Friends going bankrupt

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so we found out that a couple we are close to are losing their house and probably going bankrupt with non- mortgage debts of 200k!!!!! How is this even possible????

surely banks wouldn’t lend to that level?

It's possible. Many forms of lending are possible, not just your generic 5k bank loans.

It could be personal debt, business debt etc.

If it’s non mortgage debt then it won’t be from the banks, it will be loans and credit cards etc.

i would’ve thought that you wouldn’t be able to lend that much on non mortgage debt.

Not massively shocked if they are on high incomes. High incomes means high credit limits and often more access to credit etc. An expensive car each, a couple of credit cards each and a loan for a new kitchen could very easily push you into the six figures

I have unsecured debts of £75k as a single earner on £60k, not a homeowner. So I can imagine a couple who are both earning with a mortgage could get £200k in credit. Mine are mostly with banks, via personal loans, and fortunately I have enough assets to pay it all off in full if I needed to.

It's not the banks that have lent the money though it's the credit card companies.

Better to go bankrupt at this point . Start again with a clean slate

That sounds hard - are you managing ok?

My friend's husband has done it twice with debts of well over £100k each time.

It's mostly been credit cards, but the second time also involved debts from a business he'd started. They lost their house and everything - twice!

He's got a very well paid job, and since the last bankruptcy was discharged they've managed to buy a £650k house, renovate it from top to bottom, and it's now on the market £1.2m.

She's starting to wonder if he's got some sort of strange form of bipolar disorder. It seems that every 15 years or so, he spends and spends like crazy and then it all goes tits up.

It could be many things- tax if they are self employed/company, business debts if guaranteed, legal fees- it's not necessarily cards or loans

There must have planned to go bankrupt to have let it get that bad.

As a fairly high earning couple we could easily access £200k of unsecured debt. At the moment we have a few unused credit cards each with a limit of £20k. It’s easy to access credit if you earn a decent amount of money.

So they have used bankruptcy twice to clear their debts!

So irresponsible and feels unfair for people that pay their debts off fully.

How were they even approved a mortgage the second /third time round?!

I can show you how we can amass at least 100k debt right jnow

My cc with 0 balance has £15k limit
my CC with 0 balance has £15k limit
repeat exact same for DH - so 2 CC with zero balance and total £30k limit

thats £60k if we wished to by tonight - and two £20k loans each?

A car each in HP?

some furniture/catalogues?

bingo.

They wouldn’t have been approved for a mortgage though?

They'd managed to build up a lot of savings partly thanks to living rent-free in a property friend's father owns, but also because her DH is on a massive salary, gets great bonuses, she has a small business that pays her a decent wage and produces a good profit, so they had a very large deposit and a very good income.

They may also have got a chunk of money from friend's father, who sold his massive place on the coast for a 7-figure sum and retired to his villa in Spain at around the time they bought the new house. The mortgage was relatively small compared to the value of the property.

And they haven't "used" bankruptcy as a deliberate thing, they (well, he) took out credit, couldn't meet the payments and they were made bankrupt.

I honestly think there may be something wrong with her DH though, it really is as though he goes on the most outrageous spending spree every 10-15 years and runs up massive amounts of debt.

Well, they got one somehow. It was a good while after the last bankruptcy, maybe 15 years? Or maybe her DF guaranteed it, he is loaded.

Multiple sources of credit, not just a bank, i.e.

Credit cards (I have several credit cards with different banks with combined credit limit close to £75k! though I always pay off in full every month. Could easily go on a wild spree if I wanted to!).

Car loans, leases, hire purchase - again, different lending firms, a couple may have 3 cars between them, and if they're new on lease/loan/HP, 3 cars easily can top £75k, or more if any are say a camper van, or a £50k Merc or a Tesla etc.

Easy to get unsecured bank loans for other things like a caravan or boat.

Easy to get unsecured finance for furniture, home improvements such as double glazing or new kitchen/bathroom.

Pretty easy to get up to £200k or so if you've been getting finance from the retailer/supplier of your cars, caravan, kitchen, sofas/beds/carpets, double glazing, etc etc.

I can see how that’s possible. At one point, my old flatmate had £75k of credit card debt, no savings for a house deposit, very limited pension. I was scared for him. He got rid of it over time but has never managed to save. Despite earning very well he’s in his 40s and renting when he could have easily bought a flat in his 20s and been financially very comfortable. They could have been assuming they’d be able to get low cost balance transfers, took it out when they had a low cost mortgage etc. at that level of debt, you’d only need a few changes to be in trouble quite quickly eg assuming 3% balance transfer but only being able to get 8%, losing a job, having a mortgage go up significantly etc.

DH and I have probably got access to £100k on pre-authorised overdrafts and credit cards today, between us, and we're bog-standard public sector professionals. Add in a car loan each and we could easily hit £200k.

Have you tried asking them? If it was them that told you?
Otherwise, ask the person that was gossiping with you?

You get discharged from being bankrupt after a number of years, then you can do it all again, sounds like they had it off to a T.

Oh because people are complete and utter shites and really don't care.

<huge back story to that bitterness that I just can't unpick at the moment>

And because their mother bails them out repeatedly and they've learnt that it's acceptable to spend what they want as it really doesn't matter.

It might be very different on this occasion...... the couple I knew who went bankrupt, had his and her range rovers, and children in private schools.