Hi all,
My sister-in-law and her husband are having some money troubles, and they are considering declaring bankruptcy
They are early 30's, and have 2 young kids. She is a stay at home mum (although looking for part time work), and he works full time in the manufacturing industry. I dont know his salary.
They own their own house, for which they got a 100% mortgage at 6x their salary approx 4 years ago. They have done everything they can with the mortgage company to reduce the monthly bill, and they have got it down to £600 a month.
Their immediate problem is that they say they cannot afford that £600 a month for the mortgage - and they think they're about £400 a month short.
So, they have been advised (god knows who by) to declare bankruptcy as this will solve their problems. They want to move down to London and move back in with his parents. They have some friends who have been declared bankrupt, and i think they see this as the easy way out (i.e. their debts will be wiped clean).
HOWEVER i know for a fact that they could close that £400 p/m defecit with a little bit of effort, as they are living well beyond their means, i.e.:
They have 2 cars (1 is a 3-series estate!)
They have a top Sky TV package incl Sky Sports, and pay around £75 a month
They both have phone contracts
They have all nice brand new furniture (on finance)
They have plenty of 'Toys'... flat screen tv's, PS3, surround sound, laptops, iphones etc etc etc
They have an active social life, having people over, going out, going for meals etc
With some effort and planning, they could cut back on their lifestyle, downgrade on some of their toys, and they would close that £400 a month deficit.
Up to now they havent listened to any of their family (who i think are enabling them)... they havent got anyone to talk some sense into them with any authority.
However, the only person they havent talked to yet is me, and they dont want to (as i think i'm the only person that's going to have a go at them and not be an enabler - they just dont want to hear the truth).
Can anyone with any knowledge or experience please point out to me how bad declaring bankruptcy really is please? Just bullet point all of the negative effects bankruptcy would have please...
...or am i wrong? Could bankruptcy be the answer to their problems??
Cheers...