Is Bankruptcy the way to go?

watcher27

Hi,
We are in a bit of financial bother, and am after a bit of advice on what to do next, but i fear bankruptcy will be the only option

It's all to do with the mortgage...
Basically, since taking out out mortgage, my wife has had to go part time to look after our new baby, i've been made redundant twice and now our fixed rate with Northern Rock (now NRAM) has come to an end. Our joint income was about £40k when we took out our mortgage, and its now around half! :eek:

Or current mortgage balance is around £192K. When we took it out, we were paying £1265 a month. The rates dropped so it became around £850 a month, then when i was made redundant, we changed it to interest only for 12 months so it became £450 a month. This is the figure we can afford, but now the fixed rate has ended its gone up to £775 which has stretched us to the limit.
We have nothing left a month after paying mortgage, bills & food. And now, the interest only is ending, meaning it's going to go up to £1037 a month!!!!

We have applied for it to remain interest only for another 12 months and are awaiting the decision.

But thats not a long term solution to the problem, and when the rates rise, we are stuffed!
So, the house in in negative equity and is worth around £160K, so we cant sell it, we cant afford realisticly to stay in it. If they reposses then they will still chase us for the remaining money, so we are at a lose of what to do.

Which is why we are considering bankruptcy! And thought?

philnicandamy

Bankruptcy may be an option..BUT its a last resort & should only really be considered when all other options have gone

best thing to do first of all is contact one of the free debt advice helplines & see what they suggest...

Main recommended sources of help:

• Consumer Credit Counselling Service - Website: CCCS Telephone: 0800 138 1111
• National Debtline - Website: National Debtline Telephone: 0808 808 4000
• Citizens Advice Bureau - Website: Citizens Advice or visit your local CAB centre (find nearest)

Others:

• Business Debtline - Website: Business Debtline Telephone: 0800 197 6026
• Christians Against Poverty
• PayPlan
• TaxAid - Help with tax debts.

watcher27

Well an update on this, we submitted our application to remain on interest only.
NRAM phoned us and spend over an hour on the phone going through all our expenditure/income etc and they agreed we cant afford to go up to full repayment so have allowed us to remain on interest only BUT only for another year, so we have until oct to find more income

My problem is, i think we were daft buying our house when we did, and are now overstretched, and i cant see this correcting itself

As it is, we are just managing the interest only payment's, but we have nothing left. The car's need servicing, road tax tyres MOT's etc, then there are general house repairs and we just don't have the money.

And dont even mention an interest rate rise :eek:

I need to follow the advise given by philnicandamy, but the thought of it just makes me feel sick with worry

If it's any use, my income & debts are:
Our yearly joint income is £24500 a year
Total mortgage owed is £192000
Low interest loan £6000

dancingfairy

Can you get a lodger in? rent the whole house out and rent somewhere else cheaper?
df

watcher27

dancingfairy wrote: »

Can you get a lodger in? rent the whole house out and rent somewhere else cheaper?
df

We cant get a lodger as its just a 2 bedroom

We did considering renting it, but i think we could only get around £600 a month rent, and be time we pay the mortgage and rent somewhere ourselves, we'd be no better off.
Plus we'd have to see if NRAM will let us change the mortgage type and allow us to rent.

HateBanks

Call NationalDebtline for their advice...they are open until 8pm, its a free call, no obligation, they wont judge you, and will give you the advise you need.

silvercar

Are you working now? Is your wife working? (You could claim working tax credits and child tax credits and childcare help that would pay upto 80% of childcare costs.)

Seems to me that you have another year on interest only and can use that time to maximise income. Although interest only is not a long term solution, its as good as renting, so seems unnecessary to walk away from the home unless you can rent long term for a lot cheaper.

spectreman

Can't give you advice but you should speak to CCCS or Payplan or CAB first before doing anything. If you go bankrupt this will only include unsecured debt. Your mortgage is secured over your property, therefore, if you go bankrupt first and it is granted it may not include the negative equity debt from a repossession. Last thing you need is to go bankrupt only to find you have the negative equity debt hanging over you as well.

silvercar

spectreman wrote: »

Can't give you advice but you should speak to CCCS or Payplan or CAB first before doing anything. If you go bankrupt this will only include unsecured debt. Your mortgage is secured over your property, therefore, if you go bankrupt first and it is granted it may not include the negative equity debt from a repossession. Last thing you need is to go bankrupt only to find you have the negative equity debt hanging over you as well.

Not quite true. If you are repossessed any negative equity is included in bankruptcy, even if you are already bankrupt.

molly1412

hi your circumstances sound very similar to ours, except i have not finished work yet as not due baby until end of the year but i will be stopping work as we cant have childcare for 2 children so we will lose my wage and we are the exact same with our house, - in negative equity, on interest only mortgage struggle to pay now so will have no chance when i have to stop work so we are seriously considering bankruptcy as i see no other way. i think the same as you in that we wont be able to live off one wage let alone pay bills to and we are not going to be able to get money back on the house for a long time. we also have some loans too due to wedding and deposit for house etc

i was wondering how you are getting on and what you decided to do?

katsu

Would you actually be any better off if you moved and were renting? How do rents in your area compare to the mortgage repayments?

Do get debt charity advice - they hear loads of people's problems all the time so don't worry about talking to them.