Customer BACKGROUND
Alan and Alison Smith took out a loan which was secured against their property. At the time, it was easy to borrow more than the value of their property and this was used for general home improvements, as they had purchased their first home fairly recently.
Alan and Alison had also used credit for living expenses and to supplement their income. They normally paid the minimum amounts due, which did not cause any issues for a while. However, the level of interest and charges began to build up and they were both finding it increasingly difficult to continue to pay their minimum payments.
Even though they were paying £300 per month on their secured loan, the balance did not seem to decrease. Along with no other credit commitments growing, Alison and Alan were finding it harder and harder to make the minimum payments due.
Alison and Alan had been in a debt management plan for seven years. Their house was in negative equity and the debt management plan did not seem to be decreasing their overall level of their indebtedness.
To compound their situation further, Alison was a director of a company that unfortunately had to placed into Liquidation. This meant she was now liable for personal guarantees given to the bank. Her income also decreased significantly, and she was only receiving jobseeker’s allowance. Alan and Alison found that they were unable to make even the minimum repayments to both their secured and unsecured creditors. Between them they had approximately £125,000 of debt which included possible shortfalls on secured debt of £71,000.
The situation was extremely worrying and the most stressful thing to endure. Alison’s health was starting to suffer, their relationship was taking a toll and the stress began to affect the Alan’s performance at his job.
We assisted them to put together all their combined financial information on their assets and liabilities and helped them with an Income and Expenditure Account. We discussed the various options available to them, and finalised an Individual Voluntary Arrangement (IVA) versus Bankruptcy. However, due to the lack of a regular income stream an IVA was not possible.
Bankruptcy was a better solution in their circumstances allowing them to write off all of their debts and start again.
The bankruptcy forms are online and are very cumbersome to complete and so we assisted them in the process to ensure that all the information provided was accurate and that there were no transactions prior to filing the bankruptcy which would be challenged by the Official Receiver.
Situation before bankruptcy
Total Unsecured Debt – £125,000
Shortfall on mortgage and secured loan – £71,000
Personal Debt – £43,000
Personal Guarantee to leasing company – £12,500
Approved Bankruptcy Solution
Bankruptcy covered all their debts including personal credit cards, loans and business debt that had been personally guaranteed plus the element of their mortgage and secured loan that was not going to be settled when the property was sold.
Alan and Alison ended up moving into a rented property, their previous property was sold and because they had no surplus income after taking into account their reasonable monthly expenditure both they were not required to make income contributions. Alan and Alison obtained their discharge after twelve months and are now working on improving their incomes so they can look forward to saving a deposit for a new home in the future.
The names of our clients have been changed due to General Data Protection Regulation (GDPR).
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