Questions you have before making a decision to go Bankrupt and the Bankruptcy process

Moderators: TalbotWoods, JaneClack

By Missymoo
#224926 Hello

I don't really know where to start as I feel that I'm sinking fast and need a hand to pull me out. We have been struggling for some time now and have a dmp in order 190 per month, mortgage is around 860 with insurances, other debts 150 per month and now arrears on utility bills. One of the mortgage accounts is 300 per month and on 29k, we will end up paying back over 80k due to interest. Ive had enough. Each month we are borrowing off my sister to make ends meet, have young children and an income of around £2000pm tops with child benefit between us. Before we start the outgoings are around 1600k thats without food/petrol and extras so you can see we are struggling big time. The house has been up for sale a while and we just reduced the price 10k now in at least 7k negative equity, any more and we are in serious negative equity but it wont sell for the price its up for judging by all properties in the area.

We dont know which way to turn really and if we drop the price, we walk away with at least another 15k loan to the second mortgage co which will take years to pay off if they allow to do this.

What I really want to know before I bury my head in the sand further is what my chances of going bankrupt are and whether I will end up owing creditors/mortgage after bankruptcy, I get a bit confused when I check out bankruptcy sites. I'm sure I read somewhere that you have to make a payment for years after declaring bankruptcy. Can anyone help as I cannot see what other options we have right now. Many thanks for your time, I am in the uk.

Just to add - I just read that houses are not included in bankruptcy (ie secured lending) so if we can't sell unless we end up in negative equity big time, how do we go about ridding our house. I also read that bankruptcy is placed in the London Gazette and a local paper that was on an up to date advice site - on here Ive ready it doesnt go in the local paper. Can anyone advise what is best to do as it seems that the mortgage we have strapped around our necks of £144k is going to be the biggest problem. We are now in £1900 arrears too.
By nomlas
#224929 Hi Missymoo, sorry I dont know a great deal about BR but I am sure someone will be along soon to advise, it can be quiet on here during weekends. I do know that it will not be put in your local paper unless it is considered newsworthy.
User avatar
By JaneClack
#224935 If you do not want to stay in the property then any mortgage shortfall would go into the bankruptcy - so you would not have to pay that as would any secured loan.

If you can afford the mortgage and secured loan payments and wish to stay there then you could each buy the "notional" beneficial interest for £1 plus the inhouse conveyancing fee. Read the leaflet What will happen to my home? at www.insolvency.gov.uk in the publications section.

If you cannot afford to pay this then you could think about renting - but this will mean that you do have a surplus income and the Official Reciever/Trustee will look at arranging an income payments arrangement - again you can read about that at the same site - another leaflet - on Income Payments Orders.

There are a lot of posts on this thread that you should read through as you will find a lot more information there!
By Missymoo
#224937 Hi Sarah

Thanks a lot for that, will have a good read when I get my head together. I feel utterly drained from all the thinking and re-thinking today. The whole point of selling the house is that the mortgage and debts are crippling us.

If we have surplus money after bankruptcy, this would be just enough to live on and part of the reason to do this otherwise its simply not worth while. I wasn't aware that going bankrupt meant you ought to be left without any surplus income. I doubt its not as cut and dry as I am making it sound so I shall have a good read.

Thanks again.
User avatar
By JaneClack
#224938 No, bankruptcy does not mean you will be left with no money!

Basically the cost of going bankrupt witll be £450 apiece for the bankruptcy deposit and £150 for the court fees. However, you should both fill in forms EX160 as you may get a discount or even have the whole fee remitted on the grounds of hardship.

An income payments agreement is arranged with the Official Receiver/Trustee and if you are deemed to have a surplus income of over £100 then they would want a proportion of this to be paid into the bankruptcy estate for up to 36 months if this can be afforded. There is a sliding scale from 50 to 70% the more surplus income you are thought to have - and they are a lot more generous than anyone would be in a dmp scenario.
By Missymoo
#224939 That is really helpful Sarah.

Basically I feel we need to rid the house completely in order to start afresh, the mortgage with necessary insurances are almost 900 and our wages are £1900, we simply cannot afford it with everything else.

If we reduce the price of the house again, we can pay the main lender off in full and around £10k of the £29k we owe to the other. Weve paid over £8k back on the secured loan and still owe more than we borrowed because of how they work the interest out, its soul destroying.

I guess this means the £19k left on the loan along with £26k dmp can all go into the bankruptcy am I getting this right? or do we just pay what we can on the monthly mortgage payments ensure we have enough to live on and let the house go into the bankruptcy from the start. When my husband is around tomorrow, we will have a good read of that information.

Does anyone know if I can stop paying the dmp and just make nominal payments to the creditors, that would be a start and free up some cash this month. We havent missed a payment yet. I think we made a huge mistake going into debit with the main mortgage lender rather than secure loan as the secure loan lenders put way more pressure on us to pay up to date. We really are struggling.
User avatar
By moaner
#224950 I have been in your position, my advice is to act fast and :

1. STOP paying the DMP immediately (if you are looking at bankruptcy, there is no point paying it, you need the money more :)

2. if you are sure about giving the house up, STOP paying the mortgage and secured loan immediately, save this money for a rental deposit ( the companies will ring you but my advice is to change your phone number and do not speak to them on the phone, send them a letter informing them that you are not in a position to pay the mortgage/secured loan and that you want to give the house up) You probably won't be able to sell it anyway with the secured loan not being paid off, this happened to me, I wasted time, money and stress trying to do the right thing by selling the house :roll:

3. if you have an overdraft, tomorrow go and open a basic bank account to get your income paid into, with a bank not connected with anyone you owe money too

4.try and secure a rental house immediately (sounds drastic) but you need to get a roof over your head sorted out, do an income and expenditure of priority debts first, rent, council tax, utilities, then see what you have left over and consider your options, yes, if you go bankrupt you may have to pay an income payments order for 3 years but it will not be for all your surplus, you will have enough to live on and a bit left over and NO DEBTS :)

We did all of the above and waited 7 months in our privately rented house before we went bankrupt, we took advice from CAB in the meantime and we were trying to save the fees up for 2 bankruptcies, we got a bit of hassle from creditors by post but no phone calls as we changed the number

Doing it this way, you can be free of all your debt, the secured and the unsecured :D
By Missymoo
#224952 Hi Moaner, its good to have different angles and advice on this. Thanks.

I was hoping to sell the house and then put the surplus (its not equity, we dont have a penny equity) the surplus would be what we owe the secured loan, all into the BR pot, but from what you are saying, just apply for BR and let someone do it all for us, I dont even know what that someone would be or where to start. However, opening the account seems a good place to start. I take it I will need to go to branch to do this, Ive used internet banking that long I dont know about branches etc.

I assume its perfectly acceptable to the application for me to have another account with money in building up for rented accommodation. I have put an interest forward for a council property been on the list for years, if I was successful I take it I could move into it, even having the mortgage? Not sure how this would work but a council house is about all we can afford or a cheap terraced.

What a nightmare, my head hurts. I am removing a set amount for petrol and shopping, at the end of the day we have kids and I always leave us short having to beg borrow and steal, paying the DMP. Of course it worries me about ccj's etc as we have no surplus cash whatsoever.

Are there any restrictions when doing an expenditure form, are we allowed anything other than basic shopping/petrol. The DMP was a relief but certainly not cured the problem long term. Just out of curiosity I thought the main mortgage lender could force the sale through, leaving an unsecured loan option with the 2nd lender (secured loan)? hoping then to put that into the BR.

So many questions sorry, buzzing around in my head. Thanks again, its really useful and I feel a bit of relief for talking about it.

When you say left with a bit left over, what's a bit if you dont mind me asking?
User avatar
By moaner
#224964 what I mean is, you just walk away from your house, let it get repossessed, you cannot afford it anymore, why waste time and worry over it? you have tried to sell it, I did too, even found a cash buyer, but because there was not enough to pay off all the secured loan, (the mortgage would have been paid off in full) the secured loan company blocked the sale and refused to lift their charge on the house, you will probably not be able to sell the house unless you get an offer large enough to pay off the mortgage and secured loan in full. So in effect , you have no equity, you are in negative equity. just leave it all for the mortgage company to deal with, they will repo the house and then sell it, thus turning the secured loan into unsecured debt, if you go bankrupt, it will all be included and written off in your bankruptcy

you can go and rent a house, you dont have to explain your reasons, I got one and when asked by the letting agent, I just said we had sold our house and wanted to rent for a while, if you have defaults already you might struggle with the credit check but you can rent privately direct from landlords who dont credit check

with regards your income and expenditure, just put down EVERYTHING you spend, you have to be able to live no scrimping, don't forget things such as haircuts, prescriptions, car tax, maintenance, house insurance, opticians, etc

we did not get an income payments order, it depends on if you will have over £100 per month left AFTER you have allowed for living costs, this is your disposable income, so all in all, we are far better off now from being bankrupt then having a house with a huge mortgage and secured loan and paying every penny we had on debt repayments

in your shoes, I would just walk away, let the house get repo'ed and then sold, get yourself in a rented house, change phone number and bank account, save up the fees for bankruptcy, ring your local court and see if they have a waiting list, if so, book your appointment in advance, you can try your local CAB and they can advise you and help you with filling in the forms, on the day, you turn up with your completed forms and the fee, sometimes you dont even have to see the judge (I didn't) if you do, he/she will ask you have taken advice about bankruptcy, just say yes, and then the bankruptcy order is granted. You will then have an interview over the phone with the official receiver who will ask you about dates you took out credit and what it was for, etc and then go through your income and expenditure to see if you can pay anything towards an IPA

hope this helps
By Missymoo
#224965 Thanks moaner, yes great help and I like straight forward talk and advice so it sinks in. I guess what Im scared of is living in a small town, everyone knowing my business, kind of a pride thing. Also getting to to point of us both accepting we are in a no win situation and moving forward is difficult. We just did the figures again and we are at least £1k per month short in reality hence juggling around and borrowing of a family member to sort overdrafts out once.

I think I was more concerned how the mortgage lender would react not paying yet paying rent in a different house, what the legalities are there. So how do I get these forms and set the ball rolling if we go down this road and how do you get an OR, Ive no idea could ball my eyes out with pressure but clearly it seems you found it a positive move. Im also concerned about being asked why I took the credit cards out years ago and what I spend the stuff on, it was a range of things, just frittering the credit cards away Im ashamed to say and much on living expenses.

Thanks for the info.
User avatar
By JaneClack
#224967 The site you need to visit to get forms etc is www.insolvency.gov.uk - you would need forms 6.27 and 6.28 or just ring your local county court and ask for a bankruptcy pack - they send them out in the post all the time.

Have also pmed you some information.
By Missymoo
#224970 Sarah

That is so very clear and helpful of you I have read much but will sit and read thoroughly tonight with my husband, its pay days over the next week and we need to think long and hard about this situation. I defo think its a viable option and as we are hundreds per month short, hence the extra loan and dmp etc, its a route that we may be able to go down. Just got to get my head around a few things.

Thanks again, that takes a weight off and most of the negatives of bankruptcy, we were aware of anyhow. We certainly are not worried about credit ratings etc, we want to shift the debt for good, not start with it again. Thanks so much for that.
By Missymoo
#224979 Thanks Johnny and all.

I know deep down Bankruptcy is probably the only option and whilst the thought of being debt free would be amazing, after reading and hearing stuff on the CAB site (cannot get through to them), things like restricting orders for up to 15 years and not all debts being wiped out, leads me to think it could be harder than it looks.

At the end of the day I owe 26k to a dmp, 5k to a family member which has to be paid, 29,800 to a secured loan and the mortgage 115k with the house not selling for anything like what we want to cover. I guess that makes me a candidate for bankruptcy based on the fact our incoming is around 2k. To take the plunge knowing half the town and kids school will probably find out is quite a plunge. I realise our situation has to come first really I do, but it really isnt easy to feel and know that others may well know. What to do Ive no idea, if I could get in touch with CAB I could chat in more detail and maybe make an appointment. Will keep trying. If I stop paying the mortgage which would mean that we dont have to borrow for food etc, then I could well be out of the house before the BR goes through, how does that work, not really understanding the loop holes in BR its not all sinking in.

What also scares me is the interview thing and how these orders can go on after BR if we intentionally borrowed money knowing we couldnt pay it back. Does anyone borrow this much money knowing that they can truly pay it back. I had a credit card company up my limit from 2 to 10k when I was out of work. It kind of went down hill and yes Im responsible but how do I get away with going BR knowing I spent without a plan to pay back.