I read an interesting article today that I would like to bring to everyone’s attentions. The just of its content is that as interest rates begin to rise more and more people will find themselves in serious financial difficulty – Fears of mortgage debt tsunami.
Historically speaking when individuals ran into difficulty with their mortgage the lenders would not too soon after consider repossession proceedings. In recent times, because of Labour Government pressure, lenders have delayed such action. The Government’s intent was simple. Provide those struggling with enough breathing space to recover by being fairer.
So has this been to the benefit of those in debt? For some yes. For others no. My reasoning for this opinion is that life can be worse than going bankrupt. The real damage for some families comes from struggling month after month without any relief from their debt problem. Due to the amount of debt that some people have accumulated, the increase in the cost of living and the effects of the recent recession there are a significant number of people living on the edge. The inevitable increase in interest rates is a genuine cause for concern, for those on the edge and others, and will certainly be a factor in the bankruptcy statistics in the near future.
After the breakdown of an 8 year relationship in 2007 my then ex-partner left me with £13,000 worth of debt. He also disappeared into the ether with anything of value that I didn’t manage to get out of the house before his return from the holiday we were meant to go on together. As I was employed part time at this point, I had nothing extra to give my creditors. After receiving calls at work over four months from a High Street bank, I finally admitted defeat and declared myself bankrupt in August 2008. My advice to anybody thinking of going down this route, I sympathise completely and offer the following advice:
1) For me the County Court judge was fair and balanced when considering my petition. I did not even have to speak to the judge in person.
2) The bankruptcy petition may be daunting but be totally honest with the Insolvency Service from the outset – they will catch you out in their good time and there is a penalty to pay for lying.
3) As my petition was straightforward (not involving assets such as a house or business or savings abroad etc), I did not have to meet the Official Receiver but was allocated to one of the Insolvency Service staff. However, the important point here is that if you are interviewed by the Receiver (as I was), then be prepared for all eventualities. I found it very hard to believe that during the 50 minute interview call, I had to convince him that he should not seize my 12 year old Peugeot with almost 110k on the clock as an asset. If you have a car worth selling, the receiver may seize it as an asset as the primary aim is to pay back as much to your creditors as is possible. He allowed me to keep my beloved car as it would cause hardship for travel to work, thereby worsening my situation. In the weeks following, my tax code changed for 12 months as any tax paid is used to pay your creditors. I also decided to tell my landlord that I was now bankrupt in case the receiver’s Officers do. I found it easier to speak to my landlord first and he was very sympathetic. Two years on, I am still living in the same flat. If you don’t fall into rent arrears, it will help your credit situation no end, and I have been promised an excellent tenant reference when I leave the flat this Spring.
4) There is light at the end of the tunnel for anyone going through the stress of financial problems. I lost weight and became ill until the bankruptcy was organised. I am now free of debt but feel guilt at times that I didn’t hang on to try to sort my debts out. However, I felt there was no choice but to admit that I could no longer carry on with debt I knew I would never be able to pay off. Please do talk to friends, colleagues, family and organisations that can offer help. I found them very helpful. All is not lost and you will find things improve over time but it won’t be an easy time. Think positively and make plans for your future – you do have one!!
Ann Marie.
I quit nursing in 2005 as i was fed up with it all. I bought an upmarket cafe in a very small town, no competitors and good turnover. I had a lovely house and a beautiful girlfriend – all looked rosey for the future. Almost immediately things started to go wrong, the business was not as profitable as the sellers had made out (my fault for not checking properly) a lot of the equipment was outdated (my fault again) and there were too many overpaid staff. Basically it spiralled out of control, i racked up debt trying to sort things out – managing to survive while the economy was good. Finally the economy crashed, roadworks hit my town for 6 months and my lifeline, my girlfriend, got fed up of my 80 hour weeks and left, selling the house as she went. I foolishly sunk my proceeds from the house sale into the business and plodded on.
I realised there was a problem at this point – I took out an IVA – bundling £1500 of monthly payments into £220 – making things much easier. However after a year, my mental health was failing, my physical health was failing, i was lonely and hated work. Business had not improved, in fact with the worsening recession, it had halved! I tried to sell – no joy! Finally after an argument with one of my staff over her redundancy pay – i flipped – closed the doors and walked away.
Fast forward a month, i had escaped to a job offer in France and was returning to the High Court in London to declare bankruptcy. A professional (sorry sir, i have long forgotten your name) filled out the forms for me by telephone interview and had forwarded them to me, i was stood in the High Court, money in one hand, forms in the other. I handed over my cash, only to be told that i was paying too much – i was now officially poor and did not have to pay the full £510. The staff in the High Court were amazing – friendly, understanding and helpful – 5 hours later, i was back on the Eurostar heading for France and offically bankrupt.
11 and a half months later back in England, i am fit again, healthy again and most importantly, happy. I have returned to nursing – no longer bitter about it, enjoying its daily challenges and cheerfully smiling at those that moan about how bad it is.
In 2 weeks, i will be discharged – that is not the point my life started again though, it was definitely the day i signed the dotted line in the High Court.
Do i recommend it for everyone – no, of course not – i had no assets at all, no family to support, no car, no life – in my case it was the choice of bankruptcy or early grave. I will struggle buying a house but apart from that, i won’t attempt to get credit, I save money for what i want. I am wiser, happier and grateful to those that helped me get my life back!
Today standard variable rate mortgages have hit the headlines after an article from Which?. This is probably the beginning of a number of such articles with interest rate increases considered likely in the near future.
After reading a number of such articles online I thought that it would be worth highlighting a couple of points.
The interest rate on a variable rate mortgage will change over time according to the type of mortgage that you have. If you are already in a debt solution such as an IVA or a debt management plan then any increase in your mortgage payments will affect your ability to make your debt repayments. This could have unwanted consequences such as the IVA failing.
When deciding on a debt solution it is important to consider how income and expenditure shocks in the future may affect you. For more information have a look at IVA considerations or DMP considerations.
If you decided to go bankrupt and were able to keep you house then there are a number of important considerations to keep in mind.
Firstly, if you are in an income payments agreement then you may have to apply for it to be varied if you cannot afford the payments due to the increase in your mortgage costs. In any event you need to be sure that you can afford the mortgage. If your property is eventually repossessed then you may end up with a shortfall placing you back in debt again.
Being aware of these potential eventualities is important so that you can seek advice early.
My wife Sara and I had been in Debt Management since May 2000. We had been keeping up the payments each month and were very slowly we believed getting out of debt. Then at the start of 2010. My earnings had dropped by a large amount.
I knew several people that had gone bankrupt and I decided to investigate this route. I found Piggy’s site and, using this and other reference materials, decided this was our only way forward. Having no assets it seemed logical. So I went to the court obtained the paperwork (petitions etc) for both of us and filled them out. On May 17 2010 at 09:17 we were declared bankrupt.
Two days later I was interviewed over the phone by he Official Receivers Office, about 30 minutes interview that was it! Because of my earnings we did not have to pay anything towards our bankruptcy. On the 21 October 2010 we were given early discharge.
So Thank you Piggy for this site it was useful to us, we found the whole experience quite painless and now are happier than we have been in ten years
