Is bankruptcy the right thing to do in my situation?

Sandwich

Hi guys and gals,

I've been thinking a lot about debt lately. I cannot believe the situation I've got myself in and I just wish I could go back in time four years and make some different choices.

Here's my situation. Right now, I'm doing a PhD. I started in 2007 and I was self-funded from the beginning. I had a little bit of money saved up so in the first year I took out a loan of "only" £7000, and I was due to get installments of around £10,000 in my second and third years. However, the company I was dealing with went bust after year one, so I was up the proverbial creek without a paddle. I thought the best option was for me to get a Career Development Loan from the Co-op for £9000 to cover me for my next two years, and I was going to work part-time to cover living expenses.

So that's what I did. However, my PhD has taken longer than I thought it was and I'm still doing it, three and a half years later. I've managed to keep my head just above water recently by taking all the work I can find. However, my problem is that my loan repayments are due to kick in soon.

My Co-op repayments kick in in August. They are £250 per month (!!!).

My original loan repayments will probably kick in in March, but I think I might get an extension on that because the loan agreement says the payments starts 10 months after graduation, and technically I won't graduate until September (although I was originally supposed to graduate last September). They are another £250 per month.

Then as soon as I get a full-time job I'll have to start paying back my student loan, which I believe is 9% of my income.

I've been applying for full-time jobs lately and it looks like, when I do start full time, I'll be on around £28,000 per year. That would leave me on around £21,000 after income tax. So after council tax, rent, bills, groceries, I can't see how I'm going to find £700 each month to pay my debts. It just doesn't seem possible and I'm really worried.

That's why I've been thinking about declaring bankruptcy, but I don't know anything about the process and what it's consequences are, so if anyone can give me any advice I would be extremely grateful.

Could someone in my position be declared bankrupt, and is that my best option given the circumstances?

What would happen after I'm declared bankrupt? Do the debts stick with me for life or are they wiped away?

Would I get a visit from some bailiffs (this is the part I'm most worried about), and what would they take? Can the bailiffs come to your house multiple times or can they only take things on one occasion?

Also, I read somewhere that if there is no communication between you and the company you are in debt to for a period of something like 5 years, you are no longer liable for the debt. Is this the case? If so, I might get away with not having to payback my original £7000 loan. I was just looking at the loan agreement and that £7000 is going to cost me £31,000 by the time I've paid it all back, plus interest!!!

IF

Hello Sandwich and Welcome, First thing make a list of all your creditors, debts and assets. Secondly and most important is contact one of the following debt charities. Please try these they don't charge and are impartial. They will go through all your options with you and if they suggest bankruptcy then come back to this board and we will help you all we can. Also if your not ‘clicking’ with one of the Debt charities do try another.

Please don’t do anything rash take your time and weigh up your options and read everything you can x

For ‘essential’ BR info this is Fermi’s sticky - Click here

• 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)

More Debt charities also on Fermi’s link - Click here


And do remember we’ve all been through this and anything you don’t understand don’t be afraid to ask.

Best wishes
If...x

Sandwich

Thanks for the advice Wishes. I will most definitely call one of those numbers on Monday to speak to someone about my situation (I'll probably start with the CAB, as I've dealt with them in the past and they were very helpful).

However, I've been thinking about the debt consolidation route. How likely is it that the company that bought my £7000 debt after the original lender went bust would settle for something in the region of £5000, and is there any chance the Co-op might settle for something around £8000?

Because it's not beyond the realm of possibility that I could get a consolidation loan of around £13,000 and pay it back fairly comfortably. This would allow me to avoid having to declare bankruptcy.

Sandwich

I just got off the phone with the CCCS and the National Debtline. Got some good information, but I'm still unsure about a few things. They basically set out what options I have but they didn't tell me which was best. Said it was up to me to decide.

I'm torn right now between trying to self-negotiate for reduced payments, declaring bankruptcy, or going for an IVA. I'm leaning towards self-negotiation. If I can get my payments cut in half I should be able to manage. However, that would mean having a lot more interest on my total credit charge :S What do you guys think I should do?

Also, the next thing I have to deal with is my Sallie Mae loan. I just emailed Sallie Mae to get the information of who now holds my debt and when my first payment is due to start, but the email was returned undelivered. So, the company that I own money to doesn't know my current address, or that I pushed my graduation date back one year, and I don't have any way of getting in contact with them to let them know! What should I do? Should I just wait for them to contact me, or should I perhaps email the main office in the US?

As far as the consolidation route goes, they pretty much advised me against that, so I've given up on that idea. Also, the woman I spoke to at the CCCS said there was a good possibility that my loan with Sallie Mae had stopped accruing interest because it was sold to a third party. That really got my hopes up, but then the Debtline told me that was bad information and that the interest still stands.

Do you guys have any advice for me regarding which route I should go down, and also what I should do about this Sallie Mae loan?

Also, how likely is it that my creditors would agree to reduced payments? Is that a pretty standard thing in the industry?

Sandwich

No advice?

debtinfo

Sadly we cant tell you wht to do, it really is your own choice. What i would sat is that reduced payments are rarely if ever a final solution, with interest and charges it is likely that you could be paying for the rest of your live or just be in the same position years down the line, reduced payments are really for where there is a short term dip in your finances E when you lose job and expect your income to improve again later and return to full payments.

tigerfeet2006

Sorry but with out knowing your full financial ins and outs we can not advise on what to do. We can support you if you decide to go down the bankruptcy route and can help you with any questions on the process.

If you go down the DMP route (either self adminstered or through CCCS) then there is no guarantee the interest will be frozen and it is not legaly binding and the companies can change their minds at any point. But it could go the other way and every one plays ball and you clear it all. Go onto the Debtfree Wanabe board for advice and help with it.

If you go for an IVA then it is a form of insolvency, it is legally binding and everyone has to abide by the rules. If you have a change in circumstance then it can be difficult t get a variation and you may end up going BR any way. Go on to the IVA sub board for advice and help with it.

If you go BR then it is legaly binding and no one is able chase you or harrass you and the with a few exceptions you are no longer responsible for your debts. As said we will support you on this board if you feel this is the way to go.

mrcurious_2

I was in a DMP and after one year put the interest back on and had no changes in cicumstances and would have taken me ages to pay. Good luck with which route you take.

kepar

I've been applying for full-time jobs lately and it looks like, when I do start full time, I'll be on around £28,000 per year. That would leave me on around £21,000 after income tax. So after council tax, rent, bills, groceries, I can't see how I'm going to find £700 each month to pay my debts. It just doesn't seem possible and I'm really worried.

Have you thought about what would happen if you don't get a job. With the present climate there is also a possibility that you may be unemployed for the next two years. If you can hold out until you get a job fine but how long can you leave things if you don't?

NeverAgain_2

...no advice?...

Reading your OP, I can't work out how much debt you have, let alone how it's due to be repaid.

Without even this basic information, it's not possible to make any meaningful comment.

Sandwich

mrcurious wrote: »

I was in a DMP and after one year put the interest back on and had no changes in cicumstances and would have taken me ages to pay. Good luck with which route you take.

Yeah, that seems to be the major problem. The interest rate on one of my debts is already pretty astronomical. Extending the length of the loan term would probably lock me into payments for the next 20 years or possibly even longer. Did you decide to file for bankruptcy in the end? Are you glad you made that decision?

@kepar: That is a distinct possibility but I think I stand a fairly good chance of a job soon. The last one I applied for I was well-qualified for, had all the necessary experience, and some good references, but I didn't even make the shortlist for interview. There were apparently 40 applicants for the same job. Things are tough out there at the moment.

@NeverAgain: I suppose I didn't make it clear enough. It's a complex situation. Altogether I have taken out loans totalling around £31,000. With interest I will likely pay back around £52,000. My monthly repayments will be around £750. One of the payments will start as soon as I begin earning over £16,000. The second one will start in July. And the third one could start any month now, but I don't know exactly when, because the company I took the loan out with went bust and sold it on to a third party who hasn't made contact with me at all in the two plus years since they purchased the debt.