Bankruptcy effect on family

failedinlife

Hi all, just looking for some advice if possible. 

I’m currently in debt to the tune of around 21k and feeling extremely down about it. I’m paying of 5-600 a month in repayments alone, a lot of which is interest. I’m debating bankruptcy, but wondering what the impact will be on my family. I personally have no assets, no car and no items valued over £300. My pay covers all the household bills including rent, my partners pay covers her car, our families living expenses such as food etc and everything for the children, childcare, after school clubs etc, basically everything outside of utilities and rent. 

I am of the understanding that the OR will only allow me to pay my “fair share” of the bills and will expect my partner to do the same, however she can’t afford to pay half of everything. Will they take that into account? Or will it be a case of tough luck? 

Any advice would be hugely appreciated. Many thanks. 

thevdm

Hi, they will take into account how much you both earn.

For example, if all the household bills come to £2,000 a month, you earn £1,800 a month and your partner earns £1,000 per month then your income is 64% of the household income (1,800 / 1,800 + 1,000) and your partners income is is 36% (1,000 / 1,800 + 1,000).

They would calculate that your share of the bills is 2,000 x 0.64 = £1,280 and your partners share is 2,000 x 0.36 = £720.

So in the hyperthetical situation I've set out above your excess income would be £1,800 - £1,280 = £520, this would be the amount you'd likely pay in an IPA. Your partner will have £1,000 - £720 = £280 in excess income which is nothing to do with you going bankrupt.

I believe in reality there are other calculations to take into effect, such as your partners car expenses may come off before her percentage share of the bills is calculated (I'm not sure quite how that part works though).

sammy32683

I just had my OR interview and he didn't even ask about my income expenditure. 

I listed both mine and my partners income and then just all the household expenses. I have a fairly good salary but she doesn't. However I added expenses that I wouldn't normally budget for like savings at £50 and clothes and medicines. I managed to get my expenses to just over my income and it wasn't questioned. I think as long as you can put reasonable expenses to cover both your salaries you will be fine. 

thevdm

In addition to what Sammy said, don't do your budget to where you can just about survive, budget for what you can actually live on. i.e. don't say you can eat beans on toast every day and budget for what you would spend on food if you didn't have any debts.

You are also allowed some provisions for birthday/Christmas presents, emergency funds etc...

MalMonroe

The very best thing you can do, before you do anything else at all, is to contact one of the free debt agencies, like StepChange. When you get one of these agencies to act on your behalf, they do all the hard work and tell you how they can help. I was on the verge of suicide, I can tell you, but after speaking to one of their agents, my problems weren't solved by any means but they were manageable. Please do contact one of them, I say StepChange because that was the one I contacted and they helped, non-judgementally and I cannot praise them highly enough. This is one of the things Martin recommends, and another thing, if I may make so bold, please change your user name, it's not helpful to you or anyone else, and just reminds you that you think you are a failure. Believe me, you are NOT!!! Please stop thinking of yourself as a failure. StepChange 0800 138 1111. 8am to 8pm Mon to Fri and 8 to 4 Saturday. 

failedinlife

Many thanks for all the useful advice, I did look at stepchange, I will contact them . As for the username, once I work out how I shall change it. 

Many thanks again everyone 

thevdm

Be prepared for the ever increasing IVA sell which seems to happen with some debt charities. Once/If you're sure bankruptcy is the way you want to go, the online forms are fairly straight forwards to fill out.

Galloglass

thevdm said:

Be prepared for the ever increasing IVA sell which seems to happen with some debt charities. Once/If you're sure bankruptcy is the way you want to go, the online forms are fairly straight forwards to fill out.

Think of an IVA as "but now / pay later". You are "purchasing" a relief from debts which requires you to continue payments for 5 years. It is quite a commitment. And if you can't keep up the payments over that period of time, and some don't, then the IVA fails and you've lost what you have put into it.

Similarly bankruptcy is the nuclear option. There are other solutions and a discussion with Stepchange or another debt charity helps you make an informed choice, rather than one in a moment of weakness.

thevdm

Debt charities are always worth contacting although I'd be aware that IVA's appear to be oversold in places where they're not the best option. As far as I am aware an IVA is rarely the best option, unless of course you own a house, then it may be worth the long term commitment to keep your home. I'm not entierly sure I'd agree that bankruptcy is a "nuclear" option, it may have been 30 years ago but is no longer a case of loosing everything and having no hope afterwards. In reality most of the restrictions of bankruptcy are the same as those of an IVA, just for 1/5 of the time and with an IPA you are financially free after 3/5 of the time.