Bankruptcy - or is there a better answer?

Nats123

Due to my husband’s work diminishing in the last couple of years, he has accrued debts which he is unable to service. All our costs have gone up but income is down – I guess a lot of us are familiar with that story.

He has £10,000 of debt on 2 credit cards, one is £7,800, the other £2,200 and an overdaft of £1,200. An agreement has been made verbally with CC companies to pay nothing until next month (February) so that he can deal with his tax bill (which he has no money for either) but I’m hoping he can come to some arrangement with HMRC and pay some at the end of the month and the remainder monthly.

I have around the same amount of debt but have been managing (just) to service it – a loan of just over £5000, two credit cards with approx. £2000 on each (both at 0%) and a £1000 overdraft.

My husband went to Citizen’s Advice who suggested that his best option was to go bankrupt, but I have come to this forum in the hope that there is an alternative, as to complicate things further we’re in the middle of applying for a bursary for our son’s senior school. He is in primary school at the moment, but due to start secondary school September 2015 so now I’m terrified that my husband's bankruptcy will prevent us getting a bursary for him. The fact that we're trying to get him into a private school probably sounds ridiculous under the circumstances and I expect that I will have little choice at the end of the day, and will have to accept the fact that he will remain in the state system. It was just something that I had always hoped we would be able to do for him.

I’m not sleeping because of the current stress and I also wake up panicking because we live in rented accommodation, we’re in our 50s and have basically not only what we consider huge debts but also no provision for the future. This is not helped by the fact that whilst I knew my husband had debts, I was blissfully unaware of the amount he owes until a few months ago as he had kept it secret.

I did think that possibly my husband could do a F&F if I could rustle up the funds, but realistically is that robbing Peter to pay Paul? I don’t know what to think any more and would really appreciate any advice anyone could give me. Thank you.
(Apologies for length of this rambling post!)

MallyGirl

I can't answer about the bankruptcy but I do have a fair amount of private schools knowledge. It would be rare to get a bursary for full fees these days and even if you did manage - because your earnings were very low and your son was extremely gifted in some way that the school was prepared to make massive allowances for - costs at private school are more than just the fees. There are many great opportunities on offer at most private schools but they almost all cost extra. Without funds he would have to miss out on all the trips and extra curricular activities his classmates were going on - is that fair. Uniform is also more expensive. Lunches are often not included in the fees and so not covered by bursaries. I understand that you want the best for him but it is very difficult to do this sort of thing on a shoestring and that is all you have.

sourcrates

Hi,
So your total debt is £20000 between you yes ? bankruptcy may be the solution, but there are others, an IVA for instance, that lasts 5 yrs on average, weras in bankruptcy you could be discharged after a year, many people will have opinions on this but in the end its whats right for you, theres lots of info on all the options online, I suggest you google "bankruptcy" and get all the info you can, its a serious decision which should not be taken lightly, other solutions may be better for you.
Just a thought, how old are the debts ? the cards ? pre 2007 ???

GuttedTBH

Totally disagree about the private schools thing.
They are now charities and must show that they are supporting talented pupils without the financial means to attend. Sadly, not many people who could not afford the fees apply, or even know scholarships and bursaries exist, so the money goes to those who can afford it.

If you son has ability, you have a great chance for full funding, most schools would much rather it went to people like your son than having to give it to those who could afford it anyway simply because they HAVE to give the money to someone.

The last point about the additional things is relevant however.
Good luck.

:-)

longtermplanner

I assume that your husband owes quite a few thousand to the tax man, otherwise CAB would have been likely to suggest a Debt Relief Order rather than bankruptcy.

Full bursaries are rare and it is possible that you two will have too much income to get one. But if you did get one, then I would expect that the school would also make provision for your son to go on the educational trips etc at a reduced cost (but not the ski trips).

However he would still probably be in a class where the other boys have iPhones and lots of pocket money.

How could you "rustle up the funds" for a F&F? If you mean by borrowing, that doesn't sound sensible. But if you have things that could be sold (cars? jewellery?) then it might be.

It sounds as though the two of you need to get together and map out a way forwards financially for the next 20 years.

MallyGirl

GuttedTBH wrote: »

Totally disagree about the private schools thing.
They are now charities and must show that they are supporting talented pupils without the financial means to attend. Sadly, not many people who could not afford the fees apply, or even know scholarships and bursaries exist, so the money goes to those who can afford it.

If you son has ability, you have a great chance for full funding, most schools would much rather it went to people like your son than having to give it to those who could afford it anyway simply because they HAVE to give the money to someone.

:-)

Obviously this varies but the private school where I have just finished a tenure as Governor at does not 'give it away' to those who can afford it to appease the Charity Commission. Bursaries are but one of many approaches to retaining charity status. Educational trips might be subsidised but that would not be the norm. Bursaries are often funded by the income generated in interest from bursary funds and these funds would have to be enormous to generate enough for full fee bursaries in today's low interest rate situation - fine if you are Eton with a big old boy network that donates back, but not the case for most independent schools.

fatbelly

The best idea may be to post a joint statement of affairs and let us help you formulate a plan to deal with this jointly, making it your ambition to get debt free.

Nats123

Thank you for your replies.

Regarding the school that we are applying for, I am hopeful that the bursary will be around 85-95% of fees as I have checked the information they provide and that appears to be what we are entitled to. The school is unique in that its intake is mainly made up of bursaries – up to around 80-90% of the pupils have some form of bursary so I’m not so concerned about our ability to get a bursary per se, more so whether bankruptcy would affect us. Having said all that, our son has to go through a rather rigorous set of procedures to determine his suitability irrespective of bursary, so we could still fall at the last hurdle anyway, but at least we will have tried.

We have always kept our finances separate because my credit rating has always been excellent and my husband’s not so good as he lived abroad for a long time and has never been a home owner. I was hoping that we could continue keeping our finances separate, but as husband and wife I assume my income/debts will be taken into account if my husband has to become bankrupt.

He will owe at least £3000 to the tax man I think, we are waiting to hear from our accountant as to the actual amount. Hopefully he will have enough to pay at least £1000 at the end of the month, but the rent also goes out then so I’m not sure. I have been topping up my husband’s finances by paying towards the rent or food bills etc but I need to be able to service my own debts rather than end up in the same place.

With regard to “rustling up some money for F&F” – yes I was thinking of borrowing it as I can get 0% interest on one of my CCs. My concern is will my husband be able to pay it back? We don’t have any assets that we can sell as we need our car & jewellery – sadly none of value!

I will look further into the bankruptcy thing and see what the consequences are.

Thank you again for all your advice.

fatbelly

Husband's debts mentioned so far add to 'at least £14200'.

If they are less than 15k, have a look at a DRO to see if he could qualify as it is cheaper (at £90) and less intrusive than full bankruptcy.

TheGardener

Nats123 wrote: »

Thank you for your replies.

Regarding the school that we are applying for, I am hopeful that the bursary will be around 85-95% of fees as I have checked the information they provide and that appears to be what we are entitled to. The school is unique in that its intake is mainly made up of bursaries – up to around 80-90% of the pupils have some form of bursary so ......

Thank you again for all your advice.

Hi
You need to check this carefully, the school may not be an issue, it might be the official receiver that is the problem - school fees are not usually a permitted expense in bankruptcy, it may depend on what key stage your son is at. I am BR and when agreeing my IPA with the OR (see the Bankruptcy and living with it board for abbreviations) the OR would not allow the costs even though we get a 80% bursary. There is a case law precedent where a BR family challenged this and as the child was in the middle of GCSE years, the judge over ruled the OR and allowed the expense as the child would have suffered for the parents 'sins' as it were but its not guaranteed to be agreed with your OR.
We had to underspend for the 1 year of BR on other agreed expenses (extra frugal on food etc) to cover the costs. The school were brilliant but at the end of the day, they were already being extraordinarily generous with the bursary in the first place.
Hope it goes well - get over to the BR forum and read up on things.
I too was in a similar position to the one you describe and to be fair - going BR saved my sanity - it is challenging to go BR but not nearly as bad as living with the stress and tears of massive debts with no relief on the horizon.
Try the StepChange charity website debt remedy tool - its amazing and I found StepChange a complete lifesaver.