struggling to know whats best to do

perpetuallyinthepoop

I'd really appreciate some advice on my current situation.

My husband and I own a very small house which we live in with our 2 young children. Owing to asrtronmical debts we took out a second mortgage 5 years a go and are now in negative equity to the tune of approx £25k. We also have debts and credit cards of about £30k on top of this.

My question is this would we be better off selling the house (I've already checked with the second mortgage Co and they said the negative equity would be transferred to an secured loan) and renting a modest property and settling up our credit ratings and clearing up debts asap. Or should we hang on where we are and work at paying off the debts bit hy bit, bearing in mind we are paying a horrendous interest rate on the mortgage with 8 years to go. I have already arranged to make £1 payments for my credit cards, but my husband has managed to keep up with the minimum payments.

Any advice would be greatly appreciated!

StumpyPumpy

perpetuallyinthepoop wrote: »

My question is this would we be better off selling the house (I've already checked with the second mortgage Co and they said the negative equity would be transferred to an secured loan) and renting a modest property and settling up our credit ratings and clearing up debts asap.

Any advice would be greatly appreciated!

This is not my area, and I'm sure someone else will be along soon to give some advice, but a quick question: What would the new loan be secured against? Do you have other assets other than the house you plan to sell? If not I cannot envisage any loan company agreeing to take you on.

SP

perpetuallyinthepoop

The 2nd mortgage company that we currently have our secured loan with have agreed to allow us to sell our home, despite being in negative equity and agreed that the outstanding balance on the loan after the sale of the house (approx £25k) would continue as an unsecured loan.

Gimpsdad

Financially, the best thing you can do is go bankrupt. Stop paying the mortgage, second charge and all debts, use the money to get a rented place and go from there. You may not want to do that, but financially that is your best option by a million miles. All debts are instantly wiped, and the worst that can happen is that you pay what you can under an IPO/IPA for 3 years. As you can only be asked to pay what you can afford and no more, it is by far the cheapest option. Best case is you pay nothing other than the court/OR fees.

Hovel_lady

I'd suggest posting a SOA (statement of affairs) for people to look at.

http://makesenseofcards.com/soacalc.html

When you have clicked 'Calculate' on the Statement of Affairs form, click 'Format for MSE'. This gives you a popup window. Click 'highlight text', right click on the highlighted text and copy the highlighted textincluding all formatting codes. Paste the copied text into a post on this thread.

paulmapp8306

while Bankrupcy is the cheapest option - it also leaves the biggest mark against your name for the future. This may be something you happy with - maybe not.

Persdonally Id do some serious research, as you may well be paying more in rent that you are for your mortgage so would actually be worse off (extra debt AND more outgoings). Personally Id look at a DMP but keep your home. That way the mortgage is ringfenced, while the rest of the debts have interest reduced/stopped. Yes it takes longer BUT you wouldnt loose your home, you would have a clean credit file in 6 years (after which time the defaults drop off). Time until your debt free would depend on what you can afford to pay every month - and a DMP is flexible allowing increasing/decreasing payments if circumstances change (provided the min ammount is maintained).

perpetuallyinthepoop

My husband absolutely refuses to go this route. He has his head stuck in the ground and I can't seem to make him realise the extremity of our situation.

We have £35k unsecured debt on credit cards and overdrafts and a 2nd charge on our property of £47k which puts us in negative equity.

I'm working part time plus struggling to run a business part time as well as doing most of the childcare. My husband has a full time job and earns approx half what I earn. No really sure what is best for us to do to be honest as it seems we will be in the poop no matter what we do.

Hovel_lady

Unless you post a SOA there is little people on here can do to help you.

Have you spoken to any of the free debt charities to see what they suggest?

http://www.moneysavingexpert.com/loans/debt-help-plan