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debt query - Emma 2010-03-12 17:00:22
 
I am currently getting help from citizens advice to help with my debt my house has just been sold and I still owe £11,000 plus other debt which in total comes to around £14,000 I am currently seeking employment so should hopefully hear something soon citizens advice is advising me to go bankrupt but i am so unsure my best option

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Re:debt query - simon wiggins 2010-03-13 14:15:50
 
Hi Emma. If the basic scenario is that you owe 14K, have nothing in the way of assets to be lost now that your former home has been repossessed and little if any in the way of any surplus income available to you then bankruptcy is one of the options open to you and a very good one to boot. However its not the only one and you have to consider what will change in your circumstances over the next 12 months or so and plan how to move forward. You financial ability to pay which is zero at present is not the only thing to consider here because if you obtain employment that ability to pay may change and have a bearing on your choice of debt solution.

Your home is already lost and your facing a mortgage shortfall. They are likely to chase this for a year or so and then often all goes quite. The law gives them 12 years from when default is deemed to have occurred to take the matter to court and obtain a judgment before the statute of limitations come into play In many cases the creditors come back 10 plus years later and go to court and get a judgment The debt has often grown substantially and you may have rebuilt your financial life by then. After all that the whole point of the creditors waiting in the hope that by then you have something to take !!!! So you don’t want this mortgage shortfall around your neck or you will never get a fresh financial start whatever you now do.

So if you choose bankruptcy all the debts you’ve mentioned including the mortgage shortfall would be wiped out giving you a debt free financial fresh start. The official receiver would look at your financial statement to see what if any surplus you had each month after meeting your basis essential needs. If your surplus is less than £100 per month or nothing as it is now you wont be asked to pay back so much as a penny. If its £100 or more (if you get a job and earn more than is required to meet your basic needs each month) then there's a sliding scale starting at 50% rising to 75% at £640 per month surplus which you would have to pay for up to 36 months. So if you want out of debt in the fastest possible way, want to pay back the least money for the shortest time and have the records of your financial problems removed from the CRAs in the fastest possible way then bankruptcy is the way to go. But you need to think about what employment you look for as if you earn too much then an IPA/O could be started right up until the day your bankruptcy ends. Most people in your position make sure that they only earn just what is needed until after they are discharged as you have to declare each and every change in your financial circumstances whilst bankrupt within 21 days of it coring to the Ors office dealing with your case so they can look again at whether or not you have any surplus income or not. So the best time to go bankrupt is when your out of work or when earning just enough to meet your costs each month to avoid a 3 year IPA/O.

Bankruptcy is not the only solution open to you if the debts are sub 15K in total and your surplus is less than £50 per month. You could consider a DRO but these are revoked if the deters surplus rises above £50 per month before the DRO ends so again you would have to watch how much you earned until it was finished. Its far cheaper than bankruptcy and may do the same job without so many ramifications. You need to discuss this with the adviser helping you. There may be a reason you cant have one such as a pension pot over £300 for example.

To help you further I have sent you in depth fact sheets on both these solutions which I hope you will take the time to read through as well as one covering every debt solution open to UK residents. It may be that the adviser helping you had already discounted a DRO as you don’t meet the criteria in one form or another in which case Yes bankruptcy is your best and only way forward at present. If you gain work though other solutions may be a possibility but would they offer you any advantages over bankruptcy In most cases not if you don’t have any assets to protect such as a mortgaged home or a business. Every other solution requires you to have sizeable surplus income for years into the future and if there is no advantage to you in doing this why would you opt for them anyway ????? My guess is that you have already been given the best advice for your situation and should follow it if at all possible before the cost of going bankrupt rises £90 on 6th April this year. Good luck and if I can be of any further help by all means come back to me again

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