£65k debt - Bankruptcy v IVA

melf_2

Hi everyone,

Myself and partner have massive debts, mainly due to renovating a property that we really couldn't afford to renovate.

Unsecured loan - £35000
Credit cards - £15000
Overdrafts - £5000
Student loans £7000
odds and sods - £3000 (utility, mobiles)

Income - £2300pm

We have been looking into an IVA but have also been advised that bankruptcy would be a good option for us. That scares the life out of me.

We sold our house at the end of last year to release all the equity possible to pay into debts. We paid back £48000 (originally had a secured loan from FirstPlus for £70000, settlement figure £83000, balance now at £35000 which is now unsecured) so we haev tried to do the right thing. We are in the process of buying a new house, very tiny but we wanted to stay on the ladder if at all possible. Our new mortgage is 100% for £123000.

Basically I wanted some info on IPO's and how bankruptcy affects you in the future? Also what the general views are between IVA's / bankruptcy? What do people really favour. I flit between wanting the IVA and then thinking can I even really afford that and thinking we should go bankrupt. We're in a right mess, been living at my parents for 5 months now and need to have our own place again. Is that so terrible?

I just don't know what to do? The things stoppign us from bankruptcy are the thought of losing the house and it going in the local paper. We hoped that by moving to new town that it would be advertised there but apparently not, its where you aquired the debts. This is the worst thing.

Anyway, any advice would be great.

Thanks

Richard_S

Hi melf,

It sounds as though you may have sought professional advice already and that is generally considered to be the best first step; CCCS, CAB, National Debt Line are all charities that don’t charge for their services and offer professional advice from trained advisors. If it was one of the debt charities that suggested bankruptcy then you should be aware of the differences between DMPs, IVAs and bankruptcy.

Bankruptcy is least painful for people who have no assets and insufficient income to warrant paying an IPA. If you go ahead and purchase a house with a 100% mortgage then you won’t have to worry about any Beneficial Interest in your house, and will almost certainly get to keep it. With a monthly income of £2,300 you may be required to pay a relatively small IPA but that is better than contemplating a much higher payment required by an IVA and over a longer period of time.

There’s nothing you can do to stop the bankruptcy notice going in your local paper and there has been a lot of discussion on this thread about the embarrassment caused by this and the majority view seems to be that the thought of it appearing is far worse than the actual event. You might be a talking point for a day or two but the gossips soon move on and remember, “the only thing worse than being talked about is not being talked about”. IVAs also appear on a public Insolvency Website so don’t go for an IVA if publicity is a factor in your decision.

As for the future impact of bankruptcy we’ve got very little anecdotal evidence given that most people on this forum have gone bust within the last year. It will stay on your credit file for 6 years but then so does a DMP or IVA, if you ever apply for a mortgage or loan in the future you’ll be asked if you’ve ever been declared bankrupt and answering “yes” will probably mean the application is declined or in the case of a mortgage a higher rate of interest applied.

I’m confident about our ability to cope with the effects of bankruptcy post-discharge, it will certainly make things harder but I’m certain, not impossible.

Hope this helps,

Richard

NekoZombie

Hiya!

Welcome to the board. I'd echo Rich's wise words, but also point out that you need to consider if you can really afford an IVA. I was all set to go for one, but when I sat down and looked at the figures in the cold light of day, it just didn't make sense. I'll also point out that banks don't differentiate much between an IVA and bankruptcy.

melf_2

I'll be honest, the IVA cost does worry me. I don't know if its affordable or not. Its a lot less than we pay out each month on debt at the moment.

melf_2

Richard_S wrote: »

Hi melf,

It sounds as though you may have sought professional advice already and that is generally considered to be the best first step; CCCS, CAB, National Debt Line are all charities that don’t charge for their services and offer professional advice from trained advisors. If it was one of the debt charities that suggested bankruptcy then you should be aware of the differences between DMPs, IVAs and bankruptcy.


Yeah, we have sought advice from a lot of people but it seems that they might not be right in what they are telling us. I'm confused.
Bankruptcy is least painful for people who have no assets and insufficient income to warrant paying an IPA. If you go ahead and purchase a house with a 100% mortgage then you won’t have to worry about any Beneficial Interest in your house, and will almost certainly get to keep it. With a monthly income of £2,300 you may be required to pay a relatively small IPA but that is better than contemplating a much higher payment required by an IVA and over a longer period of time.

Thats why BR was advised to us, we have no assets so we would be better off but the effect of going BR is worrying. Its not an easy way out, we know that and we accept that if it happens it will affect us for much longer than the 6 years its on file.

There’s nothing you can do to stop the bankruptcy notice going in your local paper and there has been a lot of discussion on this thread about the embarrassment caused by this and the majority view seems to be that the thought of it appearing is far worse than the actual event. You might be a talking point for a day or two but the gossips soon move on and remember, “the only thing worse than being talked about is not being talked about”. IVAs also appear on a public Insolvency Website so don’t go for an IVA if publicity is a factor in your decision.

As for the future impact of bankruptcy we’ve got very little anecdotal evidence given that most people on this forum have gone bust within the last year. It will stay on your credit file for 6 years but then so does a DMP or IVA, if you ever apply for a mortgage or loan in the future you’ll be asked if you’ve ever been declared bankrupt and answering “yes” will probably mean the application is declined or in the case of a mortgage a higher rate of interest applied.

What do you mean the people on this forum have gone bust? Do you mean a lot have gone BR?

I’m confident about our ability to cope with the effects of bankruptcy post-discharge, it will certainly make things harder but I’m certain, not impossible.

Hope this helps,

Richard

Thank you for your message, really helps to hear the ins and outs.

allofadither

Hi melf,

Don't know if it makes any difference to your ultimate decision, but as I understand it student loans are not included in BR, so those would have to be paid back anyway.

allofadither

And yes, Rich does mean that most people posting on this particular forum have either gone bankrupt or are in the process of doing so.

Richard_S

melf wrote: »

What do you mean the people on this forum have gone bust? Do you mean a lot have gone BR? Thank you for your message, really helps to hear the ins and outs.

Hi melf,

Bankruptcy is an "ugly" word, "going bust" somehow seems more lighthearted, so yes I did mean gone BR.

I would never say to anybody that declaring bankruptcy is an easy way out or that it's what somebody should do in a given set of circumstances. That's the job of the Debt Charities but once somebody has decided to take that route I would like to think that I, as well as the others on this Forum, will try to make that process as easy and painless as possible.

The thinking behind the Enterprise Act of 2002/04 was that bky should be made easier so that entrpreneurs who had got it wrong shouldn't be excluded from making a contribution to the economy in future.

We were petitioned for bky by a third party and they had to drag us kicking and screaming through the system to get us into court, and we would almost certainly have made every effort to repay the debts we owed. We might have succeeded, we might have failed, but as things stand at the moment I'm absolutely delighted that the m0rons responsible for our bky will get nothing from our estate, after spending who knows how much on legal and court fees.

I would spend some more time researching other people's experiences and try to objectively place yoursleves in their situation and see how you'd think about things and how it would affect your future aspirations.

Richard

gettingitsorted

melf wrote: »

I'll be honest, the IVA cost does worry me. I don't know if its affordable or not. Its a lot less than we pay out each month on debt at the moment.

Hi Melf glad you came over

have a read of this site https://www.insolvency.gov.uk

it explains bankruptcy and IVAs


There are 70 of us on this site and i would say out of those 60 are bankrupt so between us theres not alot we dont know so please dont hesitate to ask as may questions as you like


GIS

melf_2

I am just so concerned, I want the best outcome for us at this point in time and I know this is a terribble thing to say but I don't have the energy to care too much about what FirstPlus and MBNA get back from us. We need to do whats right for us. Unfortunately i don't know what the right thing is? IVA's are expensive but its more anonymous, BR is quicker (I think?) but has the stigma and will create problems in the future. The monthly payment thing sounds good in some ways but it doesn't stop the creditors ringing and writing constantly, I think we need that legal side. I can't cope much longer with the way things are. Its been going on for 18 months at least.

NekoZombie

Most of us on this side of the pond have gone bankrupt or will be doing so in the very near future. I by the way, am already bankrupt.