Dodgy practice I know but.....

Zulu_Dawn

Hi Everyone


We've just found out that with the recent house price rises, our house is worth a lot more than we had thought.:beer:

We could potentially sell it, clear all my debts and have a reasonable amount of cash left. This is fantastic news and I really am still finding it hard to believe.

However with my credit record and living near to London, I don't think I could afford to buy anything that we would want to live in, and it worries me to be out of the housing market totally.

I'm on a self-administered DMP. What (aside from moral issues) is there to stop me from selling our house, using say a third of the remaining equity after the mortgage is cleared to pay off some of my debts (those that are still charging fees and interest or those who would offer me a decent F&FS) ,then buying a new house using what is left as a deposit and continuing with some of the creditors who have accepted zero interest and a monthly standing order.

I have made no legal commitment to treat them all equally. By downsizing I will be converting secured assets to unsecured and will be more able to pay off all my unsecured creditors more quickly. Also the equity in the house is not just mine but shared with my wife - the debts are all in solely my name. Am I really duty bound to pay everything off the moment cash becomes available even if doing so means not having the capability to buy a property?

OK - I'm trying to convince myself that this is all kosher. What do others think??

Cheers,

ZD

PS It is a bizarre world. I have made more money from living in a house for 2.5 years than from working in a senior role every day for 3 years.

rog2

Hi ZD - I see nothing, either morally or practically, wrong with your suggestion.
You will be reducing your debts, which is the overall purpose of ANY DMP and you will be respecting your duty to provide a roof over your head.
I say go for it and try F&Fs with every creditor that you intend to pay.

CCCS_Emily

Hi Zulu Dawn,

You are not obliged to use any of the money you would make from the sale of your house to clear any of your unsecured debts. However it does give you a good oppertunity to try and clear as much of your unsecured debt as you can .

I would suggest you use full and final settlement offers to target the bigger and higher interest debts first and see how you go.

It is important to negotiate settlement offers in writing and to not pay anything until you have it in writing from them that they will accept the agreed amount and not pursue you to collect the debt in any other way.

Write to them first, once you know how much you have available, and ask them how much they would accept. Do not let them know how much you have at this point. If you are happy with the amount they say then great, if not write back with a lower offer and start negotiating.

Let us know how you get on!

Zulu_Dawn

Thanks guys

So to clarify, when does the cash received from the sale of a property become part of my available funds?

Would it be possible to have £200k in a building society earning interest and yet still be unable to pay unsecured debts because my earnings were not sufficient to cover my overheads?

It just seems bizarre - though of course very helpful!

ZD

Kevicho

Zulu_Dawn wrote: »

I'm on a self-administered DMP. What (aside from moral issues) is there to stop me from selling our house, using say a third of the remaining equity after the mortgage is cleared to pay off some of my debts (those that are still charging fees and interest or those who would offer me a decent F&FS) ,then buying a new house using what is left as a deposit and continuing with some of the creditors who have accepted zero interest and a monthly standing order.

banks and lenders are amoral, so be the same.

I think its in everyones best interest as obviously themore debt you have clear, then if you are snowballing, then you will be able to pay the remaining debts quicker due to the extra you will have every month.

Good luck
PS dont forget to account for other costs such as moving costs, agents fees and all the other stuff (of which i dont know about)

silvercar

I would check your housing situation thoroughly before clearing the unsecured debts.

You say you could downsize. How much equity would you need to invest in your new property in order to live in a home you would be happy with (in terms of size and location)? How much would this give you to clear debts? If this doesn't rid you of a sizeable debt burden the effort may not be worthwhile. Remember that moving home is itself an expensive exercise.

I would also check on your mortgage situation. Buying a new property will mean a new lending decision. If your credit has been badly affected by debt it may be difficult to get a new mortgage at a decent rate.

If the value of your property has increased, the value of properties around you (& rents indirectly) will be higher. Check this leaves you enough money to clear the debts.

I don't want to dampen a good idea but just want to leave some points for you to consider.

Verbatim

Also as the debts are yours alone but the house is jointly owned how would your wife's financial position be affected? If she now owns half of a house with say for example £100k equity and you sold and bought another would she still have the same amount or would she just half of whatever the new amount was. Also the increase in value over time would be more in a higher priced house than in a lower priced one so her future half share would be lessened due to this too.

I would also echo what a previous poster said about your credit rating and finding another mortgage deal.

Zulu_Dawn

I think this comes about as a result of the prospect of living in debt for a number of years.

At the moment it feels like we are just existing - work home work home bills debts etc.

If anything goes wrong, we can't do anything about it. Our financial existence is constantly stressful.

I can get rid of all of this in one fell swoop and what's more have a decent chunk of money in the bank.

I just want to get my life back!

rog2

Zulu_Dawn wrote: »

I can get rid of all of this in one fell swoop and what's more have a decent chunk of money in the bank.

I just want to get my life back!

Then do it, ZD, - I would if I were in your position. Life's too short.