Bankruptcy question

mandy1955

I have a very close friend who is considering bankruptcy as his only option.  He was renting privately but due to a breakup he couldn't keep the rent payments up so gave notice to the landlord.  He bought a cheap 20 year old static caravan through 2 separate loans which was fine until last month when he was made redundant.  I have asked him to get financial advice before making a decision about bankruptcy but he thinks it's his best and only option.  Would the bankruptcy take the caravan to pay part of the debts, he won't confirm how much he owes but I am guessing its around £15,000 +  If he loses the caravan he loses his only home and will be homeless.  He is quite a vulnerable person due to being registered disabled and I am worried he will lose his home. The value of the caravan would be about £8 to £9k at a push.    thank you

DE_612183

Are the loans secured against the caravan?

mandy1955

hi, no he took the loans out then bought the caravan with the money as he couldn't afford to private rent again 

fatbelly

Only option?

Not even sure it's a good option.

From what you tell us he has a 8-9k asset that he lives in and 15k of nonpriority debt.

Bankruptcy deals with the debt but the asset is not protected

An IVA protects the asset but he has to make payment for 5 years, or the IVA fails

A debt management plan does not really endanger the asset and he makes the payments he can afford for as long as it takes

Brie

If he can find a way to get back into rented accommodation and sell the caravan I think he might qualify for a debt relief order (sometimes called a baby bankruptcy).  I assume the caravan would count as being a home which would exclude him from this option hence my suggestion.  It would of course also get rid of some of his debt if he didn't have the caravan loan anymore.  

mandy1955

He can't go back into rented property as he is now unemployed and therefore has no money for a bond or a deposit plus the rents where he lived previously were around £750 a month. 

fatbelly

In that case bankruptcy is a really bad idea.

Unfortunately (and unlike IVAs and DROs) anyone with £680 can declare bankruptcy without taking professional advice and possibly having no understanding of the implications.

In the old days the court staff could filter out the most blatant cases but now it is an online do-it-yourself process.

It seems the sensible people who set up DROs in 2009 must have been replaced by the time the bankruptcy website was set up in 2016

sourcrates

He should forget Bankruptcy, just offering token payments is likely the best short term solution, then due to his circumstances and vulnerability, he should perhaps go down the path of asking the creditors to write off the debts as he will never be able to re-pay them.

This strategy can be very successful, and does not endanger where he lives, someone needs to impress upon him that going bankrupt could see him lose the caravan, doing nothing would be a better choice than that.

sourcrates

mandy1955 said:

hi, no he took the loans out then bought the caravan with the money as he couldn't afford to private rent again 

Just to add, the absolute worst case scenario here, if the lenders take legal action, he gets a CCJ or two, which he would pay according to his budget, if his budget says he has no money, the court would make an order to that effect, and he pays nothing.

Or, if he could pay £5 a month, again, the court would make an order to that effect.

He would not be expected to pay more than is affordable, so worst case here, just let the process run its course, and he would still be OK.

If he chose to declare bankruptcy, he would be doing himself more harm than his creditors ever could, try and make him realise this.

RAS

Another one to say that he needs to avoid bankruptcy unless he wants to lose the caravan.

Has he panicked because of the redundancy and relationship breakdown? As in rented, he could have done a DRO to clear any debts and been clear in a year. And living in a caravan costs a lot more than living in a house/flat when you consider fuel etc.

My first thought is that he needs to check with housing associations, sheltered housing, local charities etc. Many offer low rent housing to people over 55 or with a disability, even if they have sold a home. And if he has family elsewhere he might be eligible there. For example a mum gave up her rental to move in with her mother, homeowner. Unfortunately she was not resident long enough when the homeowner had to go into a care home and the house was sold. She ended up in a third city, in a LA flat near her daughter, qualifying because of the "local association".

Your friend needs to go over to the debt free wannabee forum, did enlisted and the Statement of Affairs and ask for advice on his debt.

Like sourcrates, I'd suggest he stops paying by unsecured debt (hopefully the caravan loans are not secured?)

There will be phone calls and textsñ, which he needs to ignore and block. He needs a proper benefit check and to concentrate on paying his essential bills. Any extra he saves into an emergency fund.

Down the line, the debts will default and if his circumstances haven't circumstance improved, he can ask for the debts to be written off. He might have to ask a couple of times but in his circumstances, there's a decent chance some or all will be cleared.