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Possible bankruptcy...
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TheStruggleIsReal_2
Posts: 5 Forumite
So,
Long story short, at the ripe old age of 27, i find myself in copious amounts of debt (~20k) unsecured. With ~1K left to pay on a HP agreement with the vehicle valued at ~3k.
I made some stupid decisions when i was younger and am ultimately regretting them now, but trying to put them right.
I was making minimum payments on all my debts up until about 6 months ago when i started earning less money at work. At this point i opted to go through a debt management company (chargeable) which has been nothing but a headache as frankly they have been useless...
What hasnt helped this situation, a month after officially starting a DMP I changed jobs and due to having to work 2 weeks in advance i missed a payment, upon speaking to the company they said not to worry and this would be sorted... I made this payment and the subsequently lost the new job so am currently unemployed seeking work.
Since then I have had no end of letters from creditors (final demands) and notice that some of the debts have been passed to debt collectors which is quite concerning...poor choice in DM company has left me in more of a mess than when i started!
Following advice from one of my creditors i pursued other options (PayPlan/Stepchange.)
Who have essentially laid out the following 3 options..
1) Token repayments of £1 until i find my feet again and then a DMP.
This is an option however my debts seem to all have been passed on its nigh on impossible to track them down despite trying for hours.
2) Lump sum IVA - Approx. £3k would be needed according to payplan for this to likely be accepted, however i am unable to find any way to make this payment.
3) Bankruptcy - My question here is, how would this affect my car? I very much need it for transport and for looking for/travelling to work when i find it. It would be devastating to have spent close to 5 years paying this off to then lose it.
Also, I recall reading about an option for an IVA where the payment can be made monthly, does anyone have any advice on this?
Alot to take in, if you require any further info to advise me let me know.
Thanks
Long story short, at the ripe old age of 27, i find myself in copious amounts of debt (~20k) unsecured. With ~1K left to pay on a HP agreement with the vehicle valued at ~3k.
I made some stupid decisions when i was younger and am ultimately regretting them now, but trying to put them right.
I was making minimum payments on all my debts up until about 6 months ago when i started earning less money at work. At this point i opted to go through a debt management company (chargeable) which has been nothing but a headache as frankly they have been useless...
What hasnt helped this situation, a month after officially starting a DMP I changed jobs and due to having to work 2 weeks in advance i missed a payment, upon speaking to the company they said not to worry and this would be sorted... I made this payment and the subsequently lost the new job so am currently unemployed seeking work.
Since then I have had no end of letters from creditors (final demands) and notice that some of the debts have been passed to debt collectors which is quite concerning...poor choice in DM company has left me in more of a mess than when i started!
Following advice from one of my creditors i pursued other options (PayPlan/Stepchange.)
Who have essentially laid out the following 3 options..
1) Token repayments of £1 until i find my feet again and then a DMP.
This is an option however my debts seem to all have been passed on its nigh on impossible to track them down despite trying for hours.
2) Lump sum IVA - Approx. £3k would be needed according to payplan for this to likely be accepted, however i am unable to find any way to make this payment.
3) Bankruptcy - My question here is, how would this affect my car? I very much need it for transport and for looking for/travelling to work when i find it. It would be devastating to have spent close to 5 years paying this off to then lose it.
Also, I recall reading about an option for an IVA where the payment can be made monthly, does anyone have any advice on this?
Alot to take in, if you require any further info to advise me let me know.
Thanks
0
Comments
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To start,
What is the exact amount of debt you owe. If it’s below 20k a DRO is more suited.
If it’s above 20k Bankruptcy is more viable.
Your main question is around your car. It’s something you’re going to have to forget about and think more about how much money you owe and how to get yourself sorted.
BR or a DRO will give you a fresh start after 12 months and you will have 0 debts - considering they are all unsecured. Whilst you’re insolvent you may be given an IPA, so if you’re currently jobless (what’s your current housing arrangements?) it could be best to just work part time for a year, this means you would not likely be given an IPA and after the 12 months you go back to full time work and keep your full salary again with 0 debts. Truly a completely fresh start.
If your main concern is about keeping a HP car, which you cannot afford anyway then find a job ASAP and enter into a DMP. Before your situation gets worse and they enforce action on your debts.0 -
Years_of_debt wrote: »To start,
What is the exact amount of debt you owe. If it’s below 20k a DRO is more suited.
If it’s above 20k Bankruptcy is more viable.
Your main question is around your car. It’s something you’re going to have to forget about and think more about how much money you owe and how to get yourself sorted.
BR or a DRO will give you a fresh start after 12 months and you will have 0 debts - considering they are all unsecured. Whilst you’re insolvent you may be given an IPA, so if you’re currently jobless (what’s your current housing arrangements?) it could be best to just work part time for a year, this means you would not likely be given an IPA and after the 12 months you go back to full time work and keep your full salary again with 0 debts. Truly a completely fresh start.
If your main concern is about keeping a HP car, which you cannot afford anyway then find a job ASAP and enter into a DMP. Before your situation gets worse and they enforce action on your debts.
Forgive my ignorance - What is an IPA?
The toal debt is below £20K.
Believe me - i am trying to find a job, it isnt for lack of trying...
Living arrangements, i live with parents.
Ill have to do some reading on DRO - as this has never been mentioned previously, its not something i have any knowledge of at all.
Thanks0 -
IPA - https://bankruptcyexpert.co.uk/what-is-bankruptcy/what-is-a-bankruptcy-ipa
DRO -
https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/debt-relief-orders/
You need to do lots more research before making a decision. StepChange, give them a call and get them to run through if a DRO or BR is best for you.
All the best.0 -
Hi there,
A Debt Relief Order (DRO) is a way to get the debts written off for people who owe less than £20,000 of debt, have less than £50pcm available for the debts and have less than £1000 worth of assets (plus you are allowed to have a car that is also worth up to £1000). We have a factsheet available if you want to read more about it - https://www.nationaldebtline.org/EW/factsheets/Pages/debtrelieforders/droadvice.aspx
At the moment you don't meet this criteria because of the car, which may be why it hasn't been brought up previously. You have several things to consider with the car - which I appreciate you want to keep - but that may not be as practical as you would like. First of all, if it is on Hire Purchase (HP), you can voluntarily terminate the agreement, and return the car. You would be liable for 50% of the total agreement, minus what you paid to date, plus any excessive wear and tear - but anything owing would be included in the DRO/ bankruptcy.
Alternatively, if want to keep it, it would rule out a DRO as an option and would probably rule out bankruptcy. In bankruptcy it is very unlikely you would be able to keep that car. If the finance is still owing, then it would likely be repossessed if you go bankrupt before it is paid off. If you had paid it off and then went bankrupt a best case scenario is that you would likely be asked to downsize the vehicle (normally for something worth less than £1000). So, in order to keep that particular car, you would only really be able to consider making token payments, hopefully followed by a DMP in the future.
Try and post your SOA on here so other posters can try and help further.
Laura
@natdebtlineWe work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps0 -
National_Debtline wrote: »Hi there,
A Debt Relief Order (DRO) is a way to get the debts written off for people who owe less than £20,000 of debt, have less than £50pcm available for the debts and have less than £1000 worth of assets (plus you are allowed to have a car that is also worth up to £1000). We have a factsheet available if you want to read more about it -
At the moment you don't meet this criteria because of the car, which may be why it hasn't been brought up previously. You have several things to consider with the car - which I appreciate you want to keep - but that may not be as practical as you would like. First of all, if it is on Hire Purchase (HP), you can voluntarily terminate the agreement, and return the car. You would be liable for 50% of the total agreement, minus what you paid to date, plus any excessive wear and tear - but anything owing would be included in the DRO/ bankruptcy.
Alternatively, if want to keep it, it would rule out a DRO as an option and would probably rule out bankruptcy. In bankruptcy it is very unlikely you would be able to keep that car. If the finance is still owing, then it would likely be repossessed if you go bankrupt before it is paid off. If you had paid it off and then went bankrupt a best case scenario is that you would likely be asked to downsize the vehicle (normally for something worth less than £1000). So, in order to keep that particular car, you would only really be able to consider making token payments, hopefully followed by a DMP in the future.
Try and post your SOA on here so other posters can try and help further.
Laura
@natdebtline
Thanks for that - the issue i have is although the car is slightly above the value id be allowed to keep... its under lifetime warranty so incurs very little costs to that regard, whereas buying something second hand would not be the same.
Could you please advise what is SOA?
Thanks0 -
The car is worth £2k above the limit so not 'slightly' above. As others have said to enter into a formal debt arrangement like DMP or bankruptcy you can't keep that car. If you can't pay your debts, without trying to be harsh, you really need to stop trying to hang on to that car and sort your debts out.0
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Hello again,
An 'SOA' is a Statement of Affairs (a budget plan) and there is sticky available to help you complete this - http://www.stoozing.com/calculator/soa.php
This may help other people to guide you further on the options and potential terms of repayment plans if you do decide to keep the car and avoid insolvency options.
Laura
@natdebtlineWe work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps0 -
If these are non-priority debts, (i.e credit cards, loans, overdrafts, mobile phones) then don't worry about them too much. You seem employable but temporarily unemployed. To devise a strategy while unemployed may be a mistake you would regret when employed.
So keep your options open and go for Payplan's option one for now, with the possible modification of not making token offers, which serve no useful purpose.
The debts will change hands, at a discount. Just keep the paperwork and when the time comes, you should be able to see who owns what.
When the situation is stable post a soa and work out a strategy. That's a better way around than picking a strategy and limiting your working because of it!
There's also some muddled thinking here on a DRO. A 3k car on HP does not disqualify you unless you complete the payments, and hence become the owner, within the 12 month moratorium. Check that the agreement is truly HP.
Whether you could legitimately make the payments to it, or would need a third party to do so, is a better question. The payments would only be an allowable expense if there were no arrears and the car was in fact valued at under 1k on Parkers Guide.
Also a dmp is not a formal solution.
Anyway for now, get your next job sorted out. Don't pay a penny more to that fee-charging DMC.0 -
If these are non-priority debts, (i.e credit cards, loans, overdrafts, mobile phones) then don't worry about them too much. You seem employable but temporarily unemployed. To devise a strategy while unemployed may be a mistake you would regret when employed.
So keep your options open and go for Payplan's option one for now, with the possible modification of not making token offers, which serve no useful purpose.
The debts will change hands, at a discount. Just keep the paperwork and when the time comes, you should be able to see who owns what.
When the situation is stable post a soa and work out a strategy. That's a better way around than picking a strategy and limiting your working because of it!
There's also some muddled thinking here on a DRO. A 3k car on HP does not disqualify you unless you complete the payments, and hence become the owner, within the 12 month moratorium. Check that the agreement is truly HP.
Whether you could legitimately make the payments to it, or would need a third party to do so, is a better question. The payments would only be an allowable expense if there were no arrears and the car was in fact valued at under 1k on Parkers Guide.
Also a dmp is not a formal solution.
Anyway for now, get your next job sorted out. Don't pay a penny more to that fee-charging DMC.
Thanks - the debts are exactly what you listed as non-priority. Although im not exactly sure what this means for me.... what i dont want is bailiffs turning up at the door!
I have another call booked in with the DMC tomorrow, i plan on essentially telling them where to go and contacting the creditors myself explaining, and offering token payments, would this not be the best course of action?
The car is indeed valued at exactly 3k on parkers guide, however this would not account for the work that needs doing to it. (cosmetic)
As for HP, its either HP or PCP, i forget the difference... the 5 years is up in december, and the car is mine with no balloon payment if that helps?
I appreciate my current circumstances are not ideal for finding a resolution, its the stress of it all adding to an already not ideal situation of been out of work thats making me want to get things moving.0 -
OK, a DRO is out. Because in December you will become the proud owner of a 3k car. I don't think defaulting on payments makes sense at this point and I'm sure parents would help with the final payments if necessary.
That is classic HP. If it's PCP there is a final 'balloon payment' at the end.
Regarding your worry about bailiffs, this is the standard route for your sort of debts.
1. to start wiith you are reminded about your missed payments and sent an arrears notice.
2. After 3-6 months of missed paymets you receive a formal default notice and a default is registered with the credit agencies.
3. At some point (and this can be 1 month to literally anything) the debt is sold to a debt buyer. The main ones are Lowell, PRA, Hoist, Arrow and Cabot.
4. The buyer will run through their standard letters and then will take a decision on court action.
5. About 1 in 10 debts get to the stage of a court claim. There is a pre-action letter giving you 30 days to respond.
6. After this there is a court claim form to which you must respond within 14/28 days.
7. If you do not respond, you get a ccj in default.
8. The creditor now has to decide if it's worth tyring to enforce this.
9. The main enforcement methods are (in decreasing order) bailiffs, attachment to earnings, charging order on your house, statutory demand, third party debt order.
I've highlighted the bit you're worried about so you can see how unlikely it is that you will ever get there.
P.S. Token offers are OK for the short term in that they do not do much damage. You'll probably get a job and do a debt management plan within a few months anyway.0
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