marzman Posted May 17, 2011 Share Posted May 17, 2011 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... Quote Link to comment Share on other sites More sharing options...
Ricey Posted May 17, 2011 Share Posted May 17, 2011 The first thing they should do is speak to a non fee charging debt advice agency like the CAB, consumer credit counselling service or payplan......avoid parasitic fee chargers at all costs BKO might be the best option but there are definite implications. If they have equity (unlikely with 100% mortgage) then the trustee might make them sell. BKO won't impact the mortgage payments but could reduce the unsecured they owe. In the event of a repossession any shortfall would already be swallowed up in the BKO....but worth checking this with the trustee. Worth asking the mortgage lender about the government mortgage rescue scheme too.....could really help if they are eligible. I'm not an expert so use the above with caution and see professional advice Quote Link to comment Share on other sites More sharing options...
James B Posted May 17, 2011 Share Posted May 17, 2011 Unfortunately the reasons to go bankrupt have only increased. It used to be that after going bankrupt you would have zero credit rating (ie you coulnt get a mobile phone or anything that requires credit) for 5 yrs but that's now been reduced to 2. They need to understand that: - all personal items will be seized. So they will lose all their TV's, DVDs, cars, computers. Essentially anything that isn't essential for living. So they could keep fridge and microwave and 1 car if it was a total shed. All prestige items go. Onvously they would lose their house as well. you lose EVERYTHING! - they would not be able to get or do anything that requires credit. In this day and age that probably covers a lot more than they realise, for about 3 years. (2 yrs no credit + 1 yr minimum to rebuild their credit. - they won't be able to have a credit cards or even visa debits. So everything will need to be paid for in cash or maestro. I would advise they only consider bankruptcy is they have a personal debt of over £20k and getting worse or if their negative equity outstrips the projected value of their propert in approx 3 yrs. Bankruptcy is for those with no other option. It's not as bad as it used to be (used to get sent to prison not so many moons ago) but its not an easy ride. Quote Link to comment Share on other sites More sharing options...
cesc Posted May 17, 2011 Share Posted May 17, 2011 £400 short on a £600 a month mortgage? Unless the husband is earning f**k all, they should be able to cover that fairly easily. Where exactly is the money going? Quote Link to comment Share on other sites More sharing options...
Adrian@TORQEN Posted May 17, 2011 Share Posted May 17, 2011 £150 sorted by getting rid of the sky and the mobile contracts, at least!! minimum iPhone contract is £35/month or £45 plus other charges... Quote Link to comment Share on other sites More sharing options...
Chesterfield Posted May 18, 2011 Share Posted May 18, 2011 £400 short on a £600 mortgage with today's interest rates is unbelievable. Did they do even the most basic back of a fag packet maths and work out what they would be paying?! What if the rate is raised .5%? With a base rate of half a percent, and many mortgages on rates such as 2.5% above base, then a half a percent rise from the boe would add a sixth (or on this case £100) to the repayments. 1% would add a third. Many people will find themselves coming unstuck unless they budget for these things. Declaring themselves bankrupt will have very long lasting and harsh consequences. They won't get credit again at reasonable rates for a very long time (though as the flow of "free" money appears to be what's got them into the mess, that might not be a bad thing), and as for getting another mortgage any time soon, forget it. Also if they are flat broke, why on gods green earth would they consider moving to London?! They may get a roof over their heads, but it's one of the most expensive places to live in the country. Sorry if the above sounds harsh, but I have zero sympathy for those that have built up a life based on credit and then turn to others when it catches up with them. Sell the cars and get one banger that will do the job. Sell the tv's, cancel sky, take the kids for walks at the weekends spotting animals or something , the kids will still have fun, and it's free. They need to sit down, write down the total they get in each month, and the total they spend each month. Then start crossing out things on the spend side until the total is smaller than the income side, and by a decent ammount in order to cover for a rainy day. If they can't/won't do that, then don't bother trying to help. They clearly aren't willing to help themselves, or their children. Quote Link to comment Share on other sites More sharing options...
Ekona Posted May 18, 2011 Share Posted May 18, 2011 They're idiots. SEOT Quote Link to comment Share on other sites More sharing options...
Sarnie Posted May 18, 2011 Share Posted May 18, 2011 Unfortunately the reasons to go bankrupt have only increased. It used to be that after going bankrupt you would have zero credit rating (ie you coulnt get a mobile phone or anything that requires credit) for 5 yrs but that's now been reduced to 2. They need to understand that: - all personal items will be seized. So they will lose all their TV's, DVDs, cars, computers. Essentially anything that isn't essential for living. So they could keep fridge and microwave and 1 car if it was a total shed. All prestige items go. Onvously they would lose their house as well. you lose EVERYTHING! - they would not be able to get or do anything that requires credit. In this day and age that probably covers a lot more than they realise, for about 3 years. (2 yrs no credit + 1 yr minimum to rebuild their credit. - they won't be able to have a credit cards or even visa debits. So everything will need to be paid for in cash or maestro. I would advise they only consider bankruptcy is they have a personal debt of over £20k and getting worse or if their negative equity outstrips the projected value of their propert in approx 3 yrs. Bankruptcy is for those with no other option. It's not as bad as it used to be (used to get sent to prison not so many moons ago) but its not an easy ride. I'm sorry but nearly everything in this post is either incorrect or inaccurate. If they cannot even be bothered to analyse their own finances like you have Marzman, then they are beyond saving and deserve the lifetime of hurt this will cause. Quote Link to comment Share on other sites More sharing options...
James B Posted May 18, 2011 Share Posted May 18, 2011 Unfortunately the reasons to go bankrupt have only increased. It used to be that after going bankrupt you would have zero credit rating (ie you coulnt get a mobile phone or anything that requires credit) for 5 yrs but that's now been reduced to 2. They need to understand that: - all personal items will be seized. So they will lose all their TV's, DVDs, cars, computers. Essentially anything that isn't essential for living. So they could keep fridge and microwave and 1 car if it was a total shed. All prestige items go. Onvously they would lose their house as well. you lose EVERYTHING! - they would not be able to get or do anything that requires credit. In this day and age that probably covers a lot more than they realise, for about 3 years. (2 yrs no credit + 1 yr minimum to rebuild their credit. - they won't be able to have a credit cards or even visa debits. So everything will need to be paid for in cash or maestro. I would advise they only consider bankruptcy is they have a personal debt of over £20k and getting worse or if their negative equity outstrips the projected value of their propert in approx 3 yrs. Bankruptcy is for those with no other option. It's not as bad as it used to be (used to get sent to prison not so many moons ago) but its not an easy ride. I'm sorry but nearly everything in this post is either incorrect or inaccurate. If they cannot even be bothered to analyse their own finances like you have Marzman, then they are beyond saving and deserve the lifetime of hurt this will cause. Whoah Sarnie! What side of whose bed did you wake up on today? If my information is incorrect then please correct me and be contructive fella. If there's something I've got wrong I would like to know. Quote Link to comment Share on other sites More sharing options...
Stew Posted May 18, 2011 Share Posted May 18, 2011 Is bankruptcy the new celebrity divorce? First bump in the road and you throw the towel in? They need to get a grip in my opinion. Quote Link to comment Share on other sites More sharing options...
MacW Posted May 18, 2011 Share Posted May 18, 2011 Post this exact same request for advice on PistonHeads, leave the jackals to chew on it for a couple of days and then show the thread to your relatives. Should be a decent dose of cold water and might possibly even drag them back into reality. Quote Link to comment Share on other sites More sharing options...
Adrian@TORQEN Posted May 18, 2011 Share Posted May 18, 2011 Even better, post it here and then show it to your family few days after: http://www.consumeractiongroup.co.uk/forum/ Quote Link to comment Share on other sites More sharing options...
Boycey Posted May 18, 2011 Share Posted May 18, 2011 On my iPhone so sorry in advance for spelling. My brother went through a similar issueand was also as stubborn as hell, it's all about pride for them and "keeping up with the Jone's" so to speak. Try to use that, people telling them they are in a bad way will only make them worse. They need to lose some toys, what they have now, tv, ps3 etc won't hurt them to keep already as it's not costing any more to keep them. Need to get rid of top sky package, if I'm not mistaken, that's about £75 a month these days, (Who actually watches all these channels anyway, scrap multiroom etc, by the sound of them, I bet they have it) Cars are a money pit, Insurance, tax, fuel, servicing, parking charges, the list goes on, need to lose the one which is the biggest drain on money. How old are the kids? Do they work, charge them a little rent, telling them money doesn't grow on trees, it's one of life's learning curves (I bet most of us paid our parents a little rent growing up) DO NOT suggest bankruptcy, if they have other loads, credit cards etc and I bet they do, there are non fee companies out there that will work with them and the credit guys to drop the interested owed on their products and will work out an affordable payment plan with them, and their friends/family would never know. Only down side (which is a good thing for them will be that they can't apply for credit) Most importantly, they need to change how they shop and stop trying to keep up with friends/neighbours etc. Hope some of this helps, sounds like they need it Quote Link to comment Share on other sites More sharing options...
neo-ninja Posted May 18, 2011 Share Posted May 18, 2011 jeeze dont want to sound like another moaning git but i am just going through buying my first house, and our mortgage broker, and my bro who is in property have both said by the time the olympics is here rates will be at 3-4% which means a huge increase, on thier £600 unless they have fixed. So if they are struggling only paying £200 a month to thier mortgage they wont be able to rent for that price. My GF for a bit of fun does baby sitting and easily makes £200 a month with out trying and thats just for friends of friends etc.. which is bonus pocket money ontop of her salary. So first things first the wife needs to get a job, baby sitting is easy money and is in desparate demand, or at least where I am. You can change anywhere from £9 - £15 an hour - all cash in hand so no tax worries initially, and she would therefore only have to work around 40 hours a MONTH not a week a MONTH, thats 10 hours a week, 1.4 hours a day. Quote Link to comment Share on other sites More sharing options...
marzman Posted May 18, 2011 Author Share Posted May 18, 2011 Well, can i say a genuine thanks to everyone for your posts on here. The nagativity is exactly what i was looking for, as my missus has sent this link to her sister to read through (Hey if you're reading this ) What i really wanted is for them to receive some outside perspective on the situation, which will hopefully kick-start them into sorting themselves out. Thanks again... Quote Link to comment Share on other sites More sharing options...
Maccaman Posted May 18, 2011 Share Posted May 18, 2011 Unfortunately this is the generation we have created. Everything on credit so it's not as in your face as cash. At least when we had pay packets you knew what cash you had to spend, when it's gone its gone. That's why I worry for the kids of today, TV's, playstations & Xbox's, mobile phones, the list goes on. No wonder when they get out into the world of working and have to start paying for themselves they get sucked into the world of credit cards When I read that they were £400 a month short on a £600 mortgage I was flabbergasted. I would imagine that you would be paying £600 a month for a 3 bedroom council house these days. They definitely need to be told to grow up and face their responsibilities, so good luck with that. Quote Link to comment Share on other sites More sharing options...
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