Alternatives to declaring bancruptcy?

[2kidsintow]

My relative's OH owes a lot. Back taxes from self employment business. Mortgage on a house they are considering surrendering to the bank that they can't pay. They are considering going bankrupt. For some reason I seem to remember that there is something that you can do that is not quite as extreme, but I may be making it up. I was wondering if anyone on here knew what I am thinking about.

Are you thinking of an IVA?

Tell them to contact a debt advice service like the COnsumer Credit Counselling Society or the Insolvency Society ie a government-backed one that doesn't charge fees. They'll talk through all the options and give the best advice based on their actual circumstances (ie income, assets, amount owed).

That's the one Miranda. Thanks. Will go and research. And I'll tell them about the insolvency society too.

Knew Mumsnet would come through!

CAB and National Debtline are other free debt advice agencies. Bankruptcy is sometimes the best option.

What actually happens with bankrupcy?

I mean - assets/jobs etc

Do you have to pay back a certain amount over a certain period?

Bankruptcy - A Guide has quite a lot of information. A rough summary..... You are allowed to retain any assets that enable you to keep working e.g. tools, books, a car and to run a home i.e. furniture, clothing. If you own any assets like a business, home or shares they have to be sold to pay off creditors. Cash savings, and income beyond a certain amount goes to paying off creditors. Bank accounts are frozen and you cannot use credit cards or cheque books. The bankruptcy is discharged after 12 months, income can carry on being used to pay off debts for up to 3 years, credit rating is affected for six and bankruptcy restrictions can carry on for up to 15 if there has been criminality involved. It's a serious step with long implications so shouldn't be entered into lightly. Very much a last resort.

Thanks Cogito - I think we'll be seeing more of it soon

(not me btw!)

Not necessarily. Occurrences have certainly risen in the last five years or so but it is still very much an option of last resort. Rescheduling debts and things like IVAs are much more popular. Mortgage lenders are much happier to work with borrowers who are in arrears & keep them in their homes rather than repossess homes that may not realise the full value of the debt.

Ah yes - that makes sense.

Just can't imagine feeling so low and hopeless. Must be terrifying.

The next bet is to contact the CCCS who are a free debt advice group. Bankruptcy is often the best option anyway - even an IVA would completely screw up their credit rating. Ihopeeverything works out well for them x