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Whattodo
| 26-10-2008 07:43 PM |
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Joined: 26 Oct 2008 Posts: 7 | Just found this site and am looking for some impartial advice. Have made some points below that would appreciate some guidance or comments on. Unsurprisingly I have run up a small debt. Soemthing around the 80k mark (all unsecured). Eeek. Originated from having a very highly paid job, squandering all my money and the more you earn the more you owe. Add to that I then lost my job when the IT market fell apart and my eventual hatred of the job I did, I went into the construction business. The pay wasn't even a quarter of what I used to earn but hey, at least I loved what I was doing and still do. Unfortunately the recent climate has hit my companny quite hard. We had three years of doing great business until one large client has decided to turn me over for about 20k. This is something my company couldn't carry. Unfortunately I am a sole trader, so can't write the debt off into a Ltd company. My regular contractors have all had to go and I have had to bail the company out to pay wages and suppliers from my credit cards. Now there is only me left but the company and thus my ability to earn still exists. Despite being at a somewhat reduced rate. Ontop of this the company my wife worked for went into liquidation whilst she was on maternity! She lost her maternity and benefits along with redundancy etc..... The govt are slowly putting their hand in the pocket to cover some of this but it has so far taken 16 weeks to get anything out of them. Thus have had to bail her out as well..... Thus the debt has grown. A sad tale for some but I am bizarely in good spirits with a second child who is adorable, a nice home and even more looming nursery bills and a wife going onto a new job in the next month thank god. Unfortunately the debts have taken their toll on me and sleepless nights are the norm. Have to stay up-beat but really need to sort the finances and focus on earning money again. Thus need some impartial advice based on the points below 1. I want to pay back what I have borrowed. After all, I had a great time spending it and morally feel obliged to return it 2. 70k of the debt is with one bank and their credit cards along with my mortgage. 3. Said bank won't allow me to re-mortgage even though there is 50k equity in the property 4. We invested in a flat as a pension plan a few years ago. I desperately don't want to lose this and am extending the mortgage on this at the end of the year. This will only free up 10k (another 20k equity here at best if we sold it) to go against the loans. Any rent just covers the mortgage and up-keep 5. The company had high overheads (3 vehicles) 2 are on lease hire and one HP. Am trying to sell them as we speak but each one will hit me for another 1k minimum if I sell them, but it removes the monthly strain at least.... 6. As I was a start up business the accounting books look bad - all businesses should lose money in their first two years...... 7. Have spoken with Debt Management firm Debt Sure but I always feel they are saying what I want to here. Besides, their interest adds £14k over 14 years. I am just not convinced. Current outgoings are £1200 per month and they say they could reduce it to £520. Sounds nice..... 8. Was thinking of approaching my creditors direct and trying to sort out a payment scheme. Will probably be paying for 14 years, but at least I can say I paid it back. Opening another company bank account elsewhere so cheques won't get nabbed by my bank and leave me nothing for the mortgage. 9. As I am now back on my own with no contractors, spare cash can be anything from 0-£1000 per month. Things fluctuate quite alot. 10. I thought of an IVA but was told I would probably lose my flat (even if I transfer it to my wifes name) ANy option I take has to protect this wherever possible. 11. All debts are against me and not my wife (relatively credit free!) 12 I haven't defaulted yet, but have had to rob peter to pay paul, and thus have only manged to stall the problem for another month. So thats the story. I don't mind having to pay for years to come, but the monthly worries of 'can I make the mortgage payments' is slowly wearing me down and I know November / december could be a problem. Any thoughts and assistance would be appreciated. |
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Whattodo
| 26-10-2008 09:52 PM |
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Joined: 26 Oct 2008 Posts: 7 | I have just done the SOA for everyone out there and scared the living daylights out of my wife! Well we all have secrets! The SOA is skewed in a few ways. The mortgage and all the bills I have halved as the wife pays the other bit. The cars are currently off the road and up for sale so the running costs only refer to a single vehicle. Child care is again halved. Thus all the outgoings are purely based on my debts. In addition, it is also worth noting that all the vehicles and telephone etc... are off-set against my company. This is why the books can look a little worse than they really are (write off as much as you can against the company I say) Earnings can vary greatly and can change £1000 each way depending on how promptly (if ever with some people) or how busy the month is. What I have put is an average. Out of the debt, £65,000 is with Barclays / Barclaycard (also encompassing an overdraft for the company at £10000) The remainder is MBNA credit card. The mortgage is also Barclays and seeing that times might be hard I got a lifetime tracker below bank rate last year, and would be extremely reluctant to move it. Especially as my earnings kind of prove I can't afford the mortgage at the moment (but not necessarily true) There is also this flat. Now, if push came to shove I would let it go. We did try to sel at the start of the year, but as it is rented I would be breaking my landlords agreement whilst I had tenants in. Thus I would have to end their contract, pay the mortgage myself and then try to sell it. At the moment I simply couldn't afford this. If I could IVA and then they simply took the flat and the theoretical / conservative 40K sitting in it, then I would do this just to get rid of one problem and then rebuild again. Obviously my house and children are paramount, and the primary home is what we really care about. Would be happy to extend this mortgage but Barclays said no. Even though I highlighted I owed them 70k and it would really be in their interest to help out. Yes I know the cigarettes need to go. At the moment they keep me sane, but they are expensive and will kill me (but not before the wife) Satellite can easily go as we rarely watch it. The cars are all up for sale, but they are in negative equity, so you could easily add another 5k to the overall debt if you want. FYI the wife earns abut 41k and has only just started her new job. So, there you have it! A big email but you have my financial history. This is what happens when you go from an income of £110k per year to about £36k!!!! Still, at least I enjoy my work which is more than can be said for the IT stuff! Thanks in advance for your help. |
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| paladin | 26-10-2008 11:17 PM |
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Joined: 06 Jun 2007 Posts: 99 My Profile | Hi whattodo Welcome to the forum and congratulations on your new arrival. Yeah £80k is a small debt - for Peter Jones. I took a look at your SOA and think you need to be a bit more accurate on your figures eg your electricity and gas seems very low at £40 a month for both. Buildings insurance at £10 a month for two properties. Could you go over your SOA again? £180 a month on food may be a bit tight! Q1 Wanting to pay back all of your debts is very admiral but don't be too tied up with the morals of it all. After all creditors weren't and aren't too picky about who they lend to and their ability to pay back. Q2 Definitely don't bank with the same bank you owe money to. Try and move your credit card debts or get a fixed lower rate for them -you'll usually get this when you threaten to move. Q3 Re-mortgaging may be difficult and your equity may not actually be there given the current economic climate. Q4 IMHO having property is not really the best form of pension plan (I am no pension adviser take professional advice before doing anything). Pension plans are usually based on a balanced mixture of stocks and shares. It really is not a good investment if it is going to cripple you financially and it is impacting on your current life and may be limiting your progress. So I would urge you to rethink your flat as part of your pension plan. Q5 For your lease vehicles try www.swap-a-lease.co.uk or www.motorleaseexchange.com Q6 Whether you lose money or make money you should always keep your books in order. You need to get them sorted have you made any tax returns? Q7 How you tried payplan or CCC's for your DMP's. I believe that DMP's should really only be a short term solution or relief as it is highly unlikely that your creditors would freeze the interest on for the duration of the plan. Q8 DIY debt management information here http://www.debtwatchdog.com/DIY-Debt-Management.html. Good idea moving bank accounts. Q9 Use any spare cash to attack your debts. Q10 I think you should take your flat out of the equation by selling it anyway. An IVA may be difficult as you require approval to the value of 75% of the unsecured creditors so if all your debts are with the same bank. You can't transfer assets to avoid your financial responsibilities - it's illegal! Q11 If the house (s) are in joint names then your wife owns half of the equity and she may be able to buy your share of the equity out of the properties leaving you free to go bankrupt if you so choose. Q12 Obviously things are coming home to roost and so you'll have to make very big decisions quickly as I suspect that creditors patience will be not be a commodity which which is abundance. Not having defaulted yet certainly is in your favour. Your options as I see it are : 1. Debt management either DIY, free or fee. Use the DMP as a short term solution until things pick up then focus on paying the money off. The low number of creditors may work in your favour. However, it only takes one creditor to worry about the large size of your debt and your inability to pay it back in a short time for them to take bankruptcy action against you. 2.Bankruptcy - your wife buys out your interest in your home and all your debts will be cleared. I hope I have covered most points, it's getting late. Post back if you have any questions. P |
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Whattodo
| 27-10-2008 08:26 AM |
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Joined: 26 Oct 2008 Posts: 7 | Thanks for that, and one option certainly seems possible. The SOA figures are correct. Remember that these are just my half of the figures that I pay. My wife pays the same, thus they are only half the real total. The flat is self funded so insurance etc is covered by the rent. Interesting one on the car lease, will certainly take a look. The bankruptcy I have no isssues with and I wouldn't have a moral issue here. If I could be out the problem in one year then I can get back on with my life and rebuild. How easy is it for her to buy my share of the house and for me to transfer it over. Surely this is a transfer of assets and thus illegal? I would certainly think about this option as for her to buy me out would only be about 30k tops Bricks and mortar as a pension, sorry wouldn't want to change the attitude on this. I do have some pensions, but they aren't worth alot. Have seen too many peoples pensions vanish. Still, if I die with stress over the debt then its not worth a bean anyway to me! Books for the company are all up together. I have a good and cheap accountant who deals with 'the trades' so she knows the boundaries I can push without seeming greedy. With my luck a tax inspection now would probably finish me off mentally! My problem with DMP is that it will be over such a long time, any default or fluctuations in income could put me in worse situation. I have no problems selling the flat. The only issue is that I would have to get the tenants out and then pay the mortgage myself till it sold. Soemthing which I don't have the cash for. Is there any way that I can just transfer it to my name, go bankrupt and let them take it as some form of payment. Selling it might just be another stack full of hassle. Alternatively, what if I sell my half to the wife along with the house? Thanks for the ideas! |
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| DW George | 27-10-2008 12:36 PM |
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Joined: 01 May 2007 Posts: 195 My Profile | Hi Whattodo Your wife can buy out your equity at any point, provided that the house is valued on current market conditions and that you use the equity to lower your debts. If you were to go for bankruptcy then the Official Receiver would be looking at ways to liquidate your assets and your wife buying your share in the house would be one way. If you go down the bankruptcy route then, all things going well you'll be discharged of your debts in 1 year, in some cases as little as 6 months. You may have an income payment order which will last beyond the year, but at least your debts will be cleared. DMP's do have the draw back that there are no guarantees of freezing the interest and even if it was frozen there would be no guarantees that it would stay frozen or that the creditors patience would remain for 14 years without taking formal action against you. If you realise £30-£40k from your equity, and sell your flat you may have enough money to pay off all your debts or make a full and final offer if the capital does not cover your debts. Regards George |
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Whattodo
| 27-10-2008 01:36 PM |
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Joined: 26 Oct 2008 Posts: 7 | This sounds a little dubious, but could I crank the debts up to get enough money to give to the wife and then she buy me out. After all the money I am going to borrow would fall into my bankruptcy. I could very easily move the money through her family and into her bank account? As you can work out, if I had 30-40k to give straight to her then I would simply put it against my debt in the first place? Also what is this thing you mention about an income order? How does that work? I also read something about a charge order? As far as I understand it would sit against the house till we sell it. This would be fine as we aren't intending on moving and if I can keep paying the equity off on the house I would have plenty of breathing space at the end of the mortgage or when we sold to have accrued the 80k I needed? I honestly don't care if my credit rating is trashed for life as it would be doing me a favour in the long run. Another question, and again it sounds a little dubious, but what if I were to get 'divorced' and under the settlement the wife gets the house? Would that work? |
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| DW George | 27-10-2008 02:30 PM |
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Joined: 01 May 2007 Posts: 195 My Profile | Whoa!!!! You're kidding right? Cranking up the debts and then giving the money to your partner - think about it. The Official Receiver will ask you to account for your sending and justify it. If you don't come up with reasonable explanations then he'll look further, eg your wife's account and putting 2 and 2 together - which he is good at doing - he'll smell a rat. You would not be the first to think you could get away with it. If it is so obvious to you what do you think the OR who handles loads of bankruptcy would be on the lookout for?t As for the divorce thing -mmm I take it you haven't spoken to your wife about this one. Again you're right it is very dubious, there is only one winner in a divorce and they are the lawyers taking £13k in fees on average. A Charging Order is a formal process taken out by one of your creditors to secure an unsecured debt against your house. Whereas an income payments order (IPO) requires you to make payments towards your bankruptcy debts from your income. Nice joke, you had me there! For more information read this What Will Happen To My House in Bankruptcy? George |
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Whattodo
| 27-10-2008 05:34 PM |
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Joined: 26 Oct 2008 Posts: 7 | Thanks, I need to make sure all avenues have been explored before I move forward. Anyway, it was the wife who said about divorce as a temporary option (I do trust her 100%!!!) It seems that I am in between a rock and another rock here with a couple of hard places thrown infront and behind for good measure. Still, managed to finally sell a car today so thats another £189 that I don't have to shell out each month. Just another threee cars and £80k to go!! Just popping out in my canoe..............:) |
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Whattodo
| 27-10-2008 06:16 PM |
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Joined: 26 Oct 2008 Posts: 7 | Sorry, me thinking again. Just looking at this buy out option and wanted to get it straight in my head. House currently mortagaged for 180k and worth about 240kish. Would this mean than half of the 60k equity(ie 30k) would be enough to buy me out or would they need to take into account what I have paid into the mortgage for the past 7 years? Also what about fixtures and fittings etc...... Flat currently 110k mortgage with a very conservative valuation of 150k Thus 40k equity. I am assuming that because this is a joint mortgage that they could only touch half of this 40k ie 20k allocated to me and the other given to my wife which could be used to pay back a large chunk of what we borrow from her family. (see below) My thoughts are that we could at a push temporarily borrow some money off her family to cover the 30k for our house which I could pay towards my debt. Then rather than have to mess about trying to sell the flat and prop up the mortgage till its sold with money we aint got, we just hand this to the official receiver who would give my wife her share (20k)and take what is left (20k) and put it towards the debt. yes I now this might not be the actual sum but talking theoretical here. Thus, by my calculations I get to pay off 50k of the debt and write off the last 30k through bankruptcy? In return my wife gets half the equity in the flat still. Total debt now down to 10k owed to family. I am sure it is not so simple but like I said, I need to examine options thoroughly. If it is this simple, by getting the flat repossesed, would this effect my wifes credit rating? |
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| DW George | 27-10-2008 08:10 PM |
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Joined: 01 May 2007 Posts: 195 My Profile | There are really only two ways in my opinion to deal with the equity fairly. Wait for bankruptcy and your wife buys out your interest in both properties or avoid bankruptcy by negotiating with the creditors a full and final payment. The OR will take into account current market conditions of both properties and the costs involved in the transferring of the titles etc to your wives name. How your wife gets the money is not really the OR's concern but it must not be from assets which are either jointly owned or owned by you. Remember, the OR's job is to get as much money as possible back to the creditors. So if you want to try and avoid bankruptcy by realising your assets you must think about how the OR would handle the situation. That means your wife's actions would have to go along similar lines as described above, so if you have a combined equity stake in both properties of say £50k, your wife must find £50k and that £50k must be used to pay off creditors. If your wife could generate £50k this may be enough to satisfy the creditors without going bankrupt. Do an SOA detailing your income, expenditure, assets and liabilities with a covering letter stating that due to the current financial climate and the downturn you have experienced in business, then if they don't accept the £50k as a full and final settlement then you would have to go bankrupt. A creditor reading that letter would realise that due to the fees an trustee charges, they would probably get less if you had to go down the bankruptcy route. Check out the DIY Debt Management link above for standard letters. George |
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Whattodo
| 28-10-2008 05:34 PM |
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Joined: 26 Oct 2008 Posts: 7 | Thanks for that George. This has all certainly helped clarify and clear my mind a little. As you have said in other posts there are solutions out there. Adding to this it looks like some money is beginning to free up from cars etc with some very close to being sold which could free about £500 per month. Things always happen in three's in this household! The SOA has also helped a great deal as it also made my wife think about her expenditure and we are going through our spending with a fine toothpick. We think £200 per month should be quite easy to find by getting rid of certain extravagances in the shopping trolley along with other small bills around the house. Fingers crossed that one of my clients might actually pay one of their long outstanding invoices and this will be another £4k. Just got my Alliance and Leicester bank account opened and they do free business banking, so this will save at least another £30 per month on transactions. Am Speaking to the bank tomorrow to try and get some breathing space on a payment holiday or onto interest only for the mortgage. So, there is still a long way to go, but the last few days have cleared the mind a little. Will keep in touch and will have some more questions shortly. |
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| DW George | 28-10-2008 09:41 PM |
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Joined: 01 May 2007 Posts: 195 My Profile | If your wife is the same as mine i think you'll free up a lot more than £200 a month. ;) Good luck and hopefully more of your clients will pay up. I am sure I read somewhere that during the last recession, that rather than move, people did up their houses. Every cloud and all that!!! George |
| conwyman | 29-10-2008 07:55 PM |
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Joined: 05 Dec 2007 Posts: 21 My Profile | HI Sorry to hear about your business. I am in IT and struggling with my debt so i know what you are going through. I am trying to keep my business turning over and its seems to be working at the moment but my cash flow gets hit with when the debts are due i was told that going down the bankrupty route was best but i feel that there is a lot at stake for me and i feel that you should look at debt management. Do you still run your business? good luck in what ever you do |
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