Debating Bankrupcy

Potbellypig

You won't get to keep the £35k car if you go bankrupt.

Techy_George

Hi all, so finally I'm in a position to reply.. apologies for the delay, there was some 'marriage' stuff that had to be dealt with that didn't put me in a good frame of mind.

A car is a must, mainly for commuting to work but the odd customer visit as well. I!!!8217;m more than happy to downsize it but the settlement figure is so high, the dealer I bought it from won!!!8217;t touch me due to the negative equity in it currently. The fact I need to hang onto it for now at least until the equity is in a better position rules out BR by the looks of it. I can!!!8217;t stress though, if there is a way to get shot of it, I will. I!!!8217;ll also be speaking to the finance company tomorrow to see what they suggest.

In relation to moving to 0% credit cards, my credit record is shot.. this rules that out. I used the eligibility calcs and I!!!8217;m zero rated for everything. There was a question asking what the loan was for and this was already for debt consolidation so I don!!!8217;t think I!!!8217;d get away with that again. Also, the eligibility calcs for those came at zero rated as well.

I moved from an area that the same property would have been £400 a month more expensive so obviously saved there but given I!!!8217;m a few months into a tenancy, I can!!!8217;t get out of it without huge expense as well as further moving costs. I am however seriously thinking about a lodger though, two years of that would clear over 25% of the debt. Once I reach the end of ym tenancy, I will however be looking into moving significantly closer to work (ie the town I work in) I!!!8217;m also looking around for some casual bar work that I can do in the area.

Dental charges are pretty high though, I!!!8217;ve asked around in the area and there isn!!!8217;t a single one taking new NHS patients. That means fillings and/or Hygienist appointments come in around £60 each, thankfully thats only once or twice a year.

I guess what I!!!8217;m saying is that, for now, there is very little opportunity for me to cut costs due to being tied into contracts etc. It may just be a case of living on a shoestring for a year or so and then getting shot of the car and in the meantime, investigating that lodger and looking into some bar work.

LincsPaul

Have you phoned Stepchange or National debt line? Sometimes it helps to chat these things through with an expert.

You have a range of choices. Thanks to your good wage, I still see avoiding bankruptcy as an option but if you feel it will still take an age to pay off your debts then... maybe not. Is it really impossible to get out of this car deal? I mean, BR is an extreme card to play and blows everything out of the water. If you're prepared to play it, perhaps the car company is prepared to negotiate to avoid that.

Likewise the debt charities may be able to discuss with you the likelihood of being able to come to a deal with the credit card companies - who of course don't want you to go bankrupt so may cut a deal if they know you're serious about pulling the plug.

Techy_George

LincsPaul wrote: »

Is it really impossible to get out of this car deal? I mean, BR is an extreme card to play and blows everything out of the water. If you're prepared to play it, perhaps the car company is prepared to negotiate to avoid that.

This is exactly what I intend to tell them tomorrow. I'll be flatly honest with them and say that if there is absolutely nothing they can do, then BR may well be a real possibility. I know that I could get some help to get a mega cheap runaround if required but thats about the extent of help I can get.

EDIT - I'll also be making some phone calls to the Debt charities as well for some further guidance.

Techy_George

As an update to this, I called the finance company about the car.

The response was that they cannot and will not do anything to assist at this time and even suggested I go to a dealer to see if they can do anything. Given its 8 months old, I'd be stunned if that was an option with the amount of negative equity in it. So by being pro-active, it solved nothing.

debt_doctor

So,
Spending allowances in a Debt Management Plan (DMP) or an Income Payments Agreement (IPA) in bankruptcy or a Protocol compliant Individual Voluntary arrangement (IVA) are all the same - they are all done within the Standard Financial Statement (SFS).

If you want to keep your car then BR is out of the question. You could have a car, but not that car. After looking at your allowable expenses, it is my view that in bankruptcy you would pay an IPA for 3 years of £ 960 per month to your bankruptcy - that's about £35k over 3 years. You would of course not be paying any of your creditors including the car.

In a DMP, you could keep your car and pay £500 pm across all of your credit cards and personal loan. This is £6k per year. After 40 months your car will be paid for, so your DMP can increase by up to £458 per month. if you did this, it would take around 6.5 years to repay all of your debt and own the vehicle.

In an IVA you could propose that you exclude the vehicle HP from the IVA, but in practice would have great difficulty in doing so - but it is possible. In any event, the whole point of an IVA (apart from protecting assets) is to have partial write off of the debt (repay % in the pound) but in a 6 year IVA, you would write off almost nothing.
It is my view therefore that an IVA would be difficult to obtain AND have no real benefit to you.

The SFS as said earlier is the method used to calculate reasonable costs. It would pack out the SOA that you have produced to allow all of your essential expenditure (including the car HP in a DMP - NOT BR) and would allow you:

£320 pm for food / groceries.
£200 pm for Communications & Leisure
£60 pm for Personal spend.

If you don't actually spend those amounts then you could (and should) put savings away. (Need to be careful of large savings in first year of BR).

With either choice (BR or DMP) You need to move forward in a financially stable manner. Hence you need to stop paying your creditors for a period of 3 months to either;

Create a savings account of about £2500 before you enter in to a DMP and then top this up by about £100 pm from savings within your groceries allowance.

or

In BR you need to use that money to buy a relatively cheap car for about £1k - £1,5k and provide your £ 680 BR fee.

You then need to make adjustments in your budget to have some savings - but be careful not to accumulate more than £1k in your year of BR, otherwise it could be seized as 'after acquired property'.

I understand the great worry and sleepless nights that debt brings - but there is always a way out that gets rid of the stress and allows you to lead a reasonable life - It's just a matter of which way suits you best.

My calculations take in to account your reduced income due to additional pension costs.

*EDIT - actually those monthly car payments over the remaining months does not add up to any where near £35k. Is there a large final purchase figure? If so, can you not walk away from the agreement after 2 years, hand the car back and owe nothing? Maybe that makes more sense in a DMP?

Hope that helps

DD