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AIBU?

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Original poster

AIBU to presume she can pay back the money owed rather than go bankrupt?

192 replies

JemimaPyjamas · 26/11/2018 13:17

Semi posting for traffic, semi asking a genuine AIBU!

A friend I have known for ages, but have only started to see almost daily as she used to live on the other side of the country, is in a self inflicted financial mess.

Despite having an excellent career, she has taken out loans, bought from catalogues, bought new expensive items on HP, not paid utility bills etc etc and now is almost £20,000 in the red.

She has been asking me to help her get out of the mess she is now in (she confided this has happened, to varying degree's, most of her adult life.) So, we worked out her money together and she has just over £420 'spending' after covering her rent, bills, food etc. She now thinks this is 'only just enough' for things like nights out and trips to the hairdressers and isn't really much at all.

I said to her that I think this should go towards the money she owes, and then she said she is 'better off just going bankrupt as it'll take forever to pay off' and it'll mean she can start with a clean slate.

I have told her this is wrong, and I am also not entirely sure she could even do this by choice considering the options she has? (She also works part time, so could earn another £300ish after tax by working 5 days a week as opposed to 3.)

AIBU to presume that she would have to both work full time and pay back what she owes, and they would go through all her spending with a fine tooth comb?

I have been trying to look at answers to these specific questions but everything is a bit more general, or working on the basis that the person in the red has far less spare cash a month.

Thanks in advance!

OP posts:
InTheNorth · 26/11/2018 13:30

Sounds like she's not really accepted yet that she has a problem which needs addressing, even though she did take a big step forward in going through her financial position with you.

I found the moneysaving expert pages on debt helpful. If she were to read these, perhaps it would help her to understand her options and what she can do to help herself

www.moneysavingexpert.com/loans/debt-help-plan/

jimmyhill · 26/11/2018 13:30

If he debt is unmanageable she may be best to default and go into either a debt management plan, an IVA, or bankruptcy. In this she needs support from a debt advice charity like StepChange.

Doing any of these will not "wipe the slate clean". They will do enormous damage to her credit rating. She may not be able to have a credit card, mortgage, car loan etc for at least six or seven years.

If she has a car on finance or a mortgaged property she might lose them.

She needs urgent and expert advice ASAP.

MissMalice · 26/11/2018 13:34

If she goes bankrupt it isn’t just written off. She will he asked to provide details of her income and outgoings. She won’t be allowed to budget for things like birthdays and Christmas let alone nights out. Whatever excess there is deemed to be, she will have to pay towards her debts. It will be on her credit record for 6 years and there are some permanent conditions. Mortgage companies for example often ask “have you ever been bankrupt”. She’ll struggle to rent during those 6 years.

She will lose any significant assets - property, car unless it’s worth less than about £1k.

More importantly, if she hasn’t addressed the reason she’s overspending, she’ll simply end up in the red again.

She needs to speak to someone like Stepchange who can talk through her options.

MissMalice · 26/11/2018 13:34

Oh and the application for bankruptcy costs about £700. Has she considered that?

NoSquirrels · 26/11/2018 13:42

Bankruptcy is the nuclear option. It will affect her life a great deal.

No one will stop her from going bankrupt, but equally she shouldn’t imagine it’s the “easy” option.

Might stop her getting credit again for a good long time though, which would be a good thing.

Original poster
JemimaPyjamas · 26/11/2018 13:42

Thanks for the replies.

I think the debt is manageable, however my friend (who I am losing patience with) doesn't as it won't leave enough to, as she puts it, live. She see's things like wine, meals out, Shellac nails, getting her grey roots covered etc more like essentials than luxuries and hence the £420 a month leftover, after generous food and bills allowances, is, in her view, too little.

I am starting to think that, basically, she just doesn't want to pay anything back and thinks that she can 'wipe the slate clean' by declaring herself bankrupt rather than not being able to treat herself on a regular basis. But if they go through all her spending, and earning potential (as she is only part time but can easily go full time - she is a GP) this won't be an option will it....?

OP posts:
Lollypop27 · 26/11/2018 13:42

The £470 left over after rent, bills and food is a massive amount for someone in her situation. We have very recently had some hard Financial Times. Just last week I spoke to step change (thankfully after speaking to a third party ours isn’t that bad and is easily payable without having to do an iva or anything) they will go through everything with a fine toothcomb and the £470 left over could go towards bills.

Your friend needs to start taking some responsibility for her spending. To be in that much debt and still be concerned about nights out, hairdressers etc is irresponsible. She is obviously living beyond her means. It sounds to me like she needs some tough love.

Original poster
JemimaPyjamas · 26/11/2018 13:43

NoSquirrels I agree, but she has been in this position before but been bailed out by family. I get the impression this isn't an option again though.

OP posts:
Willow1992 · 26/11/2018 13:44

My concern would be housing - obviously a mortgage would be off the table, but as others have mentioned, renting also becomes very difficult.

My experience renting with a partner who still had a bankruptcy on record was that some letting companies flat out refused us, and some would only consider us if everything went in my name (and my single income meant we could only be assessed for very poky little places) and we had a guarantor - not everyone would be able to do this.

Original poster
JemimaPyjamas · 26/11/2018 13:45

Lollypop I agree completely. I live well but I don't have £420 to simply spend as I want on a regular basis. I think she is being unrealistic too

OP posts:
InTheNorth · 26/11/2018 13:45

Her view of essentials seems to be a bit different to that of most people.

She'll need to deal with it one way or another herself - I think you know that but the problem is that she doesn't! That's what has to change.

Original poster
JemimaPyjamas · 26/11/2018 13:47

Willow1992 she is in rented accommodation now, she was unable to get a mortgage when she applied a few years back (she was on approx £40k a year and the house was a £115k cottage), so she has her sister as a guarantor at the moment.

OP posts:
Lollypop27 · 26/11/2018 13:47

After a quick google as your friend is a GP if she works for a trust they may have the right to terminate her contract if she goes bankrupt!

Original poster
JemimaPyjamas · 26/11/2018 13:47

Wow, really? Fuck! That didn't occur to me at all!

OP posts:
DeadZed · 26/11/2018 13:47

MissMalice is correct. Going bankrupt is not an easy get of debt card.

The official receiver will go through her debts, outgoings and income. They will decide a monthly amount she has to pay towards her debt for at least three years. She will be left with this on her credit file for six years.
Any assets she has will be taken to pay towards her creditors.

Your friend needs to get expert financial help from one of the debt charities such as Stepchange or CAP.

MissMalice · 26/11/2018 13:48

The Officials Receiver simply would not agree to allow her a budget to include those things. Like I say, they don’t even let parents put money aside for kids Christmas presents. She’s deluding herself completely. The sooner she gets advice the better. At the moment she could potentially pay it off at a reduced rate and still have a bit left for fun stuff. If she carries on she will end up bankrupt with no money spare at all.

HollowTalk · 26/11/2018 13:48

She's a GP! Is there a reason she can't go full time? Does she have very young children? Does she have a mortgage?

LisaSimpsonsbff · 26/11/2018 13:48

I don't think they can insist she works full-time - after all, they don't make you start applying for higher paid jobs if you work full time and go bankrupt - but her income might be deemed high enough that she has to pay some of the debt back, so then she'll have all the problems of bankruptcy and still be paying money out to creditors:
www.citizensadvice.org.uk/debt-and-money/debt-solutions/bankruptcy-2/bankruptcy-explained/bankruptcy-overview/

if your income is high enough, you’ll be asked to make payments towards your debts for 3 years

HollowTalk · 26/11/2018 13:49

If she's a GP, why would she only earn £150 per day?

NoSquirrels · 26/11/2018 13:49

Well, you can’t change her point of view but an Official Receiver in bankruptcy might.

Point her towards StepChange and in the meantime tell her to post on the Moneysavingexpert Debt forum boards - they’ll tell her some Home truths. Whether she chooses to listen is up to her.

I wouldn’t get any more involved than giving her that advice, honestly.

Original poster
JemimaPyjamas · 26/11/2018 13:50

HollowTalk No, not really other than, and I kid you not, she has a new boyfriend she see's on certain days of the week and would rather not sacrifice those. She has one child, he's 11 and spends half the week with his dad.

Like Ive said already, I am losing patience!

OP posts:
Original poster
JemimaPyjamas · 26/11/2018 13:51

HollowTalk re the £150, I am not sure where that has come from now you bring it up. Maybe she means after expenses? No idea, sorry! I need to ask more questions really instead of just taking whatever someone tells me as fact!

OP posts:
PeevedOfPortishead · 26/11/2018 13:53

Dave Ramsey. It's about viewing money in a different way.

I do sympathise with your friend fwiw. I have a vet friend who needs to top up with benefits - it's not the guaranteed high income we all thought medical professionals would get!

Racecardriver · 26/11/2018 13:56

Going bankrupt isn’t really a clean slate. Does she understand what will happen to her in bankruptcy?