Going Bankrupt - 26 & Scared

enthusiasticsaver

I agree this thread is going round in circles.

Hannah- you are right to hesitate about bankruptcy as it will have a massive impact on your life and will affect things like getting insurance, phone contracts and maybe even new jobs. You will not have access to any credit which is a good thing but as you have around £16.5 debt plus a contract for a car which is too expensive for you it is a possibility after you have exhausted all other options.

You obviously enjoy your job which is good but it is costing you money to run a car you cannot afford, pay out for clothes and hair on a disproportionately low wage but as an ex LA worker I know that payrises have not been keeping track over the last 5-10 years. You are young though so if you can get through this until you can voluntarily hand your car back and get a cheaper one that would be my preferred option even if it means a DMP for a year or so. As sourcrates says though you have to reduce your outgoings to get to that point. As your rent to your parents is the biggest expense along with the car that would be the place to look for savings initially. Whilst I understand you want to pay your way £400 is almost 30% of your pay and that does not include food. I think you will need to tell your parents how bad your situation is and I doubt the OR will agree to it. Have you looked into shared houses closer to work? Try local colleges for cheap haircuts or look into a style where it does not need cutting so often. Charity shops or ebay for clothes. Can you do surveys or a weekend job for a second source of income. Not ideal I know but it would only be for a year until you hand the car back.

The OR will not allow you money to be saved towards a car and at that level of value you will have to hand the car back so you will be totally reliant on public transport. I don't think they will allow you a gym membership either.

Willing2Learn

Hannah232 wrote: »

...I work in the Fostering and Adoption team but not actually for the younger cohort it is more for young people and finding them places to live.

oh...you do similar work to me...You have chosen a fantastic career...and it is such a special and rewarding job...hard work though...not the best salary...but the positive impact you can have on a young persons' life is so cool and more than makes up for it.

[Deleted User]

I think you need some breathing space. In your situation I would open a new basic account, somewhere where you don't owe money - Nationwide perhaps, and start having your salary paid in there. Then write to your creditors, not the HP finance yet, and ask them to hold off. CAB has a template you can use.

https://www.citizensadvice.org.uk/debt-and-money/sample-letters-to-creditors/Holding-letter/

That should give you some breathing space whilst you try and cut a minimum of £246 from your budget so that you are at least breaking even each month. Leave the car for now and accept that for the meantime at least you are stuck with it.

Some things that jumped out from your SOA are £75 to a pension. Is this a private pension you pay into after you get paid each month or is this deducted from your salary from your employer so should therefore already be covered by your £1,400 income? In other words are you double counting it.

Your emergency fund is high given that you are not an owner occupier or in a private rental where you might have to rustle up a deposit.

Groceries can come down. The Coeliac Society has access to offers that may help cut down your food bill. Have you been diagnosed as a coeliac and if so are you entitled to a prescription for it to help with the costs of buying gluten free food?

https://www.coeliac.org.uk/information-and-support/living-gluten-free-faqs/

Medicines are also high and could potentially be made cheaper using a Prescription Prepayment Certificate.

I don't think it would take much to shave £246 from your SOA even if you accept that your board isn't going to change and that your car costs will also remain the same.

onwards&upwards

Hannah232 wrote: »

@Fatbelly, yes I wasn't quite expecting so much response, but I am thankful for everyones responses and each person has grown my knowledge a little bit more on the subject which I needed.

@onwards&upwards, I don't work in finance, I work in the Fostering and Adoption team but not actually for the younger cohort it is more for young people and finding them places to live. So I do not deal directly with agreeing any budgets. I don't think it would effect my job, I need to double check my contract.

What a fantastic job, no wonder you don’t want to give it up!

Don’t just think about this job, think about any future ones, if you want to be more senior at some point it doesn’t sound out f the realms of possibility that you might end up responsible for money/budgets etc.

A way to make a little bit of extra money without a second job is to do online surveys, and things like Job Spotter. Have a look at the ‘boost your income’ bit of the site.

JCS1

Lover_of_Lycra wrote: »

Did you purchase the car using HP or PCP? There's a significant difference between the two.

I entered your SOA into Step Change's Debt Remedy Tool and with your current level of spending you cannot afford your current cost of living and you have no surplus income to offer your secured creditors meaning that until you address this there isn't a debt solution that will work for you. Step Change recommended trying to trim down:

• Food, toiletries and cleaning - reduce to £222
• Clothing - reduce to £34
• Medicines - reduce to £11
• Fuel and Parking - reduce to £200
• Car Maintenance - reduce to £33
• Emergency Fund - this was a big drop as SC recommend just £15 instead of your £100
• Entertainment - reduce to £40

Even once you cut those down, Step Change still didn't recommend bankruptcy as the most suitable option for you.

You can still keep a vehicle when you go bankrupt if the OR agrees a car is a necessity. In England and Wales if your vehicle is worth more than £1,500 the OR will normally allow you £1,000 to buy a replacement.

As your car has been purchased on finance the OR might allow you to continue making the payments if it is essential for you to have a car. If public transport is a viable alternative then the car will go. If the finance agreement ends before you are discharged from bankruptcy then the vehicle will pass to the OR, not you, and the OR can sell it or allow you to keep it depending on the value so if at the end of all your payments it's worth more than £1,500 it's going to be sold.

The bit I have highlighted is incorrect. When someone goes bankrupt, assuming there is no equity in the vehicle, the OR will send a letter of non-adopt. It is then down to the HP company what to do.

[Deleted User]

JCS1 wrote: »

The bit I have highlighted is incorrect. When someone goes bankrupt, assuming there is no equity in the vehicle, the OR will send a letter of non-adopt. It is then down to the HP company what to do.

That's not what Step Change said...

https://www.stepchange.org/debt-info/bankruptcy-and-my-car.aspx

National Debtline say something similar...

https://www.nationaldebtline.org/EW/factsheets/PDFs/bankruptcy.pdf

And so do PayPlan....

https://www.payplan.com/how-to-apply-for-bankruptcy-and-keep-your-car/

FrozenBeak

Not being funny but for you all saying £400 a month is a lot to parents, its actually not a lot? Especially when the parents are paying her council tax, gas bill, electric bill, water bill, broadband etc.

However I do think a debt management plan with Payplan would be a better choice. They’ll also haggle to get 0% interest on the cards.

JCS1

Lover_of_Lycra wrote: »

That's not what Step Change said...

https://www.stepchange.org/debt-info/bankruptcy-and-my-car.aspx

National Debtline say something similar...

https://www.nationaldebtline.org/EW/factsheets/PDFs/bankruptcy.pdf

And so do PayPlan....

https://www.payplan.com/how-to-apply-for-bankruptcy-and-keep-your-car/

Section 31.2.30 of the Insolvency Service Technical Manual

31.2.30 Check ‘equity’ position of vehicle before realisation

Where the agreement is of the conditional sale type (see paragraph 31.2.26), the official receiver must consider the amount required to settle any finance agreement when considering the value of the vehicle to the estate. If there would be a realisable value after taking the outstanding finance and costs of sale into account, the official receiver may instruct agents to deal with the sale of the vehicle (see paragraph 31.2.55) and the settling of the finance.

If the vehicle has no realisable value, the finance company should be informed, by letter [note 3] that the official receiver does not intend to adopt the agreement. The finance company should also be notified of the location of the vehicle, as in the address of the person who retains control of it

https://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter31/part2/part2/part_2.htm

sourcrates

I`m with Fatbelly on this one, i`ve never seen a thread so active on this particular board, take your time formulating a stratagy, theres a lot of advice here, some of it way off topic, and I have tried to thin out the wheat from the chaff for you.


Contracts can be gotten out of, its called defaulting, the accounts just become another unsecured debt to service by whatever stratagy you eventually choose, think outside the box now hanna, the basic fact is you spend more than you earn, and that issue cannot be addresed by bankrupcy alone, you must budget to live within your means, you must achive this by doing whatever it takes to reduce your outgoings.


Having a balanced budget is an essential first step to dealing with this, balance your books first, then deal with the debt, there are other ways to do this rather than bankrupcy.

FrozenBeak

Once out of your phone contract you can easily save £30 with a tariff that costs £15 a month, and I guarantee you it’s the same tariff you have now. A simple comparison site will reveal that.

£230 a month is a lot. You could easily shave £60 off this. Soups, everyday value cereals, eggs, £1 for 6 bags for crisps which will last you 6 days, milk is like £1 for a 1L that lasts me a week (but I don’t use cereal, I buy cheap instant oat pots that I add water to) - these pots are like 39p each.

I shop at asda and spend £40 a week. Because some things I don’t need to buy EVERY week.

I don’t have a car BUT I do pay towards all my utility bills and rental appliances.

I earn £150 less than you a month. I’m in a DMP and they know I pay what I CAN afford each month for my creditors and that’s it.