Possible Imminent Bankruptcy – Please Help

Hi

I have some very serious questions that I need help in answering.
I owe in excess of £20K to Financial Institutions, I also owe £10K to family and friends, I have now been unemployed for a few months, and I am claiming Jobseekers Allowance.
I have defaulted on half a dozen credit cards and loans.
Numerous letters and calls, from debt collectors and solicitors are taking there toll on my health and that of my family, I live with parents, and my only real assets are a car valued at around £3,500 and a PC which is critical for my line of work.
I have been working in the banking sector, doing I.T. for 8 years.
I am finding it very hard to gain permanent employment despite having a strong C.V.
My parents are two weeks away from getting a secured loan to clear my debts but others have recently suggested Bankruptcy.
My Questions:
1 – Is my adverse credit affecting my future employment chances?
2 – Will bankruptcy make it worse, if so for how long?
3 – If I declare myself bankrupt, what are the factors determine the length of time of the bankruptcy (I understand it is between 3 – 12 months)
4 – Would the courts take my car?
5 – When the bankruptcy ends, what will happen to my credit score?
6 – If I’m bankrupt, and a get a job, am I right in thinking that the courts would take away all of my salary less my cost of living expenses?
7 – When I want a mortgage in the future, what implications will the bankruptcy have on it?
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Comments

  • Xbigman
    Xbigman Posts: 3,884 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    You are right that you have serious questions. Lets put things in perspective. You are 20K in debt to banks etc as well as 10k in debt to family. Now your family is planning to pay off your debts with a loan, on which someone will have to pay interest. So this will put you a total of 40k in debt (round figures). Your family can't afford to bail you out with their savings which is why they are borrowing the money. Lastly you don't have a job to pay anything with.
    Just how do you plan to pay them back? Have you worked out how long it would take you? What if you die, would your legacy be a 40k debt?

    You need to contact the CAB or CCCS or some other free debt counselling service to talk this through rationally. I intend no criticism but in your position you (or anyone) cannot make a rational decision about money on your own.

    As to bankruptcy. It lasts one year unless you are deemed to have contributed to the debt in an irresponsible way, in which case it can be as long as 15 years. This stays on your record for 6 years. All mortgage applications have a question 'have you been bankrupt' to which you will always have to answer yes or lie and risk the consrquences. A mortgage is still possible but much more difficult to obtain.
    If you don't need transport for work they will take your car unless worth less than £500.
    Your credit rating will be shot. As you work in financial services this will be very, very bad. Your current poor credit rating may well be behind your trouble getting work now. If you do get work then the official reciever (not the courts) will take all your spare income.

    I've been bankrupt and it was worse in 1990 than it is now. I've recovered and you can too. Note that you will need to pay back the 10k you owe friends and family after you are discharged as it would be illegal to do it whilst bankrupt.
    Good luck.



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  • Magentasue
    Magentasue Posts: 4,229 Forumite
    Would it be better to sell your car, buy a cheap runaround for £500 or less and pay something back to your family, rather than risk having it taken or just watch it depreciate?
  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    Combo Breaker First Post
    Hi

    I have some very serious questions that I need help in answering.
    I owe in excess of £20K to Financial Institutions, I also owe £10K to family and friends, I have now been unemployed for a few months, and I am claiming Jobseekers Allowance.
    I have defaulted on half a dozen credit cards and loans.
    Numerous letters and calls, from debt collectors and solicitors are taking there toll on my health and that of my family, I live with parents, and my only real assets are a car valued at around £3,500 and a PC which is critical for my line of work.
    I have been working in the banking sector, doing I.T. for 8 years.
    I am finding it very hard to gain permanent employment despite having a strong C.V.
    My parents are two weeks away from getting a secured loan to clear my debts but others have recently suggested Bankruptcy.
    My Questions:

    Just to answer each question, as you raised it....
    1 – Is my adverse credit affecting my future employment chances?

    Unlikely, if you are in IT, though some financial institutions will credit check you. Better to come clean when you are offered a position, before they credit check you. If you simply explain that you were naive with money and then got into real difficulty whilst out of work, then I think you'll be OK with many companies. Some may be concerned that you could use your IT skills to cream money off. But I think if you explain that you have "learned your lesson" then many would be sympathetic. Can't rule out the odd company that might take a tough line though.

    Having said that, they'll see the defaults anyway. But they'll also see the extent of your debt - if you are credit checked. That might also make them nervous, as they might feel that you are "desperate" for money and even more likely to be tempted to embezzle.

    In conclusion, I actually think that bankruptcy looks better, as it shows that you have no debt!

    Can't predict what anyone else would make of it, though and not every employer credit checks.
    2 – Will bankruptcy make it worse, if so for how long?

    See above. Both defaults & bankruptcy are on your credit record for 6 years.
    3 – If I declare myself bankrupt, what are the factors determine the length of time of the bankruptcy (I understand it is between 3 – 12 months)

    Assuming you are deemed to have contributed, deliberately, to your own debt e.g. gambling, endless exotic holidays etc then I think it will be your ability to pay. You'll need give the OR a budget showing where your money goes. If you have an excess of income over expenses, then the OR will want some of it to go towards your debts. If you don't have any excess, then there's nothing for the OR to take. Expect 12 months, with anything less "a bonus".
    4 – Would the courts take my car?
    If it's vital in order for you to work, then you will be allowed a car. If your's is worth more than £2k, the OR will probably sell it and let you have some back to buy a replacement car.
    5 – When the bankruptcy ends, what will happen to my credit score?
    It'll be shot - but it's shot anyway with the defaults. The bankruptcy will remain as an entry on your credit record for 6 years. But you won't want to accumulate any more debt, will you? ;) So it won't matter.
    6 – If I’m bankrupt, and a get a job, am I right in thinking that the courts would take away all of my salary less my cost of living expenses?
    At least some, yes. But it's simply your contribution towards repaying your debts. And it only lasts as long as your bankruptcy e.g. 12 months.
    7 – When I want a mortgage in the future, what implications will the bankruptcy have on it?

    You won't get a good deal, but some lenders are more sympathetic than others. Although the B is only recorded on your credit file for 6 years, most mortgage application forms actually ask a specific question e.g. Have you ever been bankrupt. Personally, I think this is the least of your worries at the moment, as I don't see much of an alternative to B. You seem to have no means of repaying the debt.

    How are you going to repay the debt your parents are contemplating? If they secure the loan and you don't repay, they could lose their house :eek:

    HTH
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • ManAtHome
    ManAtHome Posts: 8,512 Forumite
    First Anniversary Combo Breaker
    I have been working in the banking sector, doing I.T. for 8 years.
    I am finding it very hard to gain permanent employment despite having a strong C.V.
    Have you considered contracting? A bit more hassle (although plenty of 'umbrella' companies about these days), but many companies have relatively short-term project panics particularly when regulations are changing. I assume you're using Jobserve or similar as well as registering with agencies - worth clicking the 'contract/temp' tab on the search as well as the 'permie'.

    Good Luck.
  • muddy697
    muddy697 Posts: 89 Forumite
    My best advice in a very general way is DO NOT let your parents secure your presently unsecured debt on their home.
    I think you should speak to cccs https://www.cccs.co.uk.
    phone the helpline on the 0800 number and ask for an appointment not a self help pack.
    There may be a long wait or maybe you will get lucky.
    If there is a long wait ask for the appointment teams number and tell them that you are willing to take any cancellation anytime.
    app start at 8 am and finish at 6.30 but the evening waits far outstretch the day ones. There are always people cancelling and not being available so there is often free slots during the day. You will find cancellation app much easier to pick up before the end of the week!
    Good luck!
  • Malestrom
    Malestrom Posts: 983 Forumite
    Can't you look for non-banking related IT work? Bankruptcy shouldn't matter so much to your employer then. For someone in your situation, ANY paying job would be a good start, whether in your chosen profession or not and whether temporary or permanent.

    Do not let your parents pay off your debts with a secured loan, you're just dragging them into the mire with you. How would you feel if they lost their house?

    Lots of good advice already posted above, hopefully its helped.
    He huihuinga taangata he pukenga whakaaro – A meeting of people; a wellspring of ideas (Maori proverb)
  • Stonk
    Stonk Posts: 937 Forumite
    Have you considered contracting?

    As an IT contractor in finance, my experience is that the client performs exactly the same checks as for permanent employees. The companies are so heavily regulated and paranoid, they can't afford not to. So it won't help much as a suggestion to get round being credit checked, etc.

    However, if you're prepared to consider contracting (and in your position, why not?), then including this in your search will at least open up more possibilities to you. Umbrella companies make it very easy to get started, although they're pretty inefficient so don't stay with them if you end up doing contracting long-term.
  • Moses
    Moses Posts: 18 Forumite
    Look into an IVA agreement, if your parents are able to help with finance. Negotiate your debts down to perhaps 25% or even less. Give your debtors a choice i.e. Work out the value of your assets if on paper they are perhaps worth £3000 if you go bankrupt there are costs involved eich would take up at least 50% of that figure.

    Bancruptsy debtors would receive 15p in the pound
    IVA debtors would receive 20p in the pound

    Give them a choice, they would prefare something rather than nothing, they will write of there losses as bad debt against tax, it would also cost £1000's in manpower solicitors fees & court costs. You are not in that bad a possition as you think. I would treat debts to family and friends as a long term commitment pay when you can.

    These were only rough figures. My partner got into nearly a Quarter of a Mill with debts, I sorted it out in a IVA agreement. The debts are now clear, although I have a large mortgage, I can manage and the wolves are not banging on the door any more and the letter box is going rusty.

    All the best
    Pete
  • Thank you all for the superb advice you have given me :D

    I think I will go through with it, and seek I.T. contract work in the non financial sector, and seeing as I will never want a credit card or loan again, I think it is the best route to take.

    All The Best and thanks for your time :T
  • daveboy
    daveboy Posts: 1,400 Forumite
    First Post First Anniversary Combo Breaker
    An important point, possibly - would be to put your car into the name of your parents on the V5 form (or whatever the new version is called).

    Someone might correct me but I would have thought that would make the car safe from any possible baliff/court action.
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