Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

cheesypuff

Hi
I sent a PM to the Stepchange private messages box yesterday would anyone be able to answer me? I’m suffering awful anxiety st the moment ☹️

StepChange_Allen

cheesypuff wrote: »

Hi
I sent a PM to the Stepchange private messages box yesterday would anyone be able to answer me? I’m suffering awful anxiety st the moment ☹️

Hi there

Thanks for posting.

I'm sorry to hear that you're suffering from anxiety at the moment. I hope you have some support for that but if not, please contact your GP.

An advisor is going through our private messages as quickly as possible today, so please bear with us and we'll be in touch.

Best wishes

Allen

londoner1000

Hi,

I'd like some advice on behalf of a friend.

My friend has a lot of debt and i'm not entirely sure how much. I know he owes around £15000 to friends and family. Also, he owes £5500 to his car loan company, several thousands on credit cards, £600 to water company, £1400 to gas/electricity, £3500 arrears on mortgage (which includes an additional £1000 fee for missing a payment last month), and he's £3000 into an overdraft (i presume his overdraft is 3000 and he's used it all). He might even owe more. That's about £30000 of debt.

The car loan company has written to him asking to repossess his car, which can't be worth more than about £1500 now (but which he still owes £5500 on, after already paying £5500 on it), and saying they will deduct the money they make from the amount still owed. I believe debt collectors have been in contact for something else also, but not sure what.

He's just been sentenced to 4 years in prison on a separate issue. Hence why i'm seeking advice on his behalf. He hasn't been honest about his debts for years and i think his friends and family are worried he'll never get them sorted and they will never see a penny back of what he borrowed from them. Nobody can really believe just how much debt he was in as it never 'showed' - i think he just buried his head and let it build up.

His partner is living at his home and paying his mortgage which is an interest-only mortgage thus he won't even be able to sell it to gain some capital. His partner is also worried about bailiffs taking away their belongings and those of their lodger, both of whom have no debts.

After prison, where he is likely to serve about two years, it's unlikely he will earn enough money to pay anything close to a 'reasonable' amount back, and having known him a long time, i don't think he'll ever be able to reduce his debt. We just hope he will be able to live within his means in the future.

I'd like some advice on what his best course of action is.

If he is declared bankrupt, for example, how much does it cost and can it be done without his blessing? Will it reduce his debt to zero? How long does it last? Will there be problems for his partner and his mortgage which she and lodger are paying for currently? Are there any debts that will not go away? Is it best not to mention debt to family/friends to any companies?

Any advice would be appreciated. On Monday i had also planned to speak to some financial advice numbers.

StepChange_Rachael

Hi

Thanks for getting in contact.

I can see why you’d be concerned about your friend, clearly they are going through a difficult time. I’m sure they’d be glad to know they’ve got family and friends that care so much about them to help them find a way forward.

There is certainly a way forward for your friend, no matter what someone’s financial situation is there is always a route to become debt free.

It’s important that your friend is able to look into all their options as all solutions will have some impact on them. With types of insolvency like bankruptcy, the Official Receiver (OR) can set restrictions that can last years after discharge. The bankruptcy will be based around an individual’s situation.

To answer your initial queries regarding bankruptcy, it costs £680 but there might be trust funds available to get help with the fee. Assets will certainly be taken into consideration and this can mean the OR forcing sale of a property if there is over £1000 equity in the property. Although bankruptcy is normally discharged after 12 months, the OR has up to three years to decide whether it’d be worth forcing sale, they must have done this before the three years end from the start of bankruptcy or the property reverts back to the discharged bankrupt.

They’ll also look into other assets the bankrupt has and previous transactions they’ve made, the OR has the option to reverse these.

In regards to family and friend debt, this will be included in the debt total for bankruptcy and written off. All debt has to be included in debt solutions and insolvency.

There are some types of debt that won’t be written off in bankruptcy, although most will, this includes magistrate’s fines, child maintenance arrears, debt classed as fraudulent debt and TV licence arrears.


Other than the debtor a creditor can apply for bankruptcy through a court process; however, the individual must be made aware of this by being served the court order which should be done by hand.

A non-creditor can’t make someone bankrupt but a third party can help someone look into their options and help them find solutions and work on their behalf with consent.

I’d suggest looking at our website to get a better idea of the process to get your friend to a solution and also get a better idea of what creditors can and can’t do, also what your friend can do in the meantime regarding the creditors. If your friend is now in prison a letter of authority would be necessary to discuss their individual situation and give tailored advice. Our contact details are here.

I hope this helps,

Thanks
Rachael

londoner1000 wrote: »

Hi,

I'd like some advice on behalf of a friend.

My friend has a lot of debt and i'm not entirely sure how much. I know he owes around £15000 to friends and family. Also, he owes £5500 to his car loan company, several thousands on credit cards, £600 to water company, £1400 to gas/electricity, £3500 arrears on mortgage (which includes an additional £1000 fee for missing a payment last month), and he's £3000 into an overdraft (i presume his overdraft is 3000 and he's used it all). He might even owe more. That's about £30000 of debt.

The car loan company has written to him asking to repossess his car, which can't be worth more than about £1500 now (but which he still owes £5500 on, after already paying £5500 on it), and saying they will deduct the money they make from the amount still owed. I believe debt collectors have been in contact for something else also, but not sure what.

He's just been sentenced to 4 years in prison on a separate issue. Hence why i'm seeking advice on his behalf. He hasn't been honest about his debts for years and i think his friends and family are worried he'll never get them sorted and they will never see a penny back of what he borrowed from them. Nobody can really believe just how much debt he was in as it never 'showed' - i think he just buried his head and let it build up.

His partner is living at his home and paying his mortgage which is an interest-only mortgage thus he won't even be able to sell it to gain some capital. His partner is also worried about bailiffs taking away their belongings and those of their lodger, both of whom have no debts.

After prison, where he is likely to serve about two years, it's unlikely he will earn enough money to pay anything close to a 'reasonable' amount back, and having known him a long time, i don't think he'll ever be able to reduce his debt. We just hope he will be able to live within his means in the future.

I'd like some advice on what his best course of action is.

If he is declared bankrupt, for example, how much does it cost and can it be done without his blessing? Will it reduce his debt to zero? How long does it last? Will there be problems for his partner and his mortgage which she and lodger are paying for currently? Are there any debts that will not go away? Is it best not to mention debt to family/friends to any companies?

Any advice would be appreciated. On Monday i had also planned to speak to some financial advice numbers.

lmurray1980

Hi I am in the process of going bankrupt and am terrified I will lose my house. I am a single mum now on benefits but I am a sole home owner. I understand that the OR will want to evaluate the equity in the property after the 3 year term. Could you offer any advice how likely it is they will push to sell as opposed to being offered a buy out from me? The property could be perceived to be valued more than the real value as alterations were made when we bought the property, fenced in the property creating a large garden - although the council have said we need to apply to change the curtilage of land if we ever sold. We also made a parking space that needs to be brought inline with council recommendations. Would this all be taken into account? I really do not want to lose my family home but ex partner has agreed to give me a lump sum at the time to offer the buy out as most of the current debt is for his company (all in my name!!). Any advice greatly appreciated, many thanks :-)

londoner1000

Thanks for your reply.

I have read your site and it sounds like a Debt Relief Order might be a better deal. It seems cheaper and serves almost the same purpose as bankruptcy. As for him having under £20000 of debts, i'm not entirely sure. It's somewhere around that number.

What is meant by this: "make sure your assets are shared out fairly among your creditors" (with regards to bankruptcy)?

My friend doesn't really have any assets worth much. Just furniture and other household items. His car is being repossessed and was on hire purchase and his mortgage is interest only.

Flyright

He does not qualify for a DRO if he owns a property.

londoner1000

Flyright wrote: »

He does not qualify for a DRO if he owns a property.

Would an interest only mortgage be considered owning it, i.e. he's not actually paying off anything other than interest.

Flyright

Doesn't matter. He owns a property so is not eligible for a DRO.

[Deleted User]

First post, bear with me!

I was discharged from bankruptcy last year and whilst I know that any repayments due from PPI claims have to be declared to the bankruptcy court, I was wondering if the same also applies to refunds of interest following a complaint to payday loan companies when the loans were taken out prior to being declared bankrupt? I suspect that the same rule applies but wanted to check.

Thank you.