Is Bankruptcy the Best Option for Us in the UK? – Hayley

“Dear Jon,

Both me and my husband have always worked full time, we have three children and a house brought in 1999.

In 2004 out financial situation changed which meant we could no longer afford to continue paying all of our loans/debts. We got into financial difficulty and had to stop paying some bill/debts in order to live. We have always paid our mortgage and household bills, however could not reach aggreements with the companies that we owed money to and working for a bank at the time I burried my head in the sand as I knew I could not go bankrupt at fear of losing my job.

I then got made redundant in 2010 and quickly found a part time job. Our HFC loan put a charge on our house which they are now threatening to envoke and order sale of property. The HFC saga is a long one where we borrowed 11,000 paid a few months payments of nearly 400 per month then a £5,000 lump sum, then a year later got contacted with a view to start paying again, co uld not afford it, asked the HFC man to take the PPI off which I recall him saying we had to have in order to get the loan and he refused, this was passed onto another company who offered me a 75% discount, the amount to clear was given to me 3 times and I have witnesses regarding the amount and a friend offered to pay it for me but when I rang to pay the amount went from £1873 to £18973. I did ask what that was a 75% dicount on but they would not help me.

I am in full time work now, part time only lasted a few months and the redundancy helped us survive, although my salary now is at least £10,000 less than what it was in my previous employment, so needless to say things have had to change, but recently we are finding it harder and harder to live and keep up with the debts that we are paying back, getting food on the table is a struggle and we are having to rely on handouts from my parents and my husbands parents.

We can no continue like this which is why I have to try and face up to the situation and do everything that I can so that I can put freshly cooked meals infront of my children and be able to treat them on birthdays etc. We also have had no heating for 2 years and we are in desperate need to get that fixed and replace a mouldy toilet and wall but are never in a position to repair anything.

Is bankruptcy our best option?

Will this releif myself and my husband of the stress we have been under over the past few year.

Hayley”

Hayley,

Thanks for explaining your situation, but I do have just a few questions to help me get a better idea of things.

Is there any equity in the property?

Can you realistically afford the property?

Are you concerned if you were to lose the property?

How much unsecured debt do you have?

I ask as only unsecured debts are included in bankruptcy, and a mortgage and a charge on a property are not included.

Also if you were to go bankrupt, there is the possibility you could lose the house.

If you have other unsecured debts, and can afford the house, and there is no equity, then it may be possible to go bankrupt, be relieved of the debts, and keep the house.

If it is the house that is the main source of your financial difficulties, just going bankrupt and wanting to keep the house won’t solve anything.

If you are looking for a complete fresh start, you could hand the keys back to the mortgage company, go bankrupt, and include any loss or shortfall in the bankruptcy as once the property is repossessed and sold, any shortfall is unsecured debt.

That is one option.

On a side note and not to complicate matters, what became of the PPI? Many people are claiming the PPI back on loans. If your claim is substantial, and your other debts are not, it may be you can claim this back an settle or pay off your debts.

If you were to try to claim the PPI back during or even after going bankrupt, you cannot do this as the insolvency service says any claim refunds are the property of the bankruptcy, not the individual.

Let me know.

Jon Emge is an experienced UK debt advisor who has helped thousands and thousands of people in the UK to deal with problem debt. Jon specialises in finding good solutions for problem debt using a variety of UK specific techniques.

If you have a question you’d like to ask about how to get out of UK debt, just use the online form. I’m happy to help you for free.