General Bankruptcy Query and Assets (Car)

Suseka97 · 8 September 2019 at 10:14AM

Hello all,

I am trying to help a friend think through his options to resolve his current financial crisis. He is in a bad place and whilst I know a lot about DMPs, I know very little about other debt solutions such as Bankruptcy or IVAs. My advice to him, first and foremost, was to seek advice from National Debtline - but he is really finding it hard to make that step. He has recently been signed off work with depression and I am very concerned about his mental health. Being signed off work is exacerbating his financial predicament because his employer is not be overly sympathetic and so it looks like he will only get SSP, not CSP and that will be difficult for him over the next few months.

Anyway - back to the question... he doesn't have any assets of worth except for his car. It's worth around £2.5k and I think I'm right in saying that he would be asked to sell it but would be allowed to retain £1,000 of the sale price to put towards another vehicle. He relies on his car to travel to and from work (he works shifts, so public transport would be difficult). Is there anyway he could keep the car he has, perhaps if someone in his family paid the difference between the car's value and the £1,000 limit? He is concerned about the possible costs of keeping a lower value car on the road, when his current vehicle is in very good order and has cheap running costs and is low maintenance.

He owes around £20k across a loan, CCs and an overdraft - all with Barclays and is paying ridiculous penalties (charges) on a daily basis for going over his overdraft limit. His partner went ahead with an IVA for her own debts very recently and included his contribution to the household costs in her IVA. This was calculated at around a 67% contribution as he is the main earner at present.

I know it would help to have more info regarding his SOA - and I'm working with him to try and pull all this together. I am wondering also whether a DRO might be an option - but not now sure how that would work now his partner has signed up to an IVA including a monthly income contribution from him... all very complicated.

I will continue to encourage him to call NDL, but in the meantime I want to try and offer him hope that there is a solution out there and give him some sense of what that might be. I have been reading some very good articles online, from NDL and Debt Camel and I know debt solutions need to be worked around each individual's circumstances, but would appreciate any advice from the good folks on the bankruptcy forum - any tips, thoughts, things to consider.

Thanks in advance.

sourcrates · 8 September 2019 at 11:48AM

Suseka97 wrote: »

Hello all,

I am trying to help a friend think through his options to resolve his current financial crisis. .

I will continue to encourage him to call NDL, but in the meantime I want to try and offer him hope that there is a solution out there and give him some sense of what that might be. .

Hi,

Normal rule of thumb, debt solutions are tailored to individual circumstances, and there is always a solution, no matter the amount of debt, or the complexity of the situation.

If you have assets to protect, and a large amount of debt, an IVA may be suitable.

If the debt is less than 20k, you are not a homeowner, you have assets of up to £1000, a car to the same value, and less than £50 disposable income (not including any debt repayments) then a DRO should work for you.

Then there is the backstop, the goalkeeper, the last line of defence.......bankrupcy, not as bad as it sounds, all very easy to set up, all online, by post, and includes a call from the OR, but should be used wisely and only if the debt cannot be dealt with by other insolvency means, its certainly one of the quickest option, usually discharged after one year, gone from your file after six years, and includes all debts you currently have (excluding certain court fines etc).

See if he qualifies for the DRO, as that would be first choice here.

mwarby · 8 September 2019 at 11:50AM

I guess if asked to sell car and buy 1k car someone could
- get car valued
- buy car at value
- sell car back at 1k (would probably need to be with no strings attached)

as long as its sold at its fair value I can't see much reason for OR to object

I think he should as a matter of urgency, get himself a new bank account with someone he doesn't owe any money to (or in same group, such as lloyds and halifax) and switch his salary and essential bills (not debts he can't afford) over, this maybe best done manually. This way he can use his salary to live off and make nay payments he choses.

Barclays will start collections activity default eventually, but they won't be happy with DMP, DRO, IVA or bankruptcy. I have to say when I told barclaycard about me considering an IVA they were very quick to give breathing space.

If partner went for an IVA is this due to her owning property ? if so bear in mind your friend may have beneficial interest in the property(if a divorce lawyer would argue it, the OR would too) which may mean its not safe in bankruptcy

Minkym00 · 8 September 2019 at 7:51PM

If a third party was able to buy out the £2.5k interest in the car then the OR would let him keep it.

Suseka97 · 9 September 2019 at 1:13AM

He and his partner currently rent - so I'm not sure why she chose the IVA route. I think she took advice from a friend who had cleared her debts that way and contacted Gregory Pennington who advised an IVA would be her best option. There may be more to it, I guess, but I'm not able to find out too much about his partner's individual circumstances. All I known is he pays her a set amount of money each month and she then pays all the household bills.

Anyway - I appreciate all the feedback and will take on board what has been said - many thanks.

mwarby · 9 September 2019 at 5:55PM

If they are renting, and if mental health issues could cause employment issues such as long periods on statutory sick pay, I'd avoid an IVA.

An IVA could be very stressful in circumstances and if it were to fail he'd be back looking at bankruptcy. A bankruptcy or DRO would at least get it over and done with asap

Suseka97 · 9 September 2019 at 9:49PM

mwarby wrote: »

If they are renting, and if mental health issues could cause employment issues such as long periods on statutory sick pay, I'd avoid an IVA.

Thanks mwarby.

I'm pretty shocked to have now found out that his employer had recently put him on a disciplinary for breaching their sickness absence limits. He'd apparently taken a number of days over the last 12 months which put him over some sort of limit and in doing so you are automatically on a disciplinary. Now when I say ' over the limit' we are not talking of days and weeks - just a number of separate incidents over a 6 month period.

I realise now that having worked all my adult life in the public sector, just how brutal working in industry can be. I'm appalled if truth be told. This has undoubtedly added to his mental health issues and has contributed to his current state of depression. What beggars belief is that in the 10+ years he has worked for that same company, working 60 hour weeks at times, with very little to no sickness absence - none of that counts when you hit bad times. Jeez.

Suseka97 · 12 September 2019 at 12:32PM

A bit of an update.

I've finally managed to get hold of his paperwork and sat with him whilst he went though the StepChange Debt Remedy tool. It is recommending an IVA, he does not qualify for a DRO. His debts actually amount to just shy of £28,000 and the Parkers Guide valuation for his car (Private Poor) is around £1,250. I'm rather hoping he can keep the car, although may have to pay the £250 excess - is that how it can work?

Based on his I&E he has around £180 per month available to pay towards his debts- so I don't think a DMP is an option now and the IVA seems to be a reasonable route to take.

If you have any other thoughts - please do share and am happy to pass on any further advice and do what I can to help this guy.

WhenIam64 · 12 September 2019 at 1:01PM

The DRO is out as he has a car, more than the limit on a DRO (£20K) and more than £50/month spare.

What was the reasoning in the Stepchange letter to explain the choice between an IVA or a DMP?

Have the creditors been alerted to the MH issues as there should be a different protocol here.

Suseka97 · 12 September 2019 at 11:05PM

Thanks for the reply WIA... no, no reasoning because I could only get him to do the online remedy tool and he's therefore yet to have an actual conversation. I suspect the IVA recommendation is based on the amount left to service his debts. If he was to pay around £180 per month then it would take him 12 years to clear via a DMP, whereas via an IVA you are looking at 5/6 years with the remainder written off.

I'm helping him put together letters to his creditors so that they are aware of the situation and that he is now on sickness absence anyway and will be receiving little more than SSP over the next two months. So whilst the IVA option sounds reasonable he can't do much until he is in a better place and able to return to work.

I wish I could do more... and am not, yet, convinced he is going to be able to follow all this through. My overriding concern is his mental health, having known him for many years I have never seen him so low and I'm mindful that depression can take a person to dark places.

WhenIam64 · 13 September 2019 at 8:16AM

I wish I could do more...

You are actually doing a lot and you've got him into the right sort of area. You might want to take him to see a local debt charity for a face-to-face. The key issues apart from sorting the debt are getting help with his MH; to get some sort of resolution to the employment issues as that has difficulties too; and to find a way forward on understanding affordability.

Online/phone debt advice is great for the majority of people but MH issues make it more likely that face-to-face would get better, longer term solutions.

General Bankruptcy Query and Assets (Car)

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