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

[JemimaPyjamas]

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!

Captain do you think the other feckless gps wear fake nails?

ivykaty I think they all spend specially allocated hardworking taxpayers’ money on their fake nails that they get done on a midweek afternoon because they are PART TIME LAZY BASTARDS amirite????

Going bankrupt is a really crap thing to do unless you’ve no other option. My DP had to do it, only to find out 2 months later he was being made redundant with an incredibly generous payout. The Trustee took the lot (was around £16,000 more than his debts) and he never saw any of it again. He’s discharged from bankruptcy and it’s past the 6 year mark and he cannot get any credit. Good job we’ll never need a mortgage! Your friend has some serious issues with money and she def needs to get a grip.

She is stupid. She should be able to service that debt, put a lot of it on 0 interest credit cards and gradually pay it off. It just seems like she doesn't want to.

My (part-time) GP has shellac nails.

I think there is a level you can work as a GP, do a three day week, make extra pension payments to stay below higher rate tax bracket and do quite nicely. The job isn’t too stressful as you’ve got plenty of time off, the money is enough given you can do a a lot yourself on the days you’re not working and everything is kind of sustainable. A lot of people do it whilst they’d re bringing up kids or if they have serious hobbies/a part-time business.

But your friend isn’t in that situation. She could work full-time at the drop of a hat and with that, some lifestyle changes and some negotiation of debts she’d be debt free in virtually no time.

I went bankrupt in 2015 due to exhusbands 40k plus unsecured debts plus secured debt on our home. Fraud involved. I worked in a profession where I was unable to continue due to being bankrupt. It wasnt a decision I took lightly. Step change wont advice bankruptcy in this scenerio. The debts can be paid out of her income. The paperwork you have to fill in and file before a District Judge is vast and theres no chance a bankruptcy order would be approved if there is any dispoable income. Bankruptcy is uncommon wheres theres no property thats similtaneously being repossessed. Best thing would be for her to enter into an IVA. Much lower monthly payments frozen or reduced interest rates plus she will still have some spare cash every month. Unless shes prepared to claim benefits and a v low wage for the next three years then bankruptcy is not an answer as she would be paying any surplus income to her official receiver who will distribute it amongst her creditors

If she’s affording her debts then bankruptcy won’t be considered. When my ExH left me I looked into this. Mainly because my house is in negative equity and in my name only so he walked away from it. We shared our other debts and had no savings. I started a new job that week. I contacted the debt counselling people who went through my budget. They were surprised to hear how much I spent on weekly food - apparently it was well below the national average and they suggested I spend more! Lol. They were surprised to hear that I didn’t have money allocated for socialising, going out, hairdressers etc and that those things only happened If I happened to get vouchers for Christmas/birthday or someone treated me. Anyway, my gut reaction to the separation was I needed out of the house. Couldn’t sell it, likely to be auctioned off as it needs quite a bit of work. I’d still be left with a £30k debt to pay off after selling and if this was to change into a loan it would cost more than my current mortgage. I asked about bankruptcy and was told this wouldn’t be considered as my budget dictated I could meet all mortgage and bill payments (despite being left with no money each month for emergencies and luxuries like going out). They basically told me that if I lost my job then this would likely knock me into arrears with everything and I’d be able to consider bankruptcy but was advised against ever doing this as it would affect my whole life.
The debt councillors were helpful to talk to. I contacted stepchange as I’d heard them mentioned by Martin Lewis. He also recommends Christians against poverty.
OP your friend has psychological issues which need dealing with around her spending and also with her priorities.

Stepchange are fantastic btw

Sorry not read through thread in detail, so forgive me if this has been said, but even if she goes bankrupt she has to sign up to an income payments agreement which usually lasts for 3 years. This involves a bankruptcy officer going through all her income calculating enough income for her to cover housing, food and small amounts for other cost of living like hair cuts, some clothes etc. Any income left after this will be taken by the bankruptcy officer and paid to her creditors so she will have restricted spending for 3 years. Then even after six years her bankruptcy will come up if she applies for a mortgage.

Citizens advice bureau has a great page on the involved for bankruptcy, IVA etc. Whatever you do, don’t lend her money, you will not get it back. She needs to learn to rein in her out of control spending habits.

Citizens Advice page on the different debt solutions. www.citizensadvice.org.uk/debt-and-money/debt-solutions/

Maybe your friend has seen celebs like Kerry Katona declare themselves, only to jet off on holidays to Barbados weeks later?
And of course Trump was declared bankrupt a few times.

She won’t get a DRO because her disposable income is too high.

She isn’t actually insolvent - the two tests are asset vs debt (she may be insolvent on this one if she owes more than she owns) and also income/expenditure - not only can she meet the required repayments, she actually has a healthy surplus there.

The Official Receiver will require her to make a contribution from her bankruptcy. I’m betting that there is other expenditure that isn’t considered reasonable, e.g. a very high food budget will be scrutinised. She will have to make payments for three years.

If she is a salaried GP I doubt it will affect her employment, but if she is part of a partnership they will almost certainly kick her out. The bankruptcy order would automatically end the partnership, causing problems for all involved.

Does anyone actually think that a woman with a child can surrender the whole of her leftover money every month for the next 4-5 years? Even if she paid half of that a month she would be paying it off for about 10 years. Your friend is panicking, that's why she is jumping to bankruptcy. She also probably doesn't like the implication that she is lazy and feckless with her money.

Drogos

Whether the friend goes bankrupt, or enters some sort of debt management plan, she will be allowed to cover reasonable, and actually quite generous, household and child expenditure, plus a modest amount for her own clothes, entertainment etc before she has to 'surrender her leftover money'.

It sounds like she currently has plenty of money, but not reasonable expectations of prioritisation and spending.

I’m taking a back seat with her situation as I have now realised the extent to which she is making her own situation worse and also how it’s purely her fault in the first place.

She can come across as very together and professional but, a bit of a dig, reveals the mindset more of a child.

Yes, I do think she thinks it’s an easier option! She can’t cope with the idea of having to pay back an amount she sees as enormous, despite her potential earning power

Pass on any info you think she might need JemimaPyjamas and then leave her to it.i just hope she wasnt expecting you to lend or give her anything. She sounds very immature. Im glad im not her patient tbh

Well, if she has £420 left over per month then she ain't down to FoodBank level is she?

Maybe you should let her go her own way (it's not YOUR problem) and let her reach rock bottom - it's the kind of reality check she needs before she'll take her position very, very seriously.

She's living in Barbie-Land, FFS!

Same problem here guys.
Albeit a different route.

My wife gambles on line ALL of her salary 21K and has her head stuck in the sand regarding the debts elsewhere she racks up.

If this was someone else I would say talk it through and address the issues, difficult to do so when it's so close to home. In the meantime, the debts are getting Bigger and Bigger

@JackJack199

You need to leave her, get a financial separation. You will both lose everything if you don't.

BIL lost their house, he was getting more credit agreements by meeting the postie at the end of the road after they were already on some debt repayment plan. They had £200k equity - all gone...

Bankruptcy seemed amazing for my (selfish and irresponsible) friend. She had no assets other than a car. She had shit loads of credit cards and loans. Including one for £12 that she took out to go travelling for 8 months. She used the loan money in her account to meet the monthly payments.
When she got back she declared herself bankrupt. Got it all written off. 3 years later bought a house. 5 years later said house increased in value enough for her to move to a much bigger house in nice area. Literally handed to her on a plate. I'm incredibly jealous.
The worst thing that appeared to happen was when she got her original mortgage that she was on a higher interest rate. But given the house was her only outgoing as she was debt free that didn't matter.
None of our friends can believe it but hey ho. I'm sure she's not the only one.

The more I read the more I think she shouldn't be allowed any form of credit for a very long time.

She needs a hard lesson to make her realise that we all have bills to pay that should come before anything else, ie rent, utilities, insurance, food.

She needs to realise that she has to repay these debts and that her spending will be limited for a very long time.

Or of course, she can do what most debt addicts do, which is bury their heads in the sand and build up even more debt until they cant stand the phone ringing because it is always somebody after their money.

@Mumshotel

5 years later said house increased in value enough for her to move to a much bigger house in nice area. Literally handed to her on a plate. I'm incredibly jealous.

She wasn't 'literally' handed a house on a plate. She paid a deposit and made monthly mortgage payments for her house. No one handed her anything.

She was smart to declare bankruptcy and looks like she's learnt her lesson. Well done her.

If someone is in debt for spending the credit on food, housing payments or necessities then I'd say it's no one's business how they sort it out. If, however, they have lived a life of luxury, jetted the world and stayed in 5* hotels then they should be required to pay it back! It's not fair that some people get away with doing what they want with cash that isn't theirs whilst others can barely afford to feed their children. Lifelong credit bans should be a concept for really serious offenders, I.e. been in thousands of pounds worth of debt multiple times with different companies and never shown any stability in payments. It would really help the rest of us that actually use credit properly

I am a bit puzzled about Mumshotel 's friend, how could she buy a house 3 years after being declared bankrupt? I thought in the first 6 years after bankruptcy people struggled even to get a bank account, never mind a mortgage?

You can get a basic bank account straight away, @Pemba
As soon as you’re discharged (usually 12 months) you can start rebuilding your credit record so that once the bankruptcy drops off your file after 6 years, you can have a decent rating again.