Super complex large debt nightmare - pointing in the right direction for help needed please

Kamala_

Hi All

I have a super complicated debt situation and am hoping someone might be able to advise me where to get ‘proper’ advice or perhaps offer some advice. I have spoken to payplan but don’t feel they are able to offer me the comprehensive advice I need as there are so many layers to the problem.

Ill try and be brief in a giving a summary of my situation below:

I brought an investment property in 2008 which has been an ongoing money pit, nightmare. I purchased it just before the recession hit and ran into financial difficulty in securing funds to finish it. I eventually managed to finish the work and refinance with a second charge secured loan.

In addition I used credit cards to finish the work and still have 38k of outstanding debt. This is split between 5 cards but is all 0% interest and all payments are up to date.

Because of the second loan and credit card repayments the monthly overheads are really high. I was managing to cover the costs by renting the house on airbnb but can no longer do this due to a planning restriction. (The planning nightmare is a different story but happy to share the details if useful). Without being able to airbnb the house my other option was to rent it out as a long rental but the rent doesn’t cover the overheads and leaves me with a monthly shortfall of £1000.

The house is a listed building that has been the subject of a lot of enforcement action and problems and my attempts to sell have been unsuccessful for 2 years. (Despite dropping the price repeatedly). I am not optimistic I can sell it at all (or at least at a price that covers the debts).

I have been managing to cover the overheads with income from other rental property. The rental portfolio are all in positive equity but looking at realistic quick sale figure to release cash there is probably 20-40k equity.

There was an informal family loan of 100k which was used for renovations, deposits etc across the whole portfolio. The 100k is being repaid as a 25 year mortgage on a different property and the £510 repayment is covered by the rental income.

So all in all I am covering all the loans and whilst not ideal it was all manageable and I was treading water and everything has always been paid on time and all accounts are up to date. The negative side being the properties are in an area that has never appreciated in 12 years and if anything are now depreciating due to wear and tear.

Then two things happened which have tipped the scales and now I am not sure what to do next.

The first problem:

I was hit by a drunk driver whilst crossing a road and sustained serious injuries which have meant I haven’t been able to work since. As such I don’t have any income other than the surplus from the rental properties which is about £9000 per year.

I am living with family and have zero monthly personal overheads so all of the £9000 would be available for monthly payments towards any debt solution.


The Second Problem

After a lengthy investigation it has turned out my accountant made a mistake filing my tax returns for the past 5 years and as a result HMRC have sent me a £36,500 bill. (This is another long story but happy to share the details if useful in another post). I have tried to set up a payment plan but as I have a very low income they won’t accept any payment plan proposal.

After my accident I have a greatly reduced ability to cope with all of this and im trying to work out whether to throw the towel in and go bankrupt, whether to try to get into an IVA or otherwise.

I don’t mind if I lose everything but my highest priority is to pay back the family loan. There is enough equity in the properties for all the other creditors to recover their money. I realise it is my responsibility having borrowed the money in the first place and have always been 100% responsible in meeting my repayment obligations. I am just at a crossroads where I don’t know what best to do.

To summarise the summary:

Listed building property secured debts 378k
Listed building value 450k but struggling to sell.
Potential equity 72k but subject to sale.

Rental portfolio mortgages secured debts 470K
Rental portfolio value 490k to 520k
Equity 20k to 40k

Family loan debt 100k (unsecured)

Credit cards debt 38k

HMRC debt 36500 (not currently repaying)

9k available income per year (profit from rentals)

Sorry for the super long post but would hugely appreciate if anyone can tell me where I might be able to get some comprehensive advice.

Many many thanks

K

Mnd

Sorry to hear your situation, I'm afraid I can't offer anything constructive to this, hopefully other posters will help

CakeCrusader

You could do with seeking legal advice if you haven't already. First of all regarding compensation for being hit by a drunk driver, and secondly for the accountant, you'll need a litigation Solicitor. You may be able to get a CFA (conditional fee arrangement) for both but the Solicitor will let you know their fees, it's usually free for the first 20 mins though.



In regards to your credit cards and your mortgage, it would be helpful to contact a debt charity (National Debtline or someone).

Working_Mum

Are the mortgages in personal names??

Is the HMRC debt in a Limited Company name or you personally??

iolanthe07

Surely being hit by a drunk driver and suffering such serious injuries will lead to a massive compensation payment. There are plenty of lawyers out there who would likely take it on a contingency basis.

Kamala_

Thank you for the message of support much appreciated.

Cake Crusader I have taken legal advice and whilst they think my negligence claim with the accountant will be successful he would only be liable for the late payment penalties and interest HMRC have charged, not for the additional tax.

Working Mum, all of the mortgages and debt are in my name personally.

islanthe07 unfortunately I was hit whilst on holiday in the Caribbean. I had travel insurance which covered my hospital fees but as far as I know there isn't any way to access any compensation.

Working_Mum

Thanks Kamal_
Have you written to all of your creditors and advised hardship?? They may give you a bit of breathing space for a while until you get your head around things.

Have you written to the HMRC and explained your true situation and advised them the houses are up for sale and they'll be repaid when you get monies in?? I think it'll be a waiting game for a house sale to drop. Maybe keep them updated? I had a very sticky time business wise a few years and simply wrote to the HMRC with an update every two weeks. Often it said the same thing I had said previously but it was keeping them in the loop.

You have to take things a step at a time:-
* make payments where you can on your existing debts - you may find help reading the DMP/IVA/insolvency threads on this forum as they may resonate with you and you can explore IF this route is an option for you. It's an amazing resource this forum :-)
* keep HMRC informed of state of play
* start no win no fee proceedings against your previous accountant
* box off IF any legal route is possible in the Caribbean for recompense? If not work on accepting the situation
* work through a plan of rental house disposal i.e when X is worth £Y I will sell. Have you considered approaching a local landlord to see if he/she wants to take your portfolio off you? May not be the maximum profit but may give you food for thought??

I hope you can work something out

tallyhoh

Can you claim PIP due to your ill health?

theoretica

It looks to me like you might benefit by talking to business advisors, not personal debt experts.

tlc678910

Hi,

You could drop the price on the listed property so although you won't get 72k you hopefully get enough to pay off hmrc. Then keep the other rentals as they bring in a positive income.

I wasn't sure clear about the family loan 100k. Has this been repaid to the family member? You describe it as being on a mortgage - is the mortgage to the bank of the family member? Anyway it sounds like if you get rid of the listed property with enough to pay the tax you are back in the black.tax

Tlc

Kamala_

Hi All

Just wanted to say thank you to everyone for all your input and suggestions.

TLC yes I think your right, hoping that one will sell and it will at least pay off HMRC.

Working Mum, thanks again for your advice, haven't written to creditors yet as at the moment am managing to cover everything but will keep this in mind for when/if the time comes. And it makes sense to write to HMRC and get it all in writing rather than just phone calls, so thank you I will do that.

I have acted on your suggestion re the rental properties and have an agent that works with investors carrying out valuations over the coming week.

Many thanks again all

Best, K