repayments................. 0
Hire Purchase (HP) repayments........... 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 90
Electricity............................. 60
Gas..................................... 0
Oil..................................... 0
Water rates............................. 5 wow! that's low!!
Telephone (land line)................... 0 do you not have a land line for personal use?
Mobile phone............................ 40
TV Licence.............................. 11.75 £12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 180 £200
Clothing................................ 20 £40
Petrol/diesel........................... 80 is it really this low?
Road tax................................ 20
Car Insurance........................... 23.33
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 15 £20
Pet insurance/vet bills................. 0 any pets?
Buildings insurance..................... 0 why no insurance?
Contents insurance...................... 0 ditto
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0 £10
Entertainment........................... 0
Holiday................................. 0 £40
Emergency fund.......................... 0
Total monthly expenses.................. 1725.08

Monthly Budget Summary
Total monthly income.................... 2,300
Expenses (including HP & secured debts). 1,725.08
Available for debt repayments........... 574.92
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 574.92

There aren't any debts listed here obviously - they're in the top post, but you can see what Payplan suggested. How does it compare with what I'd be allowed for BR? My fuel and internet charges are a lot higher but they disguised them as medical bills and extra on the car tax.

Richard - that's great to know you can buy the BI yourself (so to speak!) - they may have said that to me at the time too but there was just so much information to take in... for some reason Parkers doesn't have my car - it has what it thinks is my car, but it isn't - so we shall see what they say when it comes to it.

I think I am more or less set on this now but it's really good to hear everyone's input - as I am notoriously good at making bad decisions - hence why I am here

Thanks again,

S

I am assuming that your wage is what is left at the end of the month after all your business expenses have been taken out.