Don't know how to move forward?

[tre]

Hi everyone, have sort of buried my head in the sand for the last couple of weeks just couldn't deal with it but know I have too just don't know what way to go.

Bank have asked us to come in for financial review - should I tell them we are thinking of DMP or IVA? Debt to them is £23K. Situation is have house with some equity, have debts of £60k. Sensible thing would be to sell house release equity and pay of debts - problem, have very large redemption penalities on mortgage and would push debt to £75K. Can afford mortgage payments, utilities and basic living costs just not the debt repayment which is as much as the mortgage! Would still like to try to raise loan to pay creditors. Payment would be 50p in £ as full and final settlement. Our situation will hopefully improve in that hubby is waiting tohear about promotion, have saye worth £4,000 payable 02/2008 and another of £9,000 in 02/2009. Also in 2009 will not have nursery fees for youngest child. If sell house will have nothing left and may not have enough to clear debt - will have 4 kids nowhere to live and no money to start again! Am so depressed and ashamed. Haven't told anyone even though family members keep asking what is wrong!!! Just can't bring myself to tell them - i think it is because i can't quite believe it myself. HELP!!!!![:(]

[MelanieGiles]

Hi again tre

Can you remind us of how much equity you have in your property. Creditors will be unlikely to accept 50p in the £ if you have equity which could be released to pay them in full.

It is a good idea to still go for the financial review. Just see what the bank have to say, but don't commit to any more borrowings.

Please stop feeling ashamed. There is a solution out there for everyone, it is just a matter of finding the right one!

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[tre]

Thanks Melanie, equity is roughly £50K but as i said have huge redemption penalities on mortgage of £12,500. Would like to take out further advance on mortgage to meet total outstanding debt but mortgage lender says we have borrowed to our maximum income.
Does this mean that selling is only option?

[MelanieGiles]

So the equity is only really £37,500? How long is it before you are out of the penalty period? You could think about getting a secured loan to release money to make an offer to your creditors, but beware they are very expensive, and will take an age to repay. I am not a fan of them personally.

How much do you think you could afford to repay your creditors on a monthly basis, and is your current mortgage on a repayment basis or interest only. If repayment, you could also consider switching to interest only to release more money to be able to repay your debts.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk

[tre]

No, it is interest only have already done that to try to keep on top of things. Can I just say have not used the credit cards for the last six months and have been moving them around for 0% but savings pot (which was very poor anyway)is now empty and do not want to start using cards again so need to do something now. Am just doing budget but think roughly £400 a month against £60k debt. Have 4 years to run on penalties. Bearing in mind my earlier post when i mentioned the saye do you think dmp might be worth a visit to give a little breathing time, my reluctante with IVA is in relation to equity release clause.
many thanks for your valued advice.

[MelanieGiles]

Hi again

You are back to three choices here, as you have recognised that you cannot afford to repay your debts.

1 Bankruptcy - house will likely be sold to release your equity. The Trustee will be unconcerned about the penalties and can take possessory action one year after the date of the bankruptcy order. I would not recommend this route to you.

2 IVA - either lump sum or contributions until the mortgage penalties expire and then lump sum. There is therefore little to be saved by waiting until the penalties expire as the equity you will need to release at that time will be greater, however this option will give a greater return to your creditors.

3 DMP - With disposable income of £400 per month, this will take over 15 years to repay. You could offer ongoing payments for the next four years, which will probably not even service the ongoing interest on those debts, and then equity release when the penalties have expired.

You must consider the merits of the IVA compared to the DMP on your personal plans for the future.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

For further details contact me at http://www.melaniegiles.com and view my IVA blog at: http://melaniegiles.blogs.iva.co.uk