am i insolvant?

[marie1]

Hi - i have been advised by clearstart that insolvency may be an option for me, although reading through your forum im doubting the advice i have been given so far. After seperating from my ex i now the sole owner of my house valued around £200.000 and i have a mortgage of £155,000 interst only over 29yrs. I have unsecured debts totalinng £25.000 and i am now only able to work part time taking wage cut on a gross salery of £12.000per annum i also receive tax credits and maintenace along with a fostering allowance of £180 perweek for a boy in my care. after all my income and essential expediture on my budget with clear start i am left with dissposible income of around £200 per month. Finally i have been offered funding from my local council to create a bedroom in my loft to take the brother of the current child in my care - i also have two children of my own. the council are planing to put a £35.000 charging order on my house which i will only have to pay back if i choose to return the child to them before his 18th birthday in 4yrs. Selling the house is simply not an option for me as the council have already told me that i will be making myself intentionally homeless and will not help to rehouse me and i am trying to avoid selling as i will not be able to care for the kids in my care, who are extended family. i have the following concerns? am i insolvant? if so what would be the proceedure with the 4yr rule and generally if insolvency is not the right way forward for me, how can i go about repaying the £25.000 as i currently have a cccs dmp which i am falling behind with???? i hope you are able to advise me? and thanks for your help - this website is excellent

[emma_t]

Hi Marie

Wanted to welcome you to the forum and I am sure an expert will be around soon to answer the specifics of your post.
I hope you find a solution right for you as you sound like you give a lot of yourself to helping others[:)]

Best wishes
Emma

[marie1]

thanks - i am trying my very best but can see the situation becoming impossible as i can not remortgage to release any equity. Not sure what i will do as i am just carrying on untill that day comes when i have to give up the kids and the house really hoping that somebody can give me an alternative but even if they cant its great to discover people like yourself that are supporting people in crisis. thanks emma

[carlmcmullen]

HI Marie,

You say your property is worth £200,000 is that in its current state ?

You also mention the council are planning to put a charge on your property for £35,000 for the work that is carried out, is this work not likely to increase the value of the property to above £200,000 ?

You say planning to put a charge on the property so i assume it has not happend yet ?

I would suggest that before you agree to anything with clearstart you take advice from at least two other IP's

[marie1]

Hi Carl
the council are planning to put on the charge within the next eight weeks - the current value is £200.000 with an extra room comparing to others in my area the value will increase around another 20-25k although the charge will still stand at £35k. also should the foster placement breakdown they will want their money returned so it is a gamble in itself???? uuuuuuuurgh i dont know what to do, so many WHAT IFS???? thanks for your response can you advise me on two other reputible IPS that could confirm wether insolvency is an option or not??? thanks again

[carlmcmullen]

You may want to visit www.iva.com were you can read reviews of alot of insolvency firms.

What i have found from this forum are you often get a more personal service from the smaller firms.

I think there are a few issues that need to be considered with your case.

1. You currently have enough equity in your property to cover your debts and by allowing the charge to be placed on your property, your creditors could argue the fact you have given away equity knowing you are potentially insolvent.

2. If the charge does go through and the work carried out, as you said, what happens if it doesnt work out - you could be forced to sell your house to repay the council.

3. Assume you have the improvments to your property and it increases the value by a further £20k this would mean you have a property worth £220,000, a mortgage of £155,000 and a charge of £35k, so you would still have £30k equity so technically you are not insolvent as you have assets that outweigh your debts.

It is a difficult one, and i am sure Clearstart know the facts of your case, but i would consider taking further advice.

I would be interested to hear Ian or Melanie's adivce on this scenario.

[MelanieGiles]

Carl has correctly identified the main problem with your case - in that you are not technically insolvent.

With the advent of another foster child, and may I say how much I admire foster carers and the valuable work you do in caring for children with so many difficulties in their lives, this will bring you additional income. Have you worked out how much disposable income you will be left with in these circumstances?

Have Cleardebt actually suggested that you ought to do an IVA? I would have thought that a managed DMP would be a better option for you if you wish to avoid bankruptcy.

[marie1]

Carl - the council have said that they would not force me to sell the house if the placement breaks down but they would have a financial interest in the house should i sell it or would ask for a proportion of the money back depending on how long the placement works - i am still waiting for an official contract to be drawn up on that before i sign anything. i would however have an extra £100pw income whilst the child is in my care. i hope im not confussing you with this lol

i will check out the site and contact two other IPS tomorrow - thanks

I know this is not straight forward but whatever the otions my main aim is to ensure that i can keep the kids in my care even if i loose out financially.

i have looked at the option of renting and for a 5bed house in this borough i am looking at between £1600-£2000 per month (not an option)

really grateful for the advice so far
thanks

[MelanieGiles]

I really feel that you could afford to service these debts with the additional income the new placement will bring, and presumably the Council are not asking you to pay towards this charge?

[carlmcmullen]

As Melanie suggested in her post, it may be better that you enter into a DMP until your circumstances change, it may be with the additional income you are not struggling financially and to enter into an IVA at this point knowing your income is going to change dramatically would be perhaps not best advice.

Shop around and take further advice, and i hope everything turns out good for you. [:)]

[marie1]

Hi Melanie - thanks for getting back
as mentioned above an extra £100 per week - the problem being is that the current dmp i have i have fallen behind by two months - letters and phone calls have started. Also the council fund me allownaces for the kids that are above what the csss and creditors will exept as essential and i would not live with myself paying their allowances towards my debts. in the case of state benefits and tax credits fostering allowances are not counted as income for this purpose. Do you know if creditors will expect me to pay their allowances towards my debts?? My current dmp is for ten years at £262 per month for ten years, with only around £200 disposible this is impossible and the last advisor i had was unrealistic about some of the amounts she was quoting as essential??? not sure what to do?? thanks for your reply

[MelanieGiles]

Can I suggest that you contact Andrew Graveson of Brightoak who runs a DMP company with the interest of client, rather than creditors at heart. Andrew is a regular poster on the forum and I am sure he will be able to get your payments back on track, as he fights fearlessly for his clients rights and is not funded by the creditors.

As an aside, Andrew is also an experienced mortgage broker, so he will be really useful to you on the property side as well. Definately worth a call, and you can find his details from the experts page.

[carlmcmullen]

If your disposable income is £200 but your DMP is asking for £262 then you need to discuss this with them to look to reduce payments.

And whilst they are forecasting 10years in a DMP as you said you are likely to be in a better position if you take the placement so your cicumstances will change and you will probally pay your debts quicker than 10 years.

Creditors would include all forms of income (including benefits) when calculating your income and expenditure, but of course they also include your full expenditure aswell, so it should be a true picutre.

[marie1]

no the council will not be asking for payments towards the charge unless the placement breaks down, which is another risk but i am sure that i can work with this child as he is an extended family menber and i know him well so the risk is not that great. i am more worried at not being able to keep up with the dmp and if i ask for a reassement on paper its going to look like i have alot more money coming in but in reality that money is to enable a child in care to live a normal life - not to pay off my debts as a result of my relationship breakdown?? How can i find out what creditors policies are in view on fostering allowance in DMPS?? THANKS

[MelanieGiles]

As I said in my earlier post - call Andrew. He will take this problem away from you as soon as possible, leaving you to concentrate on looking after those little ones. Such admirable work.