Is bankruptcy an option or good idea in this instance?

[1stlifeline]

My partner and I have a lot of debt and are doing our best to sort it out. We also have a large mortgage and a secured loan which we are struggling to pay. Our house is up for sale at the moment and when we get it sold it will help pay off a lot of our debts. The problem is that both myself and my partner have individual debts and there wont be enough equity to pay everything. Would it be possible, or even sensible, for us to clear the debts that are in my name with the equity (which technically is mostly mine as I put down a large deposit on the house when we bought it) and then for my partner to declare bankruptcy. Even after selling the house we will still be making substantial payments out each month as even though we have been to the cccs and made payment arrangements with out creditors most are still banging on huge amounts of interest each month and we will also still have to rent. It seems to be a vicious circle, the more we try to solve the problem the worse it gets.
Would it make sense for him to declare himself bankrupt, I have a small business so I dont want to put myself in that position but he is fine about doing it if it will help solve our problems. Its just that Im not sure about the pros and cons, I tried looking at the bankruptcy thread but it looks very complicated and I would just appreciate it if anyone could put it in a sort of compressed laymans version or advise from experience.
Thank you.

[shane5408]

Hi 1stlifeline,

Welcome to CAG. I am by no means an expert on bankruptcy, I'm sure a learned cagger will be along to advise. I would also recommend speaking to the National Debt Line.

You mentioned earlier that you and your partner have individual debts as well, I take it these are unsecured ones, loans, credit cards, catalogues etc?

If So I would suggest sending out CCA requests to each creditor to establish whether they have a legal right to collect the debt. To do so they must have a valid executed agreement which conforms to the consumer credit act & various regulations. In most circumstances, especially if the accounts go back a few years creditors arn't able to supply fully enforcable agreements which can be a great bargaining tool for you.

Lastly, Do you think there might be any unlawful penalty charges on any of your accounts? If so you could send a S.A.R - (Subject Access Request) request to each creditor, work out all the charges and begin claiming them back, you might be surprised how much they amount to, especially if you have been through some financial diffuclty and missed the payments.

kind regards,
shane

[powelll]

I think you would benefit from expert advice from somewhere like National Debtline - this forum is great but you really need some quite in depth advice. Its free & confidential & they know their stuff on bankruptcy. It's freephone 0808 808 4000.

The main issue would be the property as you will both be seen as having a 'beneficial interest' in it regardless of whose name is on the mortgage.

If you sell it, pay your creditors then your OH goes bankrupt the OR will look at the property transaction to ensure that you both had your 'share' of the equity. They will loook at how the share of the equity that was your OHs was distributed ie have some creditors been unfairly prioritised over others?

Really we would need more info to be able to offer specific advice - is your partner working? How much equity in the home? Any other assets? How much debt and what kind of debt?

[powelll]

I would also recommend speaking to the National Debt Line

Great minds...

[shane5408]

Originally Posted by powelll

Great minds...

indeed

[1stlifeline]

Thank you for the replies. We have been to the CCCS and they advised us to sell the house at the beginning of the year but we did try to hold on to it before finally admitting defeat in September and putting it on the market. we have the mortgage and a secured loan on it which we would be able to pay off comfortably when it sells. Our other debts are 2 loans which my partner had when we met as they were taken out for his former partner and also we both have credit cards which we have got agreed payments on but they are all still adding interest even though we have sent them all a statement of earnings and income/outgoings.
The thing is that we dont mind sharing out the equity across the debts to get rid of some of them but we dont see an 'end' to the situation which is why we thought about considering bankruptcy once we ahd no home they could take off us. But as I said it wouldnt be suitable for me to take that step as it would impact on my business which I am working really hard at to try to get us back on our feet and get some quality of life back.

[1stlifeline]

PS, sorry Powell. I meant to mention, OH is working, we have no other assetts and have debts totalling about £50,000 with only about £30,000 equity in the property. Also when we sell the house we will need to use some of the equity to get rented accomodation.

[sequenci]

Hello there.

Bankruptcy is ONE option and well worth talking to one of the debt help charities about. I would like you to also consider a full & final settlement. As you have equity you'll be left with a lump-sum which you could use to make offers to your creditors. You WILL need to ensure that the creditors are aware that a F&F settlement is the best deal for them and always go in at a low amount to start with. Have a look:

National Debtline England & Wales | Debt Advice | Factsheet 24 Full And Final Settlement Offers

There are lots of implications with bankruptcy that you'll need to consider such as effects on your credit file, work, furture tenancy agreements.

There is also the cost, which is £485 per person.

[1stlifeline]

Thank you sequenci. We intend to give the full and final settlement a try. Thank you for the link.

[sequenci]

Originally Posted by 1stlifeline

Thank you sequenci. We intend to give the full and final settlement a try. Thank you for the link.

remember to go in at a low figure with room to increase if need be.

also CCA them to see if they can legally take court action, if they cannot then they may be more receptive to a lower offer

[shane5408]

Originally Posted by sequenci

remember to go in at a low figure with room to increase if need be.

also CCA them to see if they can legally take court action, if they cannot then they may be more receptive to a lower offer

edited

[powelll]

I agree with Sequenci / Shane re F & Fs - I would definitely consider these first given the amount of equity you have. From what you are saying the implications of bankruptcy may not make it an ideal option ( remember as you have joint credit you have a financial association so will show up on each others credit ref searches ).