What to do - is bankruptcy an option?

skye

Hi, I’m hoping someone can help with my options. I’ve been in debt for 12 years since the age of 18, which has gradually rose despite me trying to pay it back. In recent years it has exasperated with my divorce and sale of a house which was in negative equity, which I had to take the responsibility for as my ex quit his job and ran off. One of the options my solicitor then put towards me was an IVA or going bankrupt and I probably should have taken the chance to go bankrupt then. I wanted to remain a homeowner and as I had a good mortgage rate (1.99%) it was going to be cheaper buying a flat than paying rent with a 35 year mortgage term. The problem being my mortgage company wanted 10% deposit, I’d only had 5% deposit on the past mortgage with my ex as prior to that we’d had a Northern Rock 125% mortgage so was also left with a loan. In order to finance this purchase of a flat my parents lend me 5% deposit £6,250 and my boyfriend also put down 5% (it’s in both mine and my boyfriends names with my mortgage company making my parents sign a letter that the deposit was gifted to me – I am actually paying them back though). I also owe my parents £1,600 from my divorce, although I have paid approximately £600 already so in total I owe them £7,250.

I also owe £21,000 on credit cards (I managed to pay off the most of the loan with sale of the house). I also am facing having to pay £2,500 (maybe more I may receive another bill yet) in medical costs which I am not sure if my insurance will pay out on. These medical costs have come as a huge blow to me – since moving I’ve reduced my outgoings and have paid more off my credit card debt. With owing my parents money, my debt now totals £30,750 and I just feel like I’m facing a losing battle. I earn a decent amount (£1,830) and pay at least £460 in debt repayment per month – often more if I can. The problem is my job – I am so miserable (to the point I was off work quite ill last year, but back there now) but feel I am stuck with it because it earns a decent amount, I’ve tried looking for new work but not had any success and it’s highly unlikely that I’ll be able to find anything else matching or beating what I earn now. In an ideal world I’d love to move abroad or have a career change but there’s no way I can earn the amount I do at the moment. I know I over spend because I’m stressed and miserable, which puts me in a catch 22 situation. I’ve become totally disillusioned with the company I work for and seem to be always facing redundancy so I do not even have a secure job.

What I would like to know is bankruptcy actually an option for me with owning a property? – I need to protect my parents and boyfriends money invested in the house (ie I need to pay them back). Could I sell “my” interest in the property to them if I went bankrupt? How would the OR look at it if I gave up my job for something less demanding that doesn’t make me ill but pays less? Or if we rented the house and moved abroad? I’m clutching at straws I know, I just can’t see the light for the tunnel. I know I’ve been stupid and ran up the debt and I’m not looking for a easy way out, just something to make my life more bearable. My credit card debt is currently all on 0% - I’ve managed to keep my credit file clean and am not missing payments but in the past had been robbing peter to pay paul. Can anyone offer any advice please? II’m happy to fill out a statement of affairs but can’t seem to find it so if you need it if you could attach a link please? Thanks!

National_Debtline

Hi skye

Well done on sharing the situation - easier said than done. First of all here is link to Stoozing SOA calculator which can be pasted into the thread:

http://www.stoozing.com/calculator/soa.php

Regards

Dennis @NDL

National_Debtline

I won't try to give detailed answers to all of your queries just yet as the SOA will help give some more context.

However I will say that your post is a fairly damning indictment of your current job. It sounds as if it has the potential to affect your mental wellbeing (if it's not already done so). This has to take precedence over material considerations - there is no perfect correlation between level of earnings and level of contentment.

The OR cannot and will not "oblige" you to stay in a particular job just because it allows you to better service your debts.

What happens to a property in bankruptcy will depend largely on the level of equity (if any) that you have. For starters I would read "What Will Happen To My Home?", a very useful leaflet produced by the Insolvency Service:

http://www.bis.gov.uk/insolvency/Publications

There's also our own fact sheet on bankruptcy if you live in England or Wales:

http://www.nationaldebtline.co.uk/england_wales/factsheet.php?page=01_bankruptcy

Regards

Dennis @NDL

skye

Hi, thanks for your help - do I have to include my partners income? He is not in any debt so it would just be me that was interested in bankruptcy. We don't have joint bank accounts, just a joint mortgage. We split the bills so should I just put my share in or do both incomes & all bills?

skye

I've done it on just mine with just my half of the flat - I could probably guess estimate his as well if needed?

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1832.01
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1832.01

Monthly Expense Details
Mortgage................................ 186.4
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 41.5
Electricity............................. 17.5
Gas..................................... 20
Oil..................................... 0
Water rates............................. 17
Telephone (land line)................... 7.5
Mobile phone............................ 15
TV Licence.............................. 7
Satellite/Cable TV...................... 7.5
Internet Services....................... 5
Groceries etc. ......................... 210
Clothing................................ 40
Petrol/diesel........................... 120
Road tax................................ 15
Car Insurance........................... 35
Car maintenance (including MOT)......... 25
Car parking............................. 20
Other travel............................ 10
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 33
Pet insurance/vet bills................. 0
Buildings insurance..................... 9
Contents insurance...................... 5
Life assurance ......................... 10.79
Other insurance......................... 0
Presents (birthday, christmas etc)...... 60
Haircuts................................ 10
Entertainment........................... 100
Holiday................................. 50
Emergency fund.......................... 0
Total monthly expenses.................. 1077.19


Assets
Cash.................................... 0
House value (Gross)..................... 62000
Shares and bonds........................ 0
Car(s).................................. 2400
Other assets............................ 0
Total Assets............................ 64400


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 56250....(186.4)....1.99
Total secured & HP debts...... 56250.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Mint Credit Card...............4351.4....97.91.....0
Barclaycard Credit Ca..........653.74....14.7......0
Tesco Credit Card..............7592.2....170.......0
Medical Bills..................2500......210.......0
Parents 5% deposit di..........7250......100.......0
Nationwide Credit Car..........2146.7....25........0
Lloyds TSB Credit Car..........6202.72...62.65.....0
Total unsecured debts..........30696.76..680.26....-


Monthly Budget Summary
Total monthly income.................... 1,832.01
Expenses (including HP & secured debts). 1,077.19
Available for debt repayments........... 754.82
Monthly UNsecured debt repayments....... 680.26
Amount left after debt repayments....... 74.56

Personal Balance Sheet Summary
Total assets (things you own)........... 64,400
Total HP & Secured debt................. -56,250
Total Unsecured debt.................... -30,696.76
Net Assets.............................. -22,546.76

Created using the SOA calculator at https://www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using IE browser.


I know there are things that I can do to try & lower certain things like try & spend less on food shopping etc, I do try & have got a lot better but find it difficult.

skye

Would be grateful for some advice on IPOs - I'm assuming I would have 3 years, any ideas as to what sort of monthly payment I would make? Trying to way up whether it is just better to (try &) wade it out!!

luvchocolate

just a quick one before going to work. presents and entertainment are not allowed but some times other items came be made a bit higher to help.
more help will be along later x

skye

So would I be paying more than I pay now in debt repayments, still owe the money to my parents and be making payments to an IPO for 3 years? If so it doesn't really seem worth it with the hassle of not being in negative equity and all the implication of bankruptcy unless I quit my job and go for a career change and am earning a lot less.

tberry6686

If you go BR then you won't be owe your parents anything as they will have to be listed as creditors in your bankruptcy. On you outgoing sheet you may want to check your figures for Gas and electricity as they seem very low.

alastairq

As above, in Bankruptcy, one cannot pick & choose which creditors to include, and who to exclude.

Any attempts to 'favour' one creditor over another, prior to BR..or, whilst Undischarged, is 'not allowed'.....and will result in the creditor having to repay the Official Receiver any monies received.

However, if one chooses to repay one's Parents, for example, subsequent to the BR [certainly once Discharged] this would have to be entirely unofficial.

When it comes to work, job satisfaction, etc.....we need to refer back to the days of our great grand parents [or...parents, in my case].

Back then, when a 'work ethic' ruled, one either worked, for the most part, to 'put bread on the table'....or one pursued a 'career'.

This is the harsh reality of today's economic situation.


Regarding the perception that, after a BR petition you will still be 'repaying' debts?

This really isn't the case at all.

the IPA/IPO is simply there to allow the OR to realise cash assets [surplus] for the benefit of the Bankruptcy estate. An awful lot of that money goes towards the administration of that estate...the Insolvency Service aims to be self-financing.

The major difference between 'paying' an IPA....and servicing a debt lies in the fact that the IPA amount isn't set in stone...and can be varied up, down, or removed altogether should the BR's circumstances alter at all in those 3 years.

Try doing that with a debt repayment?

With regards to your property?

If it is found you have a beneficial interest in the equity, this will become the OR's...but you would have the opportunity to purchase that interest.

But, remember, the OR is only looking at your interest, not anybody else's.

skye

Thanks for the advice. I am struggling to comphrend the IPA. Looking at the figures I'm probably going to be paying £500+ (if I remain in this job) - probably for 3 years. My parents probably won't get anything and my credit rating will be horrendous with life long implications. So I'd still have to pay them back after the 6 years. Or I can keep struggling, pay my parents back, keep a decent credit rating if I take the 2 extra years to pay it back as I am doing if I make a determined effort. Doesn't really seem like it's worth bothering with bankruptcy unless say I lost my job. Is that a good way of summing it up or am I not seeing it correctly?