Do we need to go bankrupt?

Kass

Hello,
I would very much appreciate some advise (please be nice to me). My husband is self employed and over the last few years we have been hard hit by the decline in the construction industry. We have just spent the afternoon doing the accounts and our personal finances and the results do not make good reading. His is the only money coming in to the house. I have severe depression and find it difficult to hold down any sort of job that means leaving the house. Please do not judge me. Anyway, I have done a SOA. Any advice?

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 3
Number of children in household......... 1
Number of cars owned.................... 1 van

Monthly Income Details
Monthly income after tax................ 1511.79 this is averaged over the past 10 months
Partners monthly income after tax....... 0
Benefits................................ 320
Other income............................ 0
Total monthly income.................... 1831.79

Monthly Expense Details
Mortgage................................ 246
Secured/HP loan repayments.............. 543.63
Rent.................................... 0
Management charge (leasehold property).. 30
Council tax............................. 183
Electricity............................. 164
Gas..................................... 0
Oil..................................... 0
Water rates............................. 37.5
Telephone (land line)................... 21
Mobile phone............................ 125.61
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 450
Clothing................................ 0
Petrol/diesel........................... 0
Road tax................................ 20
Car Insurance........................... 25
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 50
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 37.51
Buildings insurance..................... 25.69 joint with contents
Contents insurance...................... 0
Life assurance ......................... 40.64
Other insurance......................... 14.99
Presents (birthday, christmas etc)...... 50
Haircuts................................ 0
Entertainment........................... 85
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2169.57


Assets
Cash.................................... 0
House value (Gross)..................... 280000
Shares and bonds........................ 0
Car(s).................................. 6400
Other assets............................ 0
Total Assets............................ 286400


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 148000...(246)......0
Secured Debt.................. 45250....(449.4)....0
Mortgage.......................68000....(94.23)....0
Total secured & HP debts...... 261250....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
RBS............................3936.75...88.58.....18.32
Barclaycard....................13027.2...293.1.....22.9
Sainsburys.....................2445.45...163.......7.96

Some expenses have already been deducted from my husbands business income such as diesel to obtain the income figure.

Hope this makes sense. Thank you

TheGardener

Have you tried the StepChange website? There is a debt remedy tool you can fill in online and it will give you some options, if it thinks BR is best then it will say so - have a go now while you have all the sums and paperwork out. When you have the remedy they suggest - give them a call tomorrow and take it from there.

longtermplanner

hi Cass,

there are 2 big problems with you going bankrupt on those figures.

First you have a house with 19k of equity. Is this correct? Is the house in joint names? How much of the unsecured debts is in your name, in your husband's name or joint?

Second your expenditure IGNORING THE UNSECURED DEBT is £2169 which is a lot more than your income of £1831. Although some of your expenditure lines look high (presents at £50? Entertainment £89?) you don't have anything in for clothes, petrol or car maintenence. Basically this doesn't look like a budget you could live on. And bankruptcy can't help with that!

Who is the third adult in the house and could they not contribute to the bills?

You have to find a way of balancing your budget first. Only then can you think what to do about your unsecured debt.

It looks to me as though the 2 mortgages are both interest only. This is another time bomb for your finances.

How much would it cost you to rent locally? One option might be to sell the house, rent somewhere and then use the remaining equity from the house to clear your debts, offering full &final settlements.

Kass

Thank you for the replies. I contacted Step Change today and they recommended an IVA. Their specialist advisers will be phoning me soon.

The 3rd adult is my son who pays his way in terms of housekeeping which goes directly into the food budget.

The house is in joint names and I think there is about 19k of equity. Our second mortgage is for a rental property, also in joint names. This property is in negative equity of about 8-9k.

Most of the unsecured debt is in my husbands name.

I wasn't sure how to go about estimating a presents amount. I read somewhere that the average spend on Christmas was about £500 so I divided that and added a bit more for birthdays. This figure could very easily be cut.

The entertainment one was difficult too. My hubby has his e-cigs and I smoke roll ups (am cutting down rapidly now). Then I just added an extra £10 per week to cover incidentals mainly connected with our daughter. We never go out anywhere that costs money.

To get my husbands income figure from self employment we added up all income from the business and deducted all the expenses. These expenses included fuel and maintenance on his work van. I may have done this the wrong way. Sorry.

The past 2 years have been so difficult in terms of work and health. My husbands business has been up and down like a yoyo. Sometimes are good but in December and January no-one wants their kitchens done!

longtermplanner

hi Kass,

Budgetting with a very variable income is extremely difficult. I am glad you have spoken to Stepchange. However I would suggest that you need to be very wary of an IVA with a very fluctuating income, you need to know that you will be able to afford the IVA payments even if you have several bad months in a row.

re your adult son. Is he just paying for his food? If so, I would suggest that he should be paying more. He wouldn't be able to get a room elsewhere for that sort of money! If he has a full time job, then you should be thinking of £50-75 a week i would suggest.

re the rental property. Are you making a clear profit on the rent vs the mortgage? Not a few pounds more, but enough to cover the costs you will pick up if the boiler fails or the guttering needs to be sorted or the tenant stops paying the rent and has to be evicted. Because there is no 'rental income' showing on your SoA. That could make a lot of difference to it.

racing_blue

Here is how I would balance the books:

- Ditch the contract phones. PAYG.
- Ditch the life insurance.
- Ditch the vet insurance. If the dog/cat gets sick, make a tough call.

Not saying this is right for you. Just what I would do.