These are the options, which would you do?

zAndy1

Ok folks, these are the options me and my wife have:-

Quick recap of situation, total unsecured debt (credit cards and loans) = £75000. Approx £6000 of that is my wifes and £69000 is mine although I am including the £19000 balance of a tesco loan in my amount even though it's a joint loan so in theory I suppose that means it's my wifes debt as well (making her debt £25000).

Equity in property approx £30000, value £180000, mortgage outstanding (including secured loan) = £150000. It's a joint mortgage by the way so my share of the equity is approx £15000

My other assets are a plasma tv worth a maximum of £1000 2nd hand (it was £1200 new). Also got some other home cinema stuff with a combined worth of maybe £1200 (speakers/amp/dvd player) individually nothing worth more than £500. Also got a pretty decent PC but prices of 2nd hand PCs aren't great, maybe worth £500 tops. I don't have any endowment policys or savings (obviously) or other financial assets. Also got a car worth I'd say £4000. My wife has a car worth £2500 tops.

Surplus income for the household is £400pm

Currently we are both looking at doing IVAs with Shaws. This will mean us paying a combined total of £400pm (our surplus income) for 5 years. Not sure how the surplus income is going to be split at the moment but I am assuming £300 me, £100 my wife as my debts are 3 times my wifes (when including the Tesco loan in my wifes debts). Didn't think it was possible to do an IVA with less than £300 pm though so I'm a bit confused on that point...
We will also be expected to release 75% of the equity = £23000 approx at the end of the IVA. Total cost then will be £400 x 60 = £24000 + £23000 equity = £47000 (but of course we'll be paying for that £23000 equity release for the next 15 or 20 years so the real cost will be quite a bit higher).

I can't get out of my head that the best thing to do is for me to go bankrupt. Ok that would mean the Tesco debt transferring to my wife but I'm sure my wife could perhaps arrange a DMP to pay of Tesco and her debts (OD/Credit cards). The only problem is the house but as my wife owns a share of the property and we also have 2 young kids I think I'm right in saying we'd be given 12 months grace to sort something out anyway. If my wife or someone else could buy my share of the equity from the OR in that time period then I believe the house would be safe. Would the OR definitely take all my other assets (not a big deal can always replace them later anyway).

One potential problem is that our household surplus income is £400 but if the OR works out my outgoings as 50% of the mortgage (= £500) + 50% of the utility bills/shopping etc (= £250) + petrol (= £100) + other misc (life insurance etc) then I might well end up with a surplus income of about £700 (as my income is just over £1700 pm). If the OR expected me to hand over all that surplus income we'd be in trouble to be honest and my wife wouldn't be able to pay any of her debts. Is there anyway of finding out before filing for bankruptcy just what the OR would expect me to pay or is it only worked out after filing (by which time it's too late!).

Maybe we should just sell the house and use the equity to pay off Tesco and other debts saving us £600pm debt payments + £1000pm mortgage payments. Problem with that is we don't know how long it will take to sell the house (could be months judging by other property for sale on our estate) and I doubt our creditors would entertain the idea of waiting for us to sell (although perhaps if we tell them the alternative is bankruptcy they might be a bit more patient!).

Sorry for another long post.. I wake up every day including today with the work bankruptcy going through my mind, I'll sure be glad when this is all sorted out once and for all but I just want to make sure we're making the right decision going for IVAs for both of us.

Thanks!

Joe_Bloggs

It takes guts to admit to yourself and others that you are in trouble. Advisors in this field are overworked and waiting times are long.
What did you spend all that money on to have so little to show for it ? It might be a good idea to dig out some receipts to remind yourself and perhaps chart where things went astray. I hope things work out and that you can overcome this difficulty.
J_B.

Spendalot_2

Have you read scaredsillys posts?

An IVA seems to have worked really well for scaredsilly.

If you could keep the house, and go bankrupt this would be ideal. A clean slate (you know what I mean!). Perhaps you should consult an Insolvency Practioner and see what they say about the house.

Is there any way you can get all the debts into your name by transferring balances etc? This might simplify things.

Spendalot_2

I think scaredsillys post was on https://www.fool.co.uk. A website like this one. Sorry.

zAndy1

The only joint debt is the Tesco loan and I can't see anyway of getting that into just my name to be honest.

zAndy1

How would the OR normally dispose of my beneficial interest in our property? Would they put the house up for sale through the normal means or would they usually sell through auction to achieve a quicker sale? Would my wife have any say in that as if the house is sold for less than it's market value she'd lose out as she is entitled to her share of the profit from the sale. Also can the OR freeze a joint account, we've opened a joint Nationwide flexaccount that just has a cash card with a view do doing the IVAs, would that account be frozen if I declared bankrupt? I guess timing is crucial then, do you basically lose access to any funds in any of your bank accounts at the time you go to court and declare yourself bankrupt? If I wanted to use any money in an account to pay for e.g. car insurance (mine is due this month) I presume it's ok to do that? Finally do landlords tend to shy away from bankrupts, we'd probably end up renting for a while if I go down this route and we can't get anyone to buy my beneficial interest and wouldn't want to have a problem doing that as well!

Eager_Elephant

I know I'm a bit late to this thread but I thought you might be interested in this website - http://www.kronos.moonfruit.com/

The guy who wrote this is a licensed debt counsellor and a great help to us over on fool.co.uk.

Search the left hand columns for bankruptcy and What happens next?

Below is a little extract from the websire regarding your concerns about the house:

"If you have a joint mortgage with someone, then you only own half the equity in the property, the other half belongs to your partner and can't be touched. In these cases, the lower the equity value the better and if the property needs some repair, this can be used to your advantage as well.

Any third party can make an offer for your beneficial interest in the property and if successful, this in effect, removes your home from the bankruptcy. If your home has little or negative equity, an offer as little as £1 can be successful in purchasing your beneficial interest but you would also have to pay the Trustee's legal costs (about £230 plus vat).

Some advisors recommend selling the property before you declare bankrupt, but personally, I prefer to leave this until afterwards. The simple reason being that if you dispose of the property beforehand, you must make absolutely certain that you get a proper valuation done, preferably two, from reputable local estate agents. You must then make sure that you have the full market value of your equity ready to hand over to your Trustee. If you leave the matter until after the bankruptcy, you can use your negotiation skills to argue several factors about the value of the property, such as forced sale value, (which is significantly less than full market value), costs of any repairs and the costs to the Trustee in respect of estate agent and solicitors fees, in the event that the Trustee had to apply for repossession and sale"

If you have any more questions you can e-mail him from his website and ask any questions you have got.

HTH

(no connection, i's just a very helpful site)

zAndy1

The main thing that's an unknown and that will have a big influence on whether I go for bankruptcy or an IVA is how the OR calculates my surplus income. If I declare bankrupt and my wife inherits the tesco debt and agrees to pay it and her other debts that would mean that pretty much all her income will be used to pay debts. My income would therefore be used to pay all of the mortgage and council tax and utility bills and shopping etc which would leave me with very little surplus income. If the OR is ok with this scenario then to be honest I'd go bankrupt tomorrow rather than both of us doing an IVA. If the OR thinks that my wife should pay towards the mortgage and bills etc and can't use all her income to pay debts that means my surplus income would go up which means I'd probably have to do an IPA and my wife then wouldn't be able to afford to pay the tesco loan and her other debts and we'd be in a bit of bother! Unfortunately it seems that the only way to get an answer to this is for me to go bankrupt and find out what the OR does with respect to my spare income, by which time it's a bit late to change my mind!

zAndy1

Valuation has come back, £175000. That makes the equity approx £24000 so my share of the equity about £12000. Now I don't know if the valuation would come back the same if I went for bankruptcy and the OR arranged some valuations but I think this is bound to have an impact on the prospect of my IVA been approved to be honest. Also means if I went bankrupt someone would only have to find £12000 to buy my beneficial interest which is certainly lower than I expected. Another thing to think about then....

Turning_into_scrooge

Have a search on this board, if you havent already. There is a thread somewhere or a post (this year) from someone who had to buy her husband out to save the family home as he was going bankrupt. I personnaly don't knwo anything about bankrupcy, sorry but i though this person may be able to help you from their experience. Good luck

zAndy1

mmm, would be nice to find that but it's kind of looking for a needle in a haystack...