If you had 70K debt on credit cards due to business failure What would you do?

[Cesario]

Can't sell house
can';t re-mortgage
Can't pay off the debt monthly as earnings have plummeted
ideas?

thank you in advance

[CarGirl]

well you're limited. Is there much equity in the house?

If not I'd look at bankruptcy.

You need to go to CAB tbh of an organisation like CAP

[hf128219]

Voluntary arrangment with your creditors?

[expatinscotland]

apply for bankrupcy.

i had about £13,000 worth of credit card debt in another country from a divorce, but i had NO assets and no job (was working temp) when some arsehole who was drunk hit the car i was driving and i couldn't pay medical bills.

[CarGirl]

www.capuk.org/help/needhelp.php

[Cesario]

I really don't want to do bankruptcy - that means I will have a shite credit rating forever!

[SoupDragon]

IVA ?

[expatinscotland]

I thought it was expunged from your record after a certain number of years?

[Cesario]

Soupdragon do you know much about IVA?

[Cesario]

Expat, I guess I am worried about going down that road- it seems so final and scary

[CarGirl]

There is another organisation that will help you come to agreements, stop the interest etc but I can't remember their name. CAP would do that for you but it depends if there is one local to you.

£70k is a lot though.

[Cesario]

I think , if we could manage it all in one debt, and redcue the interest then we could work it.

We have good equity in our house but we cannot sell it due to housing market and we would make a huge loss on it as it needs renovating..(obv can't afford to that either)

[SoupDragon]

No, I know nothing about an IVA other than it is an option for debt.

[Cesario]

thanks - will investigate.

[Cesario]

would we lose our house?

[expatinscotland]

also if you go down the IVA route or getting creditors to write down your debt, that damages your credit rating, too.

[Metella]

If you have a lot of equity in your house then you could lose it. The only other option is for a third party to buy out the equity.

Bankruptcy stays on your credit reference agency file for 6 years.

[LaurieFairyCake]

Losing your house depends on how much equity you have and your needs come first for the the first 12 months - is all the debt in your names jointly? Is the house owned by both of you?

The best place to go online for advice ids www.debtquestions.co.uk and click on Debt Forum on the right. This will take you to the boards that discuss your options which are a debt management plan, an IVA, and bankruptcy.

As a rough guide for doing an IVA you need 30p in the pound so you need to pay off a third of your debt in 5 years so about £400 a month-ish and then the rest could be written off. It does depend on whether there is equity to do a release in the 4th year - if you have little equity then you can have the house exempted in your IVA - your IP (insolvency practitioner) would negotiate this with them.

Payplan (charity) have a branch that does IVA's - they are quite cheap - fees are included in the negotiation they do with your creditors.

Good luck

[Cesario]

and I have private school fees - kids taking A levels and GCSEs -

[CarGirl]

Can you speak to the school about some sort of payment plan for them to each finish the stage they are up to?

[LaurieFairyCake]

The best thing to do then if you don't want to interrupt their education right now is to do token payments, it will take a looooong time to start any enforcement proceedings - maybe a debt management plan is the best idea for a couple of years?

[lou031205]

IVA and bankruptcy both affect your credit rating similarly, although they will tell you it won't. The main reason that they (the company handling the IVA) tell you that it won't is because they get a slice of your money.

For an IVA to work, you need to be able to commit solidly to making regular payments towards your debt.

Basically, your creditors are approached and told "Cesario hasn't got much money, and there is no way you are going to get all that she owes you. The likelyhood is that she will have to file bankruptcy, and therefore you will get nothing. However, Cesario could pay her debts if they were lower. Cesario could offer you £0.20 for every £1 she owes you."

The companies that you owe money to, will say "No way, we want £0.80 for every £1 she owes us"

The IVA company then says "Don't be rediculous, guys. The most we can offer is £0.40 for every £1".

The companies then have to vote on whether they accept this offer. If companies who represent 75% of the monetary value of your debt vote "Yes", the IVA goes ahead, and the remaining companies have to swallow it. If not, the IVA fails.

You need at least £200 disposable income to be able to pay towards the debt, and you won't be able to have any credit from that point on until the IVA is complete (5 years). After that, any remaining debt is wiped off.

[burningupinspeed]

To be fair, if you owe £70k and can't pay it why do you want a good credit rating?

I am not saying bankruptcy is right, but that is an odd reason to say it's the wrong path.

[HecatesTwopenceworth]

any creditor - or court if they took you to court, would probably expect you to prioritise debts over school fees, tbh. I may very well be wrong, but I don't think they'd view private school as an essential expenditure (over paying, for example, the inland revenue iyswim)

bankruptcy stays on your file for 6 years, and then you have to rebuild your credit score. Normally if you are bankrupt due to failure of a business, you are discharged after 1 year - they can even discharge you earlier. We were.

I tell you something, the build up is the worst thing in the world, you feel like you are going to die, but when it happens, the relief you feel is indescribable.

[lou031205]

Alternatively there is bankruptcy.

Once filed, bankruptcy is discharged after 1 year. You can be asked to make payments proportional to your disposable income for 3 years, if you have over £100 per month.

It stays on your credit record for 6 years.

You will have to buy out any equity in the home, if you want to keep it. Any luxury items like expensive cars can be claimed by the Official Receiver, although they will then release a lower sum to purchase a more reasonable alternative.

We filed bankruptcy in January '07, and it was the best thing we ever did. But we had no assets, were in rented accommodation and no massive disposable income. We were discharged 8 months later.