Bankruptcy/IVA advice

[musicronny]

Hi,

 

I havent spoken with any debt agencies yet but I was wondering what the best course of action might be and what my mortgage company might say if I went bankrupt or into an IVA.

 

I have around £35000 of debt spread between 1 unsecured loan, 1 personal overdraft and 5 credit cards. I have been self employed for a few years but work diminished to the extent that I earnt nothing from February 2010 - June 2010. Now Ive just started another Self employed role but it isn't turning out how they described and I expected!!! I have spoken with all my creditors who know my situation and we are taking it on a week by week basis with me paying token payments. But I cant see them prolonging this and its likely to end soon.

 

I may have access to a lump sum of around £10000 (loan from family/friend) so maybe have the option of a full and final IVA. Other than that its going to be bankruptcy.

 

My worry with my mortgage company is this. We had to rent out our mortgaged property last year due to our finances. I asked my lender about changing to a Buy to let mortgage but the costs involved and hike in interest rate meant that it was a no goer. Eventually we had no choice and we ended up moving out and moved to cheaper rented accomodation, taking on lodgers in our property to cover the mortgage and part of our rent. We havent notified the lender of this. The mortgage is interst only, the property in negative equity and we havent missed any payments.

 

Would this affect any bankrupyct or F&F IVA?

[Dodgy Geezer]

Hi.

OK. So why do you think your creditors wont prolong your token payments until your circumstances improve. Is this just you worrying. I made token payments to one creditor for 4 years. It didnt work as i was made BR anyway.

Don't borrow anymore unless its the absolute right thing to do. Although i think £10k F+F on £35k would seem very attractive if they thought your bankruptcy was the only other alternative.

I know absolutely nothing about IVAs.So i wont comment there.

You should have no worries with your mortgage co. Mine actively encouraged me to take on lodgers. All you need to do is make sure you get landlords insurance. Its incredibly cheap compared to a buy to let mortgage. You can even get buildings only cover, and rent it unfurnished.

 

You say that the rent is covering your mortgage and part of your rent. Is it a good mark up.? I ask because if you are in negative equity, and thinking of bankruptcy, then it might be worth letting them repossess.

 

Good luck. Please take your time and do what is the right thing for you and your family.

[musicronny]

Thanks for taking the time to reply dodgy geezer.

 

I would rather keep the house on and rent it out if possible.

 

Going back to my debts. Credit cards I have include an Egg card (£5600), Barclaycard (was MSDW then Goldfish) (£7100), Halifax card (£3800), Virgin card (£5000) and a Tesco's card (£1400) that totals £22,900.

 

A loan with Halifax of £11000 and an overdraft with barclays of £3500.

 

I did CCa my Egg, Barclaycard and Halifax card a while ago but left it at that because at the time there was a case in the high court going through. Is it worth taking a look at them again. Egg sent me a copy of what seems like the original agreement, barclaycard sent current T&Cs and halifax sent current T&Cs and a copy of my reconstituted version of the executed agreement. And spelt my surname incorrect.

 

Any advice on this would be of great help.

 

Kindest Regards

[Dodgy Geezer]

The best advice i can give at this stage is, don't rush into anything you might regret later. Although bankruptcy can be very liberating for some, its not to be taken lightly.

 

Definitely have another look at your cards, and there enforceability. There is a whole forum on here dedicated to helping you with this subject.

 

Have you thought about asking Halifax to restructure the loan into a more affordable monthly payment. If they think you might go BR, they might just listen.

 

You are right to keep the house if it is not another financial burden to you at this stage. If you go BR in negative equity, you will almost certainly be allowed to keep the house, but any profit from renting out will be taken into consideration if you have to enter into an IPA.

[debtinfo]

Im afraid that if it is a rental property, the OR will take the rent and not pay the mortgage with it, it also doesent get the same protection (such as the 3 years rule) that a family home does

[Dodgy Geezer]

Im afraid that if it is a rental property, the OR will take the rent and not pay the mortgage with it, it also doesent get the same protection (such as the 3 years rule) that a family home does

 

Thank you. Thats very interesting. A pointless objective in trying to sort out ones finances if the OR are going to be so negative.

[musicronny]

Yes debtinfo, thanks for that information.

 

Obviously going bankrupt would be the last resort. And if my work doesnt pick up as quick as Id want maybe I'll approach them with a F&F settlement offer borrowed off a friend.

[stewpots]

Yes debtinfo, thanks for that information.

 

Obviously going bankrupt would be the last resort. And if my work doesnt pick up as quick as Id want maybe I'll approach them with a F&F settlement offer borrowed off a friend.

 

If you have 10k available v 35k I would go down this route or at least try it

I just about to start an IVA with £88k of unsecured debt but near the end MBNA offered 8k F&F on £28k of debt and that was before referral so probably could do less

They have costs re IVA and would get less in bankruptcy

I think 10k re 35k would be ok. Big question is getting all creditors to agree to it

I had no such money to do this

[loobyloo85]

Hi musicronny

 

Yes, in bankruptcy, the property would be at risk. In the IVA, you would need to declare your property i.e how much it is worth, how much mortgage you have outstanding, the payments etc. This is to show, if any, how much equity you have in your property. If you are considering doing a full and final IVA, you would need to show on your budget that you have no disposable income to pay in on a monthly basis (if the creditors see you have for example £200 a month spare as well as the lump sum, they would rather ask you to pay this in for 5 years, instead of doing a full and final IVA for 12 months). If you have no disposable income, you could look into doing a full and final IVA and this would last 12 months, and your property would not be affected in anyway.

If you do try for a 5 year IVA, with payments and lump sum, or just payments, in the 4th year, your property would need to be valued. If you have over £5000 equity, you would be required to attempt to remortgage to release 85% loan to value of this amount.

[loobyloo85]

cont...

 

If you have less than £5000 equity, you would not have to pay anything into the IVA.

 

I hope this helps - all the best

[musicronny]

Im afraid that if it is a rental property, the OR will take the rent and not pay the mortgage with it, it also doesent get the same protection (such as the 3 years rule) that a family home does

 

I have investigated this further by speaking with 2 IPs and an ex colleague who went bankrupt with a rental property.

 

All have slightly differing views.

 

One IP said that because the rented property was in joint names then the trustee could only take 50% of the rent until expiry of the tenancy agreement. Meaning the 50% my wife takes would go towards the mortgage.

 

Another IP and my ex-colleague said that the trustee would take the whole rent and pay the mortgage payment. Any left over would also go towards paying off the balance.

 

Dont know what to make of it all.

[musicronny]

Well, I've had informal chats with 2 IPs this week discussing all options.

 

The one that I think may be better all round for me is a DMP. Well for now at least and see if things pick up. The reason behind this is because 3 of my credit cards (Egg (CCA 2000), Barclaycard (was MSDW then marbles) and Halifax (CCA 2004)) may possibly have unenforceable agreements. This should put me in a strong position to negotiate with these creditors after being on the plan for 6-12 months.

 

I have spoke with the company 'Vincent Bond' about a DMP

 

Any thoughts would be welcome...

[sequenci]

Hi there,

 

I can see that you're getting some great advice already, you cannot go wrong when both Loo and debtinfo are on the scene.

 

As far as a DMP is concerned the main advice is to avoid the fee-charging DMP providers. The key reason being is that there are DMP firms who can set one up at no charge to you. The fee-charging DMP industry will want to try and tell you that the free DMP providers work on behalf of the creditors, this really is not the case at all. They are there to do what's best all round. Most creditors are MUCH faster at accepting DMP's from the free providers too.

 

The two free providers are:

 

Free Debt Management Plans, Debt Consolidation, Debt Advice and Help | Debt Advice | Payplan

 

Consumer Credit Counselling Service | debt help and debt advice from the UK's leading debt charity

 

If you have any further queries please do ket us know and very best wishes,

 

Seq.

[debtinfo]

Hi, When i said they would take the rent, i of course meant that they would take your share of the rent, the non bankrupt person may do as they wish with their half.

 

The OR would not use any money they take to pay the rent

[debtinfo]

This is from the Official Receivers technical manual

 

31.11.115 Letter to mortgagee when trustee

When he/she becomes trustee the official receiver should notify the mortgagee that he/she is now the landlord in respect of the tenancy agreement on the property and that he/she will be collecting the rent until a receiver is appointed or the property has been repossessed (Annex M). The letter makes it clear that the official receiver will not be using the rent to make mortgage payments.

The mortgagee is a creditor in the bankruptcy proceedings and so the bankrupt should not be allowed to pay the mortgage from the rental income from the date of the bankruptcy order. Mortgage payments on a rented property are not a valid expense of the bankrupt for IPA/O purposes.

[musicronny]

This is from the Official Receivers technical manual

 

31.11.115 Letter to mortgagee when trustee

When he/she becomes trustee the official receiver should notify the mortgagee that he/she is now the landlord in respect of the tenancy agreement on the property and that he/she will be collecting the rent until a receiver is appointed or the property has been repossessed (Annex M). The letter makes it clear that the official receiver will not be using the rent to make mortgage payments.

The mortgagee is a creditor in the bankruptcy proceedings and so the bankrupt should not be allowed to pay the mortgage from the rental income from the date of the bankruptcy order. Mortgage payments on a rented property are not a valid expense of the bankrupt for IPA/O purposes.

 

Its all very confusing, but thanks for that information debtinfo.

[BEBOBEBO]

Hi Musicronny

 

it is very confusing but debtinfo is right. If you went bk the OR would not allow you to pay towards a property that you do not live in. They would take half of the rental income aswell. This would mean Hte other joint owner would have to pay the mortgage themselves by using their half of the rent and making up the shortfall.

[musicronny]

I havent spoken with any of my creditors whilst Ive been working my options out. Which is still up in the air.

 

They are, as you'd expect, calling on numerous occassions every day now. Any advice on what the best way to handle these calls are?

 

Do I answer and talk to them?

Let them ring out and not speak to them?

[musicronny]

I havent spoken with any of my creditors whilst Ive been working my options out. Which is still up in the air.

 

They are, as you'd expect, calling on numerous occassions every day now. Any advice on what the best way to handle these calls are?

 

Do I answer and talk to them?

Let them ring out and not speak to them?

 

Ohh, and all the advice and info is very much appreciated. Cheers

[loobyloo85]

A DMP would be an option for you whilst considering your options - you can come out of these at anytime. Just make sure that you do not go with a company that charge fees. Some companies have IVAs, and Bankruptcy dealings within the same company, so if you consider one of these options later on down the line, it is just a matter of transferring your information over for the other option.

[rapterman]

I havent spoken with any of my creditors whilst Ive been working my options out. Which is still up in the air.

 

They are, as you'd expect, calling on numerous occassions every day now. Any advice on what the best way to handle these calls are?

 

Do I answer and talk to them?

Let them ring out and not speak to them?

 

 

It's best that you write to them and explain the situation to them.

Tell them what options you are considering and that you need time to seek advice.

It maybe a good idea to just send them a token payment each month, usually something small like one pound each.

 

Only communicate in writing and never on the phone. Keep all letters that they send and keep a record of all letter that you send to them.

[musicronny]

Well, it looks like a DMP for the time being. Ive spoke with a private DM company and Payplan and have to decide which ones best for me.

 

For information purposes this is what I've found out about Bankruptcy and IVAs when you are a sole trader and you let your jointly owned property out whilst renting another property yourself.

 

Bankruptcy:

As debtinfo explained if I went bankrupt the OR would take my half of the rent received and my wife would have to pay the mortgage with her half and make the monthly mortgage payment up. As we dont live in this property the 3 year rule doesnt apply, its indefinate or until the OR decides. The OR could let my wife buy my beneficial interest, thats if the mortgage company allowed her. Then this wouldnt apply.

 

5year IVA:

As Ive only just started a new self employed job I would have to give an average of what Ive earnt over a period of, say, 3 months to work out my disposable income. Once my IVA is in force, if I earnt anything over what Ive declared as my monthly income then 45% of that extra income would have to be paid into the IVA.

 

Very confusing but at least I think I know the details of each solution now. I think my preffered option would still be th F&F IVA, but that money might not be available anymore...:-|

[sequenci]

I'm to see that you're doing lots of research prior to choosing your best option, it's really refreshing to see! As far as a DMP is concerned there really is NO point in using any firm that charges you an administration fee as it will cost you more in the long run and also your creditors may not agree to freeze interest and charges if you're paying a percentage to the DMP provider. Payplan or CCCS are the only way to go as far as a DMP is concened (unless you choose to self-negotiate of course!).

 

Best wishes,

 

Seq.

[musicronny]

Cheers Seq,

 

I do actually have a telephone appointment booked with Payplan later today. The only reason that I am considering a firm that charges is because I was led to believe that CCCS & Payplan dont work as hard to get the interest frozen. This is because they are funded by the credit industry. And all of my creditors support Payplan. This is the oly reason I am sceptical about Payplan.

[sequenci]

I work within the credit industry in my day job and can assure you that you'll have a MUCH MUCH better chance at getting your interest and charges frozen via CCCS and Paylan than a fee-charger. Many creditors simply refuse to do so if you're paying a fee-charging firm a percentage for themselves. It is a common sales ploy for a fee-charging firm to tell a potential customer that the likes of Payplan and CCCS work on behalf of the creditors, that is total and utter tosh. For sure they DO receive a small kickback to make the DMP viable but it doesn't mean that they are in it to help the creditors. Of course any final decision is your own, just don't get duped by clever sales techniques.

 

Best wishes,

 

Seq.