is bankruptcy the only option

inthered_4

Hi all just joined the forum in an effort to get some help for a good friend of mine who is absolutely distraught about her debts, I have advised bankruptcy to her but after looking on the net etc I see this is not her only option. Her brief story is she is a professional who earns 30k per year but lives way beyond her means and spends on her credit cards like I have never seen she just buys clothes holidays and other material things so for her debt she has nothing to show. She is not one of those people who run up debts on purpose just to go bankrupt and forget about it she is genuinely sorry for her out of control spending and is as I say distraught with worry at the moment I would like to think she is not suicidal but I could not guarantee it. Her debts are as follows:

VARIOUS CREDIT CARDS £45000
BANK LOAN £5000
CAR FINANCE £6000

SECURED ON PROPERTY LOAN £40000

PROPERTY VALUE £80000
OUTSTANDING ON MORTGAGE £63000
NEGATIVE EQUITY - £23000

As you can see its pretty bad and bankruptcy looks like her only option but I said I would get some help so I'm putting this post on just to make sure she has no other options.
She is even considering leaving her home and moving in with her brother and just hoping they wont find her, I have told her this is completely out of the question as she will be arrested is this the case??

She has many questions but if she has to go bankrupt her main concerns are as follows:

Will she lose her home ?
Will they contact her employer ?
How much will she have to pay back ?
Will her secured loan be written off or not? If not what will happen to it?

Thanks all in advance for any help / advice

chevalier

First of all we need more information.
This is called a Statement of Affairs (or SOA). There is advice on one of the stickys at the top of the forum about how to set one out, but basically it should be (ps I have put some options she may not have considered in brackets by the side, they don't form part of the SOA)

All Monthly Income

Monthly Outgoings such as
Mortgage - amount and APR
Council Tax - Amount (has she claimed here single persons rebate?)
Water Rates - Amount - (do her water company operate a low use rate, would she be eligible)
Gas/Electric - Amount for each (has she been to uswitch.com to see if she can get a cheaper provider, or even a fixed rate for x years, so that she can budget properly)
Phone Amount
Internet Amount
Mobile Phone (with all of these three has she checked she is on the cheapest package? Could she use Pay As You Go for the Mobile phone)
House Insurane Amount
Building Insurance Amount (as above is she with the cheapest?)
Car Insurance Amount (as above)
Car Tax Amount
TV Licence
Gym Membership (does she really use it can she lose it?)
Sky subcription amount (does she really use it can she lose it?)
Grocery Shopping amount (see old style board for lots of tips)

Total this up for Monthly Spend on this

THEN
All the loans
For each one who they are with, what the oustanding amount is, what the APR is.
Any overdraft, the apr and how much is on it.

Total up the monthly payments to give the total spend on loans

Add the spend for outgoings and the spend together. If this is more than the incoming (as it must be for her to be panicking), then the debt will increase.




As for doing something about it, here are a few tips.
1) don't panic. You cannot think rationally when you panic, and your friend will only get in deeper.
2) Over the weekend get your friend to open every bill, and letter she has from her bank, loan companies, mortgage provider, utilities. She will need to do this if she wishes to do an SOA anyway. Then she will know precisely what she ows to who.
3) Get her to give you her credit cards. She should do this willingly if she has had her lightbulb moment. If not you, then someone else she trusts to be strong enough to NOT give them back to her.
4) Once you together or her on her own has done 2 above, on TUESDAY, call either Payplan or CCCS. These are companies that take over the debt and manage it on your behalf. By that I mean that they will write to the companies concerned and negotiate repayment plans that are realistic, and that will leave your friend enough moneys for essentials. Ie food, heating, transport etc.
I am being specific about these two companies, because they DO NOT CHARGE YOU FOR THEIR SERVICES. Virtually every other one that your hear advertised on the tele or the radio DO CHARGE. After the initial phone call it may be a short time before they call your friend back for the long interview about how much is owed where. YOUR FRIEND MUST tell them about ALL debts, as I gather they can get twitchy if you come up with a debt later. And there is a proviso that whilst they are managing your finances YOU DO NOT TAKE ON MORE DEBT/LOANS/CARDS ETC.
Once she has phoned one of the companies above, and got the time for the long interview, she can write to all her creditors to tell them that PAYPLAN OR CCCS are managing her affairs, and until then she will pay a token payment of £1. Most reputable businesses will accept this as PAYPLAN or CCCS are nationally recognised. Not cowboys!
5) Is she in a union/staff association? Could they help with financial advice.

In answer to your questions. If she goes bankrupt and has an asset, the house, then yes she will lose it to the mortgage company, or to the company who has the secured loan on her property.

I don't know if they would contact her employer. But if she works in the financial sector then yes. If a creditor had to do an attachment of earnings, then yes because the payroll people would have to know.

And some things she can do now.
Any holdiay she has already booked, cancel. If she loses a bit of money, she will still get some back which she can throw at whichever debt has the highest APR.
A challenge - Could she go for a whole day without spending any money?
From Tuesday - take home made lunch to work, (if not doing this already). This can save you maybe £20 a week.

Sorry it is a long post. Well done to you for being concerned about your friend. But one does have to ask, why your friend didn't register if she is so worried about the debt? Has she REALLY had her light bulb moment?

Best of luck

lynzpower

excellent advice there chev

In_Search_Of_Me

I think your friend really needs to get some advice & quickly....with those debts she must be not meeting some payments. If she contiues to use credit cards knowing she cant afford them then she is effectively committing fraud - I say this because when CCCS told me that it finally made me realise I was in serious financial dodo 7 started to address my finances. At the end of the day she has to do it and tell her if she does come on here she wil be (for the most part) among friends who will not judge her & most of us are there ourselves so we know how awful it is...give her a hug from me & tell her the only way to deal with this is to confront it & take control of her finances rather than them controlling her. She also needs to check (not sure what profession she is in) what the implications are for her job...DO make sure if she can that she gets free advice CCCS/payplan etc rather than one of the sharks that will be circline - although she looks like she already met one if she has loans secured on property...hope it goes OK!

inthered_4

Hi thanks all again for the promt advice, well she has already cut up all her cards except one which she claims she needs just to buy basics etc as all her earnings are being swallowed up, she wont come on the site herself as she is not at present thinking clearly enough to take action, I can not give a detailed account of all her outgoings as you suggested but that wpould probably be a waste of time as I fear she has way more going out than coming in. I have tried to tell her not to panic but she is talking as I say about just doing a bunk so to speak and not doing anything she keeps saying she will go to prison etc I have told her this is not the case unless she does a bunk, is this true?? she is only an office worker outside the finacial sector so can I assure her that her company will not be informed?? and even with a debt management scheme I honestly dont think she would not stand a chance . Is bankruptcy an option in this case?? and does bankruptcy include her secured home loan if not what will happen to this??.......thanks again for all your help I am seeing her sunday and may encourage her to register herself.

CLAPTON

as others have said, she needs to take ownership of her problem. You of course can be of massive help by supporting her with advice and encouragement.
she will in any case need an SOA so she should produce this as soon as possible.
its not really possible to say whether she will lose the house or whether her employers will be contacted without knowing much more detail...what is her job...is it one that is affected by bankruptcy?

CLAPTON

sorry your post crossed with mine so i've just read it.

alas, until she accepts some ownership of the problem there isn't much that can be done but re assure her of the following

no you can't be imprisoned for debts (unless its a question of can pay but wont)....if you could persuade her to read this forum she would see worse situations that hers.

if she is 'only' an office worker then its unlikely her employer would need to know .

the position of her house depends upon the full financial picture

Alleycat

Regardless of whether her outgoings are currently more than is being swallowed up a statement of affairs is most definately not a waste of time. She needs to pinpoint her expenditure and we can help formulate a plan. Although you have provided a list of her debts noone could advise on whether a bankruptcy would be the way to go or not as there is no detail. You say she earns around £30,000 but is she single, family, what does she spend on groceries, what are the apr's etc?

Willsnarf1983

chevalier wrote:

First of all we need more information.
This is called a Statement of Affairs (or SOA). There is advice on one of the stickys at the top of the forum about how to set one out, but basically it should be (ps I have put some options she may not have considered in brackets by the side, they don't form part of the SOA)

All Monthly Income

Monthly Outgoings such as
Mortgage - amount and APR
Council Tax - Amount (has she claimed here single persons rebate?)
Water Rates - Amount - (do her water company operate a low use rate, would she be eligible)
Gas/Electric - Amount for each (has she been to uswitch.com to see if she can get a cheaper provider, or even a fixed rate for x years, so that she can budget properly)
Phone Amount
Internet Amount
Mobile Phone (with all of these three has she checked she is on the cheapest package? Could she use Pay As You Go for the Mobile phone)
House Insurane Amount
Building Insurance Amount (as above is she with the cheapest?)
Car Insurance Amount (as above)
Car Tax Amount
TV Licence
Gym Membership (does she really use it can she lose it?)
Sky subcription amount (does she really use it can she lose it?)
Grocery Shopping amount (see old style board for lots of tips)

Total this up for Monthly Spend on this

THEN
All the loans
For each one who they are with, what the oustanding amount is, what the APR is.
Any overdraft, the apr and how much is on it.

Total up the monthly payments to give the total spend on loans

Add the spend for outgoings and the spend together. If this is more than the incoming (as it must be for her to be panicking), then the debt will increase.




As for doing something about it, here are a few tips.
1) don't panic. You cannot think rationally when you panic, and your friend will only get in deeper.
2) Over the weekend get your friend to open every bill, and letter she has from her bank, loan companies, mortgage provider, utilities. She will need to do this if she wishes to do an SOA anyway. Then she will know precisely what she ows to who.
3) Get her to give you her credit cards. She should do this willingly if she has had her lightbulb moment. If not you, then someone else she trusts to be strong enough to NOT give them back to her.
4) Once you together or her on her own has done 2 above, on TUESDAY, call either Payplan or CCCS. These are companies that take over the debt and manage it on your behalf. By that I mean that they will write to the companies concerned and negotiate repayment plans that are realistic, and that will leave your friend enough moneys for essentials. Ie food, heating, transport etc.
I am being specific about these two companies, because they DO NOT CHARGE YOU FOR THEIR SERVICES. Virtually every other one that your hear advertised on the tele or the radio DO CHARGE. After the initial phone call it may be a short time before they call your friend back for the long interview about how much is owed where. YOUR FRIEND MUST tell them about ALL debts, as I gather they can get twitchy if you come up with a debt later. And there is a proviso that whilst they are managing your finances YOU DO NOT TAKE ON MORE DEBT/LOANS/CARDS ETC.
Once she has phoned one of the companies above, and got the time for the long interview, she can write to all her creditors to tell them that PAYPLAN OR CCCS are managing her affairs, and until then she will pay a token payment of £1. Most reputable businesses will accept this as PAYPLAN or CCCS are nationally recognised. Not cowboys!
5) Is she in a union/staff association? Could they help with financial advice.

In answer to your questions. If she goes bankrupt and has an asset, the house, then yes she will lose it to the mortgage company, or to the company who has the secured loan on her property.

I don't know if they would contact her employer. But if she works in the financial sector then yes. If a creditor had to do an attachment of earnings, then yes because the payroll people would have to know.

And some things she can do now.
Any holdiay she has already booked, cancel. If she loses a bit of money, she will still get some back which she can throw at whichever debt has the highest APR.
A challenge - Could she go for a whole day without spending any money?
From Tuesday - take home made lunch to work, (if not doing this already). This can save you maybe £20 a week.

Sorry it is a long post. Well done to you for being concerned about your friend. But one does have to ask, why your friend didn't register if she is so worried about the debt? Has she REALLY had her light bulb moment?

Best of luck

just had to thank that advice and effort as the fact that this isn't even the person in trouble posting probably means that this post will die a quick death!

Will

Addicted2Chocolate

Bankruptcy only deals with unsecured debts. Only if the property is repossessed by the chrage holder will any shortfall(s) to secured creditors becpme unsecuredand part of the bankruptcy debts.

strangel

with regards to the follwoing -
I don't know if they would contact her employer. But if she works in the financial sector then yes.

I have worked for a big bank since before I declared myself bankrupt and it is depending on what you do (ie give out financial advice) as to whether they need to know.

The company I work for have never been told and I will never tell them.