Loan problems - should I go bankrupt?

donrondadon

I've recently come out of University - I did my MBA for which I had to take out a £17,500 professional studies loan from HSBC.

I got a job soon after Uni, but recently got made redundant. I wasn't obliged to start paying back the loan until this month (March) but actually started paying it back 5 months ago by setting up a standing order.

I was made redundant this month so I went in to see HSBC about it and there's no protection on my loan so they can't help me pay for it. On top of that they set up a standing order this month too - even though I already had one up, so this month instead of my usual £300 going out towards paying back the loan, it was £670! I told them I've only got £50 in my current account to last me a month but they said the account was inflexible and they couldn't take it out. I've been frustrated with HSBC for years now, especially the Leamington Spa branch - they can NEVER do ANYTHING to help ANYONE. I currently still owe almost £16,000 on my loan.

I also have a credit card to which I have around £500 outstanding.

I wanted to find out about claiming bankruptcy. I have no assets such as a house or car and I don't have another job yet. I will be signing on for job seekers allowance tomorrow and have a few interviews this week and next week for other jobs. But, I'd love to tell HSBC where to stick it :mad:.

I spoke to an advisor about bankruptcy, and I know it lasts 7 years - the first year you are bankrupt, and the 6 years after it stays on your credit report. Now I don't really have any problem going bankrupt (apart from the £450 court fee, but overall it would mean I'm still up by £15,500). The only things I am worried about are the following:

1) I will probably be getting a house with my girlfriend in the next couple of years. She can't get the mortgage on her salary alone. I doubt I'd be able to get a mortgage, but thought I'd check as it is a secured loan I believe. Otherwise, is there a way around this?

2) My girlfriend would probably want to open her own salon in the near future, but would also probably need support from me to do so - how would this be affected?

3) I live with my parents at the moment, how would their credit rating be affected if I went through with it as we share the house?

4) I was also told that after the 7 year period there would be no trace that I was bankrupt in the past (apart from having to declare it if I were to go into a few jobs like finance etc.) - is this true?

RAS

You have to declare bankruptcy when ever you are asked if you have been bankrupt or entered an insolvency arrangement, for the rest of your life.

Assume you would not get consumer credit for a very long time, would find it well nigh impossible to get a mortgage for the next three years but may be able to get one thereafter, at a much higher rate initially.

It will affect renting, insurance, thnings like phone contracts.

it will not affect your folks unless you have joint accounts with them.

Your GF would be best advised not to open any joint accounts with you.

Tixy

Hi Don

Bankruptcy is usually a final option rather than the first one.
Have you considered other options - such as making token payments to the loan until you find work?

If you find work you will be required to make income payment contributions to your bankruptcy, which will go to your creditors. These will leave you with only very basic living costs. Usually these are paid for 3years from the date of your bankruptcy I believe.

So you would not have any spare funds to contribute to your GFs business or to a mortgage.

Who have you spoken to about bankruptcy?

You might be better speaking to one of the charitable debt advice organisations about all your options and so you have a full understanding of the implications. http://forums.moneysavingexpert.com/showthread.html?t=2077631

DGJsaver

Seems to me the OP just doesnt have any interest on paying the loan at all , why look straight to Bankruptcy ? whats wrong with at least ATTEMPTING toekn payments until you find work , Its this comment that gets my goat.....

"but overall it would mean I'm still up by £15,500"

Britwife

If I were in your shoes, I would be bustin my behind to find another job. It may be an underpaid job seeing that you have an MBA but you should be more marketable with credentials. I would see about talking to them about the next months' payment. Since you are still living at home, you should have no issues paying this back with a job.

Also, since you already have a standing order to pay the debt, I would demand that one of them be cancelled and have one month refunded asap. Take proof of the payments and such and show it to them. Then you have next month's payment all ready to go. That gives you another month cushion to get a job.

If you have plans to buy a house, bankruptcy should be the last thing on your mind.

donrondadon

I can't get the extra £300 I paid into the account this month back because the loan is an inflexible account and there's "nothing the bank can do". Also, as I don't have an income they are unable to restructure th loan agreement or do anything about it unless I go into arrears, so I can't arrange for token repayments.

Also I don live at home, my GFs parents have kindly offered to let me stay at theirs (I don't have parents). I don't think it's fair to put that kind of strain on them so I am lookin to move out ASAP, so I will have to take rent into account.

Willow_K

Open another bank account with a bank that is not associated with HSBC and move all of your money in (benefits etc) and outgoings other than the loan to the new account.

Cancel any overdraft facility that is on the HSBC account. They won't be able to take payments if there is no money there.

When a couple of payments have been missed, contact them again to arrange token payments until you find another job - they would be more likely to accept them when you are in arrears. Also ask if they have a hardship scheme.

Even if they eventually default you, one defaulted credit account is going to cause you a lot less long term pain then bankruptcy.

Bankruptcy is a last resort and is not a solution for getting out of what you owe.

Trollfever

Even when you are no longer bankrupt, there are some debts such as court fines and student loans that will never be written off.

From:

http://www.adviceguide.org.uk/index/d_bankruptcy.pdf



.

Ames

That's government student loans though not commercial ones.

I agree br is a bit too drastic for your situation. It's not as if you're never going to be able to work again, some time soon you'll be able to get back on top of things. Just make token payments for now and deal with the fallout when you're able to. Just rememer, they can't have money that you don't have.

DarkConvict

You say the bank setup a standing order? Only you can authorise a standing order, are you sure it wasn't taken by direct debit instead if so you can under the direct debit guarantee force a refund.

As above if you go BR once, you have to answer YES to have you been made BR. This is career suicide for several professions like law and finance, find out if you chosen path would be affected.

You are made BR for 12 months, and pay ~50%-70% of your surplus income for 3 years, with BR been on your credit file for 6 years from the day you go BR, so 6 years not 7.

Token payments is certainly the best way forward, incase you get a job setup shortly. Look into DMPs, ask CCCS about it.

Renting and mortgages is certainly going to be affected, some areas are pickier than others but you could find it difficult to find somewhere to live. As above do not get a joint account otherwise you become linked and your credit file can be search when either of you apply for credit, making the BR affect you both.