bankruptcy

[vad921]

Hi all,

At the moment my wife and I are paying over £1k a month on the mortgage and the First Plus secured loan is almost another £1k a month. Bankruptcy clearing the unsecured debt would certainly help. The F+ secured loan feels like a real 'ball and chain' though and it is certainly this which is has dragged us down. £200 a month of this loan is a payment protection which they tell me I cannot cancel!

With little equity, if any, in the house, if we went down the bankruptcy route do you think there may be a chance that F+ may negotiate the debt (and therefore keep the house)or due you think they will just repossess the house by default?? I've read elsewhere on the forums that we may get a year before it is put up for sale. Is this true? We have two small children.

I also read elsewhere that we are likely to face an IPO. I was wondering if there was a typical % of income, per month, taken to contribute to the debts??

Many thanks for the help & advice so far. This website has been a complete blessing to my wife and I. We also know we are not alone in what we face. That is very reassuring.

[catullus]

Provided that you maintain the payments on the F+ secured loan while in Bankruptcy it is very unlikely that they could or would want to seek reposession.
If, based on the value of your home, they consider themselves fully secured then there would be no incentive for them to accept anything less than the full amount and, in any event,where would you get the money from?
If there is equity in your home then you will need to buy this out from a Trustee by, for instance, a relative or partner buying out your interest, and this should normally be done within 12 months of bankruptcy otherwise the trustee will make application for a sale.
If you were made bankrupt you would be expected to agree to an IPA and the OR quotes 50-70% of DI as the range of normal contribution, although they do have different rules for calculation of DI compared to IVA's

[vad921]

I was thinking that First Plus may, if they know they have little or no way of getting money from the house sale (because of little or no equity) may be willing to reduce the amount we owe them and therefore the monthly amount we pay.
An IPA of 70% of income wouldn't be sustainable unless it is what is left after 'living' commitments have been made. Is this how they do it? Worryingly it looks like we don't have any options!

[catullus]

50-70% IS after living expenses.What are the figures, house value, mortgage, F+loan?

[vad921]

Mortgage about £155k value was around £170k pre flooding and where I live they reckon house prices have been hit significantly. First plus is about £85k!

[catullus]

I see. Well, under those circumstances F+ would be very likely to consider an offer in settlement but if you were to enter bankruptcy that offer would have to come from a third party. Its difficult to say how much you would have to offer, sometimes you hear amazing stories about how litttle a creditor would accept but on occasions you also see creditors holding out for completely unrealistic offers.
One thing, however, if you do this within bankruptcy do ensure that you really don't have any equity in your property otherwise you might end up having to buy that out from your trustee.

[vad921]

At what stage do I approach F+ to try and reach a settlement??I'm really confused!I suspect they will only take me seriously once I have declared bankruptcy. I did ring F+ today but they weren't interested. They simply said their loan was a priority and that I had to contact the companies behind the unsecured loans. Rang Lloyds TSB and they were not particularly interested in helping either. They said I should ring Payplan. I had hoped I could get a temporary reduction on my monthly bill for my credit card. They don't negotiate with customer and only debt management companies apparently.
It is getting to the point were we are beginning to think that the house may have to be sacrificed and we just move into rented accommodation. I just wish I knew exactly what would happen if we went bankrupt and least that we wwe can prepare ourselves properly for the immediate future.

[catullus]

there is a lot on this site about bankruptcy, several blogs to read from people who have been through the procedure and loads of people who can answer your questions.
bankruptcy is rarely a draconian process and with no equity in your property there's not much to tie you to it other than sentiment which I know can be very important but you might find that you can rent just as nice a place for far less money.
I would also suggest that you follow this link
http://www.insolvency.gov.uk/ which is the insolvency service's website and has a lot of useful information about bankruptcy.

[vad921]

Thanks catullus. Your advice is is really appreciated.This whole debt thing is very scary and I never thought I would be in this situation!!!!!!!!

[vad921]

Do you think if we can afford to keep the mortgage and the First plus secured loan we are unlikely to be required to have an IPA? So effectively, we lose the unsecured loans. More than half of our salaries are taken up by the the mortgage and secured loan.
The other thing is what happens to cars? We do have two cars but both are through HP agreements and as usual the cars are worth less than is owed. We need to keep at least one as I need it for my work. Are they likely to be taken back by the finance company??
Again, many thanks for the advice.

[catullus]

Not quite sure what your point is about paying the secured loans, you have to even in bankruptcy otherwise the creditors will apply for possession.

All your other debts will drop away, however, and your disposable income will be based upon your income, less payments to secured creditors and normal household expenses.

Generally you can keep a vehicle in bankruptcy but you do need to demonstrate that you actually need it but bankrupty might be an ideal time to drop one of the vehicles so that the shortfall on the HP will be dealt with in your bankruptcy

[vad921]

This is what I find confusing. If we don't pay and house is repossessed there will be no negative equity in the house sale to pay first plus. What happens then??? We would already be in bankruptcy so can and would they be likely to pursue us for the money??

In your experience, if the secured debt was taking half of our take home pay, is the OR likely to impose an IPA??

[catullus]

I think that you're getting confused with the term secured.

In F+'s case they have a 2nd charge on your property, in other words they have security.OK, the value of the home isn't enough for them to be fully secured but the security covers the whole debt.

If the value of the home rises more of the loan is covered by the security and vice versa.

If the home is sold, in or out of bankruptcy, the proceeds are first used to pay off the first mortgage and if there is anything less F+ get the next chunk.

If there isn't enough to pay F+ in full then that portion of the debt becomes unsecured because the home has been sold and they no longer have security.

In a bankruptcy that bit (the unsecured bit) would then fall in to the bankruptcy and you wouldn't have to pay it any longer because they can no longer repossess your house because its gone.

If you choose to continue to live in your house, as I've said before, you'll have to continue paying the F+ loan (because its secured) and any IPA liability will be calculated after these payments and other normal household expenditure.

There was a very good post here yesterday from someone in bankruptcy (sorry I can't remember who you are) but I would recommend you find and read it.

[Adam Davies]

Hi
I think it,s this one by Mish
http://www.iva.co.uk/forum/topic.asp?TOPIC_ID=4417
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[vad921]

Mish's post is quite frightening!!!

Is it really coming to that!