Is Bankcruptcy our only option?

[Helen030166]

We owe £42K in unsecured debts and we have a mortgage of £145K. After becoming increasingly impossible to keep up with minimum payments on visa cards and loans we decided to apply for an IVA with ClearDebt but unfortunately it has been declined the reason being our mortgage goes from being a fixed to variable rate with the Northern Roack in June and that will put our current expenditure up by £300 per month (Interest only payments at that!) so that blows our expenditure over the minimum payment for an IVA to be accepted.

Also, the MBNA are now threatening to put a charge on our property of £10K so we wouldnt get alot if we sold our property minus solicitors, estate agents, surveyors etc.,

Ive read on this forum that if we got a private rented property and gave up our house then went bankcrupt the house and the unsecured debts would both fall into the bankcruptcy charge and we wouldnt be liable for any shortfall should they sell the house at a shortfall?

Im at my wits end and dont know what to do for the best? Please help!

[chris.g]

Hiya helen and welcome to the forum. Your situation is very similar to our own, large debts, no real equity in the property and charges going onto the house, threaten letters etc with no disposable income to pay even a token payment. We ended up, after advice, declaring bankruptcy just a month ago. Any shortfall there is after you voluntarily surrender your mortgaged property would be included in bankruptcy.
What I would suggest is that you try to contact CAB or another impartial advisory service who would go through all the available options you have before you jump into bankruptcy.

[Helen030166]

thanks Chris, did you find the bankcuptcy went well and what is the procedure?? Do you lose your possessions etc., things like TVS, Laptops ? my teenage son has his own pc and would be upset to say the least if they came and took it to be sold.

Did you find a rented property and did you tell the estate agents that you were going bankcrupt and how did they react?

[chris.g]

So far the bankruptcy has gone well, we are still waiting for the Official Receiver to get back to us regarding any IPA etc.
We have lost our mortgaged house, had to surrender it to the mortgage Co., the car we had was financed on a loan, not HP, so we were able to sell that and buy a smaller (cheaper) one.
As far as personal possessions like laptops, tv's etc, you shouldn't lose them unless they are valuable.
We had a dormant ISA, worth around £60 which the OR has claimed as well as both our life/saving policies that we had, worth around £500 each.
We moved into rented property before our bankruptcy and dealt direct with the landlord. We explained about our situation and he was fine. Some may prefer not to let to you but it is better to know sooner rather than later in my opinion. If going through an estate/letting agent, credit checks are usually carried out and there may be clauses in your contract about br with them. They also charge fees and can request months in rent in advance, which may be hard for you to save.
Basically, the procedure is stop paying your creditors, complete the bankruptcy petition, which is available online, make 3 copies and attend county court to file the petition. You can get more info from the insolvency service website online.
xx

[chris.g]

Forgot to say it'll cost you £485 per petition when you attend court.
xx

[Helen030166]

Thanks Chris, your info has helped alot i went to view a couple of private rented properties today - i found a really nice little terraced house all brand new inside and monthly rent of £550 but it was a letting agent and they are very strict on bad credit etc they sid if we didnt pass the credit checks we might need a guarantor. Im hoping that we can find somthing very soon so we can start the bankruptcy proceedings. Its just alot of money to find months rent in advance plus a months rent plus fees etc then the bankcuptcy fees etc. Dont think we will be paying the mortgage anymore if we are to go for it.xxx

[Helen030166]

Also did you find a new bank before or after you declared yourself bankcrupt? my wages and all our DD's are in my current bank account atm

[Reviva UK]

Hi there Helen030166

There may be several options available to you without going straight for Br so you do need to CAREFULLY review all of your options before you make a jump.

For example we would need to know the value of the house / mortgage value and details about your income / expenditure jobs etc before we could recomend a solution.

Depending upon the full extent of the situation you may be able to do the following WITHOUT going Br. ( THIS IS ONLY ONE EXAMPLE OF THINKING OUTSIDE THE BOX - THERE ARE OTHERS )

Potential Action Plan.
1. set up a minimal debt management plan with some of your disposable income - this may calm everything down a little and put MBNA back in their box.
2. Depending upo equity sell the house for a realistic price and find a suitable place to rent.

3. Now that you are renting your mortgage is not going to go up in June by #300 so you would be eligible for an IVA as the rent is likely to me much more stable than a mortgage.

This is only a thought but a solution can be tailored to your individual needs if all the information is available.

Hope this gives you a few ideas

[Helen030166]

Hi Paul, have you got a private email address i can send you all this information as ive have it already saved on a word document so you could see my personal circumstances and maybe able to offer me further advice?

Thanks Helen xx

[MelanieGiles]

I think Paul's suggestion makes very good sense - there is no point in entering into any formal repayment plan if things are uncertain with regard to your property. If you do intend to sell it, best to do so and move into rented, allow your finances to settle and then decide whether it is better to try another IVA, stick with the DMP or declare yourself bankrupt.

[Reviva UK]

Hi Helen

happy to review this no problem ( Please note we do not charge for this so don't worry!!!)

you can get me at pauljohns@revivauk.com

[chris.g]

There are a few basic bank accounts out there, we got ours with co-op, their cashminder acc. We got it sorted pre-br and explained to the girl, she was fine. The account wasn't frozen when we filed so there was no disruption there.

As Paul & Melanie say, check out all your options before deciding, there may be another way through this for you.
xx

[Helen030166]

Hi Melanie, we've been told our property is valued at £170K but with the current market it is more lke to take a while to be sold and probably at a lower amount than that, because it is buyers market at the moment not a sellers market. Two propertieson our street have have on the market for over a yr now with no success. We cant afford to wait that long bearing in mind we have our creditors on our backs all the time now and threats of charges going on the property. We can only afford to pay interest only on our mortgage at the moment as it would be too high for repayment. The Northern Rock cant offer us any better deal and neither can other places because of our current unsecured debts. We have been declined an IVA because of all this so was wondering if our best option would be declaring ourselves bankcrupt go private renting and get rid of it all at the same time. My partner has just gone self employed so hes findng it difficult to prove his earnings as well. Any suggestions?

[ray_a]

Hi Helen

If it was me I would get into a debt management plan which would give you some breathing spavce so as to sell your house. You will need a good size deposit so use the proceeds to place a good sizeable deposit on a rented property.

Like the others say look at the options when life has quietened down a bit and do keep in touch and let us know how you are getting on.

[abc]

Be careful, creditors are known to obtain charging orders while you are in a debt management plan.