Questions about bankruptcy

[stumpydave]

Might be a little long winded so bear with me, but worth explaining my current situation first:

About 2001 I got into trouble servicing my debts. I was a problem gambler and built quite a substantial sum of debt up. Through payplan I negotiated reduced payments. All creditors were understanding except Natwest. Ended up with a CCJ from them.
Earlier in the year I lost my job, and as such missed 2 months payments. It looks like Natwest are now going for a Charge on my Property.

I have also raised a complaint via the FSO about the way the Natwest Loan was originally sold to me as I believe is was a classic case of mis selling & potentially fraudulant activity by a member of staff, but that is another matter and probably wont come to anything.

Anyway, my current debt is standing at around:
70000 - unsecured & managed by payplan
85000 - Morgage
53000 - Secured loan (second morgage)
All this is currently costing me about 1700 a month to service.

My wife works part time but is no big earner. I am currently taking home around 650 a week contracting.
House is currently valued around 155000 and on the market, but dont expect to sell (reduced from 179950 3 months ago).
Even if we do sell for 155000, after fees etc we would be left with around 14 / 15k.

I have two young children (18mnts & 3 yrs), and would frankly like to "wash my hands" of my debt problems which I have been struggling with for 6 / 7 years now. Natwest have really now left me feeling like I've had enough of trying to manage this and be responsible about it.

So my questions are:
1. If we sell the house before Natwest get a charging order on it do we keep our money? Do we have to notify anyone that the house is being sold?
2. If I do take the plunge and declare bankruptcy what can legally be taken and sold to pay my creditors?
3. If something belongs to my wife, can they take that too?
4. As there are young children involved, is the house taken immediately when I declare bankruptcy?
5. Am I allowed a bank account, if not how can I be paid?
6. I have 3 or 4 pensions dotted around, what happens to these?
7. Will my wifes credit file be affected?
8. Will the fact that I was a gambler reflect badly on me?

Basically I dont really want bankruptcy but there are two things driving me towards it:
1. Really had enough and want out.
2. Want creditors to get equal amounts, not Natwest to grab it all.

Any advice appreciated.

[WendyB]

Re: Questions about bankruptcy

First off, well done for trying to get this sorted. It must be hard admitting to the gambling problem but seems like you are getting back on track now, or trying to at any rate.

Secondly, I don't know that much about bankruptcy but there are people on here who do. My first thouhgt is to avoid it if possible but as I said, I'm no expert.

Do you have any bank account charges or credit card charges ongoing, if so, what's the current position on them? If not are you planning on starting any claims for them?

Post up a breakdown of all your debts, who with, how much, current state of play etc.

Once we've got the whole picture will be able to advise better

Wendy x

[Guest]

Re: Questions about bankruptcy

1. If we sell the house before Natwest get a charging order on it do we keep our money? Only in as much as the CCJ will stand and they may use alternative enforcement and recovery methods. A charging order is only one way to secure and recover debt. Do we have to notify anyone that the house is being sold? There is no obligation to inform any of your creditors. Although the secured creditors will find out before the property is sold.

2. If I do take the plunge and declare bankruptcy what can legally be taken and sold to pay my creditors? Just about everything. Bankruptcy really should not be considered if you have assets of any reasonable value, such as your home.

3. If something belongs to my wife, can they take that too? Technically no, but you may be required to prove her ownership.

4. As there are young children involved, is the house taken immediately when I declare bankruptcy? As a bankrupt, your title to any house you own or are paying a mortgage on will be passed to the Court. As such, ownership of any equity that you have personally in the property will pass to the Court. The Court will want to realise such equity for the benefit of your creditors. As your wife and children are living with you, it may be possible to put off a sale until the end of the first year of your bankruptcy to give time for other housing arrangements to be made. Your wife would be encouraged to take legal advice about the home as soon as possible.

5. Am I allowed a bank account, if not how can I be paid? You will be allowed a basic bank account only.

6. I have 3 or 4 pensions dotted around, what happens to these? Part or all of your pensions may be claimed by your trustee in bankruptcy, whether you are receiving it now or it is due in the future. This could seriously affect any future value, making them almost worthless.

7. Will my wifes credit file be affected? If your wife is not responsible for your debts, generally speaking, your bankruptcy will have no effect on your wife's credit file.

8. Will the fact that I was a gambler reflect badly on me? Quite probably. If you become bankrupt as a result of gambling debts, your creditors can apply to the court for a Bankruptcy Restriction Order. This means that the full range of bankruptcy restrictions (such as having to disclose your status to borrow money or being prohibited from acting as a director of a company) can be imposed for between two and 15 years.

Although the new Enterprise Act states that certain classifications of bankrupts may be discharged in twelve months, this is not always the case and it should be remembered that the stigma of bankruptcy still exists and will have an effect on you financially for a long period after discharge.

Long-term effects of bankruptcy are numerous not least of which is a poor credit rating, which can last as long as six or even ten years. Even when your bankruptcy is eventually cleared from your credit report, banks will still ask if you have ever been declared bankrupt whenever you apply for a loan or mortgage. This will inevitably make borrowing more expensive.

I would have to say it is worth investigating ways to avoid bankruptcy and only consider this option if you really do not have any choice and have exhausted all other avenues.

Personal bankruptcy is a difficult route and not one that should be taken lightly.

[tomterm8]

Re: Questions about bankruptcy

Might be a little long winded so bear with me, but worth explaining my current situation first:

About 2001 I got into trouble servicing my debts. I was a problem gambler and built quite a substantial sum of debt up. Through payplan I negotiated reduced payments. All creditors were understanding except Natwest. Ended up with a CCJ from them.
Earlier in the year I lost my job, and as such missed 2 months payments. It looks like Natwest are now going for a Charge on my Property.

I have also raised a complaint via the FSO about the way the Natwest Loan was originally sold to me as I believe is was a classic case of mis selling & potentially fraudulant activity by a member of staff, but that is another matter and probably wont come to anything.

Anyway, my current debt is standing at around:
70000 - unsecured & managed by payplan
85000 - Morgage
53000 - Secured loan (second morgage)
All this is currently costing me about 1700 a month to service.

My wife works part time but is no big earner. I am currently taking home around 650 a week contracting.
House is currently valued around 155000 and on the market, but dont expect to sell (reduced from 179950 3 months ago).
Even if we do sell for 155000, after fees etc we would be left with around 14 / 15k.

I have two young children (18mnts & 3 yrs), and would frankly like to "wash my hands" of my debt problems which I have been struggling with for 6 / 7 years now. Natwest have really now left me feeling like I've had enough of trying to manage this and be responsible about it.

So my questions are:
1. If we sell the house before Natwest get a charging order on it do we keep our money? Do we have to notify anyone that the house is being sold?

In practice, nationwide and your other creditors would still get their hands on any surplus, and if they intend to go for a charging order they will get an interim charge that would prevent you getting your hands on the money.

2. If I do take the plunge and declare bankruptcy what can legally be taken and sold to pay my creditors?

In practice, your house, any large assets ( cars over a couple of grand, oil paintings etc, cash deposits, shares BUT normally not your pension). They won't take necessary household items etc. In practice, they rarely send in baliffs to take back electrical goods unless they are very valuable. You can call national debt line, and they will describe the types of goods they can take.

3. If something belongs to my wife, can they take that too?

No, unless they you gave it to her in the last few years, or used your money to purchase it.

4. As there are young children involved, is the house taken immediately when I declare bankruptcy?

It would normally take at least a year. Sometimes, the house may not be taken until the child reaches the age of 16. Talk to national debt line.

5. Am I allowed a bank account, if not how can I be paid?
You are allowed a bank account, but not an overdraft. Existing bank accounts are frozen when you declare bankruptcy, so people often make sure they open a new basic bank account the day they declare bankruptcy.

6. I have 3 or 4 pensions dotted around, what happens to these?

Most often, they are not touched unless they contain really significant sums of money.

7. Will my wifes credit file be affected?

No, unless you attempt to take out credit with her in the future. It would be wise for her to disassociate with you, and make sure she isn't on any contracts (i.e. utility bills) with you. It will damage your credit record for upto 7 years, or 6 years from the date a BRO /BRU ends .

8. Will the fact that I was a gambler reflect badly on me?

Unfortunatly, it could do. Worst case scenario, you might get a BRU which extends some of the restrictions of the bankruptcy between 2-5 years (assuming you did not commit a fraud or financial crime). However, many people seem not to recieve BRU's even if they have been somewhat irresponsible.

Basically I dont really want bankruptcy but there are two things driving me towards it:
1. Really had enough and want out.
2. Want creditors to get equal amounts, not Natwest to grab it all.

Any advice appreciated.

Looking at the amount of debt, it is probably to your short term financial advantage to declare bankruptcy, but it is essential to
seek advice from a professional organisation, such as the national debt line.

In the event of bankruptcy or a charging order any beneficial interest would be split between yourself and your wife, so any charge would not be on the entire surplus of the house (after secured debt), but instead on only half the surplus. In addition, dependents and etc may also have a beneficial interest.

You must seek professional help before declaring bankruptcy. For what its worth, I think it is probably the right decision for you, but I am not in posession of all your facts (i.e. statement of affairs etc). If it is possible to repay your debts within a reasonable period, i.e. 6 years, then that may be a wise thing to do rather than bankruptcy.


NB: your sale price of £155,000 is not an auction valuation... these are, at the moment, roughly at 15% discount... to all intents and purposes, it is highly likely that as far as the OR is concerned your house is already in negative equity.

[Emerald]

Re: Questions about bankruptcy

1. If we sell the house before Natwest get a charging order on it do we keep our money? Do we have to notify anyone that the house is being sold?

Anything that is left after secured debts, estate agents etc are paid is yours, no you do not have to notify anyone at this stage.

2. If I do take the plunge and declare bankruptcy what can legally be taken and sold to pay my creditors?

Your assets basically - see below for details on the house.

3. If something belongs to my wife, can they take that too?

No.

4. As there are young children involved, is the house taken immediately when I declare bankruptcy?

See below - but no.

5. Am I allowed a bank account, if not how can I be paid?

Yes you are allowed a bank account - Co-op seem to be the main ones for bankrupts and offer a pretty robust basic account with an electron card.

6. I have 3 or 4 pensions dotted around, what happens to these?

Nothing, unless you have tried to use them to hide large amounts of cash in the past 7 years.

7. Will my wifes credit file be affected?

Most likely I am assuming the mortgage is joint - in which case she will eb associated with you anyway.

8. Will the fact that I was a gambler reflect badly on me?

Unlikely after all this time, but don't rule out the possibility of a BRO (Bankruptcy Restriction Order)

Basically I dont really want bankruptcy but there are two things driving me towards it:
1. Really had enough and want out.
2. Want creditors to get equal amounts, not Natwest to grab it all.

Any advice appreciated.

I am assuming that your only asset is the house and I work that out at current value as being around £17K, before selling costs. Half of this belongs to your wife, therefore your assets are around £6K. Which may well be less if you cannot sell at the current price. If your wife or family member could raise around £4.5K (may even be less the way house prices are falling) then they would be able to buy your benficial interest off the OR and you could keep the house. If you cannot raise the money (and you have a year to do so), then the house will be sold and your wife will receive her half of the net equity. So you will not be homeless immediately.

The way I see is if you declare BR asap before NW get the charging order then you have a good chance of keeping your house, and losing all your debts, other than the secured ones.