to go bankrupt or not?

skint69

hi,
my girlfriend is 10k in debt on various credit cards,i have mentioned the idea to her of delaring bankrupcy,but a few questions need answering first!

we have a joint mortgage-i pay it but she didnt want to be a "lodger" when we moved in so her part time job earnings were taken into account-very low earnings!
some of her bills are at her mums address so we plan to say we have split up and she has moved back home.
she also has a small piece of land for her horse which her dad/mum/sis and her all went 4 ways in-will they ever find out she has her name on this small field-we can give it to her mum if need be.

also how long does bankrupcy last? would the 10k be wiped and no credit cards allowed etc and in xx years you can apply again

thanks in advance

milliemonster

Whether she lives at her mums or not, as she has a joint mortgage with you the OR will still take an interest in that and depending on how much equity there is in the property you may have to buy the beneficial interest of her share.

BR lasts 6 years, yes it would mean all her debts would be wiped but she shouldn't go into this hoping that in 6 years time she can start reapplying for credit again, BR really is a last resort, have you not looked at other options first? you really need to take professional advice before considering this.

miss_spooky

Hi Skint69,

Welcome to the boards. Firstly your girlfriend will have to seek professional advise from one of the debt charites NAtional Debt Line, CCCS or the CAB.

The reasoning for this is that she will have a beneficial interest in the house that you are both in - other may correct me on that later and will give you more advise, also the Official receiver will do a land registry check so the plot of land will come up.

It's a hard one as the horse could be looked at as a luxury as well so questions will be asked about this.

I don't think she'd qualify for a Debt Relief Order which is slightly diff and you need debts under 15K cos of the house & land.

Has she looked into doing a debt management plan with CAB or National Debt Line, she could go through all these options with them.

Bankruptcy is quite complicated so she will need to take advise - also if she does go down this route she will be asked in court if she has taken proper advise & understands the implications.

HTH for now.

MS

miss_spooky

affluenza wrote: »

Look up debt relief order instead of bankruptcy. It deals with debts up to £15K and is cheaper than declaring BR.

I thought BR only lasted a year these day unless you are a habitual BR?

Your discharged after a year but it stays on your credit file for six years and you will ALWAYS have to say that you have been bankrupt.

So no, it's not all done & dusted after a year.

fermi

Please get her to talk to CCCS, a CAB debt advisor, or National Debtline.

The court requires that you have taken professional debt advice, and there may well be more appropriate solutions for her.

skint69 wrote: »

we have a joint mortgage-i pay it but she didnt want to be a "lodger" when we moved in so her part time job earnings were taken into account-very low earnings!

The Official Receiver/Trustee would look to see if they can realise her share of any equity. Probably not a lot, but you might have to buy it back.

some of her bills are at her mums address so we plan to say we have split up and she has moved back home.
she also has a small piece of land for her horse which her dad/mum/sis and her all went 4 ways in-will they ever find out she has her name on this small field-we can give it to her mum if need be.

The OR/trustee checks land records and past transfers so is likely to notice. They would want to realise her share.

Giving it to someone else won't work, as the OR can still ask for it. Reversing any transfer through the courts if needed.

also how long does bankrupcy last? would the 10k be wiped and no credit cards allowed etc and in xx years you can apply again

1 year. But credit record wrecked for 6, and even after credit is not too easy.

thanks in advance

affluenza

Thank you Fermi - I feel a bit better knowing that I am not completely wrong; and that was my interpretation of the bankruptcy process.

miss_spooky

affluenza wrote: »

Thank you Fermi - I feel a bit better knowing that I am not completely wrong; and that was my interpretation of the bankruptcy process.

Apologies if my post sounded a bit abruppt. It wasn't meant to be.x:o

Tinytim

As fermi says, it is absolutely essential that she seeks professional advice before doing anything.

If there is equity in your house, then the OR will be wanting her share out, which will be 50% of the equity (unless the property is held as tenants in common, with defined shares stipulated, or you have another document establishing defined shares).

The same will apply in respect of the land - The OR will want 25% of the equity unless different share proportions have been defined. As it is unlikely that borrowings were employed to buy the land, the OR may well see this as a primary source of funds.

I would imagine that the horse would be classed as an asset rather than a pet, but perhaps someone with more knowledge would be better placed to answer this. If so, and the OR ordered the sale (most likely to a family member), then I would imagine they would also look to raise money from the tack, which I understand can be worth quite a bit even second hand.

I appreciate that £10,000 may seem like a huge mountain of indebtedness, but compared to the possible effect that BR may have on her and others, it really is essential that all avenues are explored first

skint69

thanks for all your replys.
i will mention to her about the help out there and we can go and make a few phone calls.
to be honest i didnt think putting her name on the mortgage was a great idea from the start! i knew she used her credit card for most purchases.so i should of been stronger and just said i wanted it in my name only.
when we applied for the mortgage we got a phone call from mortgage lender saying the 10k had to be paid off in full before they gave us the 65k.
thats how i found out about the size of her debt-when she lived at parents obviously i didnt know what she spent etc.so it was a bit of a shock.
her mum paid it off on a credit card and now she pays her mum,along with a couple of other cards hee n there.
she is thinking of consolidating the debt onto one but thats another subject !!
but of course if you have any thoughts on the consolidating bit please add your 10cents worth

thanks again.
p.s house is worth 140k and we have a 59k mortgage left so not sure what slice they would take...i dont mean to sell up but say she has moved out-they obviously cant prove she still lives here so why would they want part of her share if there are no monies to give.

Tinytim

skint69,

You really do need to take professional advice over this.

If the house is owned jointly, then her share of the equity far outweighs her debt and it is unlikely a bankruptcy petition would succeed. (If you have more assets than liabilities, you cannot be bankrupt).

If her mum has already transferred some of the money onto her own credit card, then that debt wouldn't be included in the bankruptcy anyway, although her ability to pay her mother would almost certainly be curtailed by the OR.

Consolidation loans can be a good idea in this situation subject to the following:

1. It must be unsecured, not secured on the house.
2. The term must be not significantly longer than it would take to pay of the credit cards anyway. Most unsecured loans are taken over 3 - 8 years, so even at eight years the loan is likely to be repaid before the credit cards would at minimum payments.
3. The interest rate should be less than that being charged on the credit cards.
4. She must be able to afford the repayments every month.
5. Whilst the lenders will not require it, you should get together with her mum and insist that the credit card accounts are closed (don't just cut the cards up - new ones can always be obtained).

Obviously there is a lot of detail we are not aware of, but it really does sound as if bankruptcy is not the best option. If she is able to afford a consolidation loan, then she can probably afford the current monthly payments anyway. If she can't afford the minimum payments, then a debt management plan may be the simplest solution (but use one of the charities such as CCCS or National Debtline). If her major creditor is her mum, then perhaps sitting round a table and discussing matters together with her mum is the best way forward - she may be prepared to receive less herself for a period and avoid all the problems which come with any official form of debt management.