Bankruptcy the debt magician

[progenic7]

I have read many articles lately and heard quite a few snipets on the radio about the reasonably new rules concerning bankruptcy, it would seem that a person can be £100,000 in debt and declare themselves bankrupt. With 6 months all adverse affects from being bankrupt have gone and they can start from fresh as if nothing had happened.
Seems like the kind of thing that alot of people could find very useful in this type of situation.

progenic

[cheddar]

Not sure of these new rules myself. I would always suggest that someone considering bankruptcy always get professional advice, a lot of people don't understand what effects it can have or what is actually involved.

[me_n_my_kids]

hi there

im no expert, but from what i have heard about bancrupcy it certainly doesnt come free from adverse effects. you must always admit you were declared bancrupt on forms that ask, it limits what kind of job you can do, its published in the paper, and you can be forced to sell anything deemed as valuable, ie car, home, laptop etc. definatly something not to be taken lightly.
hth

[The Phantom]

Hello

my husband was declared bankrupt in October last year and it certainly is not as nice and easy as it may appear
Although the laws have changed you can still loose any assets that will be claimed and sold to pay off your debts (property if it holds any equity, apparently the trustee will consider selling your house if there is at least £8000.- equity in it as he has to consider any fees associated with the sale, it doesn't even matter if you only part-own the house with someone else, they can still sell it and give the other person their share of the profit, simple as that. Also your car or any other vehicle you own if it has got value and is not under an HP agreement, any other valuables if they would contribute enough to repay your debts), you will loose your bank account and all money in it will be frozen and unaccessible as soon as your bank learns about your bankrupcy (you have to tell them and your trustee / insolvency company will write to them anyway) , most banks will then terminate your account and any other business with you immediately even if they are not a creditor of yours and your account was in good standing, then try and find another bank that is willing to take on a bankrupt person...currently only the Co-Op and Nationwide will consider you for a basic cash in and out account with no cheque book or guarantee card. Although Co-Op may issue you with an Electron card, widely accepted in about 5 stores nationwide. (my husband is the proud owner of one these days). Your bankrupt status is put on your credit file so don't think about any credit cards, loans , bank accounts, HP agreements, buying a new car, re-mortgages or anything for a long time even if you are a discharged bankrupt. We know of a woman who was discharged 6 years ago and still can't even open a bank account.
Once you are discharged you can write to credit agencies asking them to remove it but you usually have to produce your discharge certificate every time. Apparently your local court will be happy to sell these to you for about £60.- per certificate.
You will also be disqualified from certain vocational , public or governor positions. My husband wanted to apply for the position of a parents school governor of our daughter's school, because they were looking for some but of course he can't as he is bankrupt.
The upside is all unsecured debts that can't be paid off with your assets will be written off and you are protected by law from being pursued by your creditors. They have to communicate and negotiate with your trustee / insolvency practitioner and not with you
It will cost you £475.- to declare yourself bankrupt up front to cover court fees.
Don't think it is all that nice - it is not

[progenic7]

point taken and acecpted however the people i were refering to were 70,000, £100,000 in credit card debt and from what they said it was a godsend being able to do it. One of them (of which there was about ten in all )was about to commit suicide !
so this was pretty desperate stuff for these people, then it seemed financial advisors told them how easy it was to get out of it and that was that.
Aparently six months later all previous history of this was gone (what was worth anything anyway) and ok they can no longer be a cival servant or compnay director but still, from their own mouths it saved their lives and totally turned them around.
After being in misery for years and years the new rules let them off the hook in a very short space of time !

[The Phantom]

Sure, as I said, it wipes off your unsecured debts but if you have any, it can also wipe off all of your assets including your home. And I find it hard to believe that there was no trace of their bankruptcy after six months, as you usually do not get discharged until after 12 months of your bankruptcy and the trustee can hold on to his interest into your property for three years to see if any equity develops if there isn't enough to start with.
Most people find it very hard to re-build their credit history after bankruptcy as you are flagged up everywhere. As I said there are cases where people were unable to open even a bank account six years after having been discharged.
But of course, it has the benefit of getting rid of debts you simply cannot afford and as in my husbands situation it was the only option left
Some people call you a thief and fraudster for doing this , but they do not understand that lenders are too keen to lend money to people, it is too easy to get into debt and circumstances can change in one's life so you cannot afford it anymore. Tht's also to consider

[LondonPam]

A bancruptcy will be noted on your credit files for 6 YEARS not 6 months.

Whoops posted as you did Nicole. Glad you mentioned the six year bit!

[gizmo111]

All very good points above- Bankruptcy should be considered as a last resort not as a quick fix to overspending. Also on the downside once discharged which can be done in as little as 6 months, apart from having the banking problems mentioned above, when you do get into a position to but a house or remortgage you wil lfind only sub prime lenders will look at you in the 6 years, nd the rate you can borrow will be heavily loaded and will cost you dear. You still even after the 6 years have to declare that you have been bankrupt previously if asked. The upside is of course you can wipe your debts out and start afresh.
Some more details on insolvency here http://www.consumeractiongroup.co.uk...ling-debt.html

[progenic7]

To all,

again all points taken in and agreed with, im not in any way trying to trivialise bankruptcy. The particular cases i heard were maybe unusual and im not exactly sure how they managed to lose most of the history in these cases. However for these particular individuals bankruptcy lierally saved their lives. It is something ofcourse not to be taken lightly and in some cases can cause many problems in the future too. The guy with the £100k debt however thought it was the best thing since sliced bread, and with the help of a financial advisor seemed to get over most of the hurdles associated with this.
Clearly loosing your house is a terrible thing and clearly a last resort as previously said, but for some people it is a viable option.
The particular cases i heard however didnt have a house of their own, infact they had nothing to start with. So for these individuals it made great sense to be able to get rid of a 100k debt.
food for thought all the same

[cross379]

Dear progenic7 and any others reading,

You are right in what you say about bankruptcy being a godsend for some people, the truth is it can be a huge relief if you have come to terms with what you can lose thats if youve got anything to lose in the first place. For me personally I felt no negative effects of it only really positive ones, I now live in rented accommodation and have done for 18months in a very nice and better house in a better area, £100 a month cheaper than my high interest Kensington mortgage on my vile property that I couldnt even afford to maintain which was in a very rough area of the city with no more than £5k of equity left in it (thanks to SPML £6500 redemption charges 1 year earlier), I never lost my car (black horse) as the official receiver told them they didnt have to take it off me, so i ensure they receive there payments and thats all they cared about - getting there money. The landlord couldnt care less as long as he gets his money and thats what he told us. Barclays were informed of the bankruptcy but never closed our accounts as they were simple cash accounts with no credit facilities attached to them and they said they had no intention of closing them. I also now have a co-op account with an Electron card. I used to be terrifed of the phone and terrified of the post and started to suffer with extreme anxiety and depression whilst looking after our newborn in the middle of the build up to the appointed date of bankruptcy, now im not so nervious of the post and the fone and generally alot happier. Perhaps my case is very out of the norm and if youve got a lovely home and a nice credit rating then it must be the worst thing in the world! Im not interested in taking on bad credit or secondary lender mortgages and am happy to wait until I can have a decent one - not bloody spml or kensington again! So what I was dreading turned out to be a positive in the end for me, I do feel better off but then im not paying anything back so maybe Im the exception!!

[gravitas]

perhaps lenders are too keen to lend money, but arent we (the consumers) too keen to borrow? There maybe irresponsible lending occuring but i would say there is also irresponsile spending to, at what point do we take responsibility and admit that we arent prepared to save up and wait and want everything now?

i would say there is no upside to bankruptcy, i know someone who was made bankrupt over ten years ago and still cant get a high street lender to even entertain giving him a mortgage despite having a spotless record since

[gizmo111]

There is obviosuly a case of responsible spending but the majority of people who get into major debt that they can't manage are the victim of circumstances.

I know somwone who had bank loan, credit card and mortgage a part time a job and 2 pensions coming in, within 4 months he had hi leg amputated, he lost his job cos of his disability and his wife suddenly passed away. He was in the position then of losing over half household income, no prospect of increasing income andstill ahving debts to pay - he therefore did best he could and kept getting more cards to get cash to pay off bills, then bank increased his loan, he want from having a good financial record and manageable debts of around 10k to over £30k in debt, just to get by - no irresponsible spending here.

Likewise there are people who have lost their jobs, relationships have broken up, ill health etc who just cannot cover what they did before
te unexpected happened.

And nowadays with young people starting off their working life in debt through the student loans system, more and people will face insolvency when life crisises occur as they are not being the chance to start budgting their money well.

I think financial education should be part of the national curriculum, I try my hardest to teach my kids how to manage their money - but I personally learnt the hard way - after a divorce with huge debts to pay and little earning capacity.

[cross379]

Gizmo, thats a sad story and i would agree sometimes it can be a dramatic change in circumstances that can lead to serious financial hardship, I know that when my husband and I split and he stopped paying things thats when it all started to go down hill for me, I panicked during the separation and there were no overspending in my house not much chance of it. My husband wa a financial advisor and agreed to a remortgage and took on financial commitments that looking back might not have been in my best interests and the fing is these things carry on with you into new relationships/partnerships etc and in my case led to the ultimate penalty being paid. When you cant pay something youve always taken for granted you can pay for you panic and end up borrowing elsewhere even at silly rates just to make sure you can get back to norm, but of course you are in reality getting further away from norm as you go deeper into borrow to pay and the same again and again until you r deep in a vicious circle.
God talk about depressing! and there was me trying to look at the bright side of bankruptcy cos in my logical mind there has to be pros and cons to all!!

[progenic7]

thanks everyone for all of your comments.

To be honest i started this thread by playing devils advocate, i wanted to see what the reaction was on this subject in general. The caes i heard on the radio are very real and as i say again to them bankruptcy was a godend.
Im slightly embarrassed i started a thread and dont know all the legal points to back it up. However what i do understand is that the law has only recently changed (last year) and as for people saying their life has been a nightmare for 10 years, these people had 75% of all negative effects gone within six months.
Now im not sure how they did this, but somehow the laws have changed and become alot more relaxed so presumably certain records ect can be removed earlier than before.

The particular people in question were able to open bank accounts, rent property, get another job, get all utilities connected, and basically start living again. Bearing in mind these people were extreme cases and one in particular was about to kill himself, such was his misery from fee upon fee upon fee, the actual debt had quadrupled from fee's themselves !

Im sure there are plently of people out there that would stick their hands up and say i am or was very irresponsible with debt and spending in general, i know i would ! I think as consumers were encouraged to take on debt, hundreds of adverts on the TV from banks, mortgage companied, cars, settee's, holidays you name it someone is offering 0% till christmas. How can people resist this, its very difficult to keep a level head when you really really want something.
Its only been in the last 2-3 years i have actually developed the ability to resist credit and only tend to buy things i have the cash for, im 35 now so thats a fair few years of irresponsible spending before i realised the errors of my ways.
Back to the point, im sorry i dont have all the recent statutes or whatever it is that has made such a difference to bankruptcy. However one thing is for sure in certain circumstances bankruptcy is a life line, that true should not be taken lightly. Though for many people in recent months seem to be taking advantage of these new rules, im not sure about the moral implications on this maybe that should be for another thread, or not !

progenic

[gizmo111]

The enterprise act 2002 was the change that made BR easier - I think it is a good solution for people struggling and the removal of the stigma can only be a good thing. The majority of people who go BR don't take the decision lightly and it is a last resort solution, but the relief of having no debt and ast last being in control must be fantastic.
Bankruptcy will stay on your credit file for 6 years -
The link I put up earlier will give you more info on life as a bankrupt

[cross379]

I know bankruptcy used to be a terrible thing years back, but as im a recent one i come under the new laws - maybe thats why i feel so uneffected on a day to day basis - cos ive have the normal things like bank acct, rented house, car etc and grateful for that - very! The only real positive to come out of it is that feeling of relief and the control I have back which feels great - apart from that its still an extreme last resort not to be entered in2 lightly and hopefully with groups like The Bank Action Group and others most people out there can avoid it and enjoy going for there charges instead and gaining a bit of control back (i wish i knew of these sites back in Jan 2006!, might just have put off that bankruptcy appointment).