I have recently found out that my wife has debts

[reesh2052]

I have recently found out that my wife has debts of around £25,400, and was going to get it settled through an IVA. This has obviously put a huge strain on our relationship and it has almost caused us to part as a result. What if any realistic claim could the creditors have on the property which has an outstanding mortgage of £32K and a recent valuation of £70K. My wife does make a contribution of about a third towards household bills etc and this type of issue may mean we will have to divorce with our child staying in the property with me and my wife leaving.
What would bea consequence of this as we would have to divorce to raise some of the money from the equity in the home. Can you help?

[plasticdaft]

Now that you know about the debts is it not possible to sort out a debt payment plan with creditors. Why make a bad situation worse by adding to the divorce rate in the uk which is too high already.As you have stated that your wife contributes about a third to household bills etc they probably would expect equity to be released to pay off part of the debts. The house itself is in no danger unless loans were secured on it.
Dont let debt rip your family apart.

[MelanieGiles]

Hi reesh and welcome to the forum

First of all, please try to understand that your wife has been pretty brave in going and seeking advice, and probably agonised for a long time as to how to tell you about her difficulties.

It is possible that not all of the money she has borrowed has purely been spent for personal use, and that some of it may have been used to supplement family expenditure. I am sure that once you come to terms with the situation, and can understand how this affects you, you will be proud of her for doing something about it - when to be honest a lot of people would probably just keep borrowing.

Turning to the property, in an IVA your wife will be required to get the property revalued during the final year of the IVA and then look to raise borrowing at 85% loan to value. So using the current value of your property at £70k, and taking borrowing of 85% this would create a new loan of £59,500 - which less your current mortgage of £32,000 provides a combined sum available of £27,500 - of which her share would be £13,750.

This would need to be paid over in addition to the contributions she would be able to make over the five year period. Assuming that she pays at least £250 per month into an IVA, she may be able to repay her debts in full - so perhaps a better option at this stage would be to remortgage now, while interest rates are low, and pay off the money in a lump sum. This would of course affect your share of the property, but if done via an IVA your wife's credit rating would be affected for six years, thus limiting her ability to access credit over that timescale.

Bear with it - this is raw for you at the moment, and must have come as a great shock, but you have a little one to think of, and at the end of the day your family are the most important thing that you both have.

I wish you, and her, the very best of luck with whatever solution you decide to follow, and either of you need support you will find it on this site.

[reesh2052]

Hi Melanie,
If the money has to be raised by remortgaging the house then what claim if any would she have on the house at a later date if we divorced as the equity share that she was entitled to as part of the divorce settlement would have been spent paying her debt off. This debt has made life so difficult for us all, not that the financial side has caused me any personal problems as we have always kept our finances seperate. My wife did not take the mortgage out with me and the mortgage is in my sole name.
Why should l be made to suffer and possibly pay for her mistakes through this. She covered this up for five years when it could have been sorted a long time ago. Had l not opened a letter from the bank by accident l feel that l would still be unaware that this was going on.

[MelanieGiles]

At the moment, in legal terms, your wife has not claim to any part of your property, however she may well have a valid claim to be entitled to a beneficial interest in the property given that she has contributed to the running of the household over the last few years.

If you were to raise some money either now or in the future to pay towards her creditors, this would be set against her "share" and credit given for this is any future insolvency or matrimonial settlement.

[rayb]

Hi,

I can understand your frustration with your Wife especially being lied to but you have a young child who needs both there parents and it is not worth splitting over debt - life is to short.

Please try and support her and get this resolved together if not for your sake, your child - they deserve that much at least

[Skippy]

I didn't tell my partner about my debts until I couldn't afford to pay them any more. He knew I owed money, but not how much and it was a big shock to him but he supported me through everything.

I hope you can support your wife through this as it isn't easy and she's been brave taking the first step towards sorting her debts out. Like Ray says I hope you can sort this out for the sake of your child x

[kallis3]

I was the same - we were in a DMP and I managed to run up more debts and hide them from hubby until I couldn't manage to pay them.

It caused problems for a short while, but I believe we are now the stronger for this and don't keep anything from each other any more.

Your child needs you both, and hopefully you can both come through this.

[reesh2052]

Hi, thanks for your advice. The pressure of this could easily lead us to divorce as it stands at the moment. The possibility is that our daughter will most likely stay with me and my wife will move out. If we were to go to court to sort out the financial side what would the possibility that the equity in our home would be sizeable enough to pay towards the IVA settlement. Bearing in mind it is our only asset, but my wife has a substantial NHS pension or will do. Would the current or final surrender value be used in the financial settlement. Please don't assume me as being partisan but l need to make sure that my daughter is in a stable position. It has always been that l paid the bills etc because l like to make sure things are done properly and l always planned for our home to be used to secure our daughters future. Please advise.

[kallis3]

Unless your wife is due to retire during the duration of an IVA, then her pension should be ok. I have a public sector pension which I am still paying into and mine hasn't been touched.

If you had a sizeable amount of equity in the home, then this could be freed up to offer a full and final IVA.

I do hope this doesn't drive you apart. A lot of us on here had similar problems, but we have worked through them.

[bryn]

Hi Reesh

Do hang in there . Has come as a bit of shock . The worse thing for me was to tell my parents about my debts , Dad's look of disbelief and the sense of letting him down was awful ! The next was explaining to my fiancee of two months that I was not so affluent as she thought with the BMW Convertible having to go !

This was back in April and things getting back on track and actually in many ways a lot happier without having to keep up appearances . At times it is very tough , but every month seems to come and go , some harder than others , but unlike me your wife has faced up to things earlier rather than later .

Dont be angry , as she would have had so much guilt on her mind and the biggest thing is to come clean , however and whoever found out . I hope you can now make inroads . At the end of the day it is money . Relationships that are torn apart by it are just not worth it . You'll get through ...

[reesh2052]

The problem with all this as you probably all know is that I can't seem to see how this is going to end.There are so many variables and what ifs! The IVA company will be meeting the creditors on Friday and a month ago l was informed that "good news the property will not be considered again in the IVA agreement"! Last night we were informed that some/ one of the creditors of which there are nine wanted to know about the mortgage payments. Can any of the creditors force me be it now or in 4 years time remortgage the home even if my wife isn't on the mortgage anyway?

[reesh2052]

I have just received a call from my wife and she has been told that one of the creditors that she owes 9K to would want equity to be taken out of the house and the other one that she owes 6K to has refused to accept the IVA outright. Surely this is not beneficial to either and she has been told that she must accept the equity release or possibly have to go to a debt management company!
I refuse to allow any equity to be used to pay her debt which would then affect mine and my daughter's life style by making me remortgage at a different rate and force me to pay more each month than the mortgage.
What can l do to prevent them from doing this to us?

[rayb]

Hi,

I am not 100% sure on this but if the Property is only in your name only and your Wife has nothing to do with it then they cannot ask for any equity out of it. Perhaps an expert can clarify exactly

[kallis3]

That's probably right.

I would wait until the creditors meeting on Friday before doing anything rash. Your wife does not have to agree to the IVA on that date, she can take up to two weeks to decide if it is still OK, particularly if she is going to have to move out.

I suggest that you both need to sit down and discuss exactly what is going to happen with your wifes finances.