I am currently in over £10k in debt and have no way of making a repayment plan, should I declare bankruptcy?

Question

I am 25, no kids, or partner. I currently rent and have few material possessions. Would bankruptcy be the best course of action and could their be any other pitfalls i'd not thought. I'm aware of the effect it would have on me getting credit, buying a house and my ability to have a bank account. I intend to get professional advise on the matter but thought this might be a good port of call first.

Answer 1

Just move to a new address and ignore it. If you are clever enough you will get away with it. I have walked away from around 40k owed to credit card companies and bank sover the years and never paid a penny of it back. It is quite easy to do just make sure you dont tell the post office your new address so dont have your mail diverted as they inform the debt collection agencies where you have moved to. Once you have moved stay low for a couple of years then open another bank account then start to apply for credit cards again. I have lived a little and spend thousands of pounds and enjoyed it and have never paid it back. Banks make enough profit so take my advice and just walk away from it. It is only a fool who worries about it and pays it all back over years. Now get packed up and find a new place to stay.

Answer 2

Hi, yes pay off any council tax first, as this is the only debt you can go to prison for not paying!

Debt is not bad, bad debt is bad!! There's a difference! It is all about control of your cashflow.

Have a look at money saving expert, and see if you can do any balance transfers etc or similar, this site is always worth a browse for anyone in the UK.... http://www.moneysavingexpert.com/
This site just gives advise and offers links to products that are good deals, it is very up tp date and may save you something somewhere.


You are lucky this is cool cause you don't have any dependants! Well you are not alone either, however this debt has built up over time wasn't it! Don't leave it any longer!
What you should remember! Is it will take time to pay it off! OK it is not an overnight thing. But you could be debt free when you are 30 if you have a reasonable income.

Get the professional advice, go to citizens advice centre in your area or try and call them although they are very busy.

I suggest it all stems on your income really. If you are earning £20,000 and potentially this could rise over the next few years, I would pay it off, in a long term loan.

However if you are on a low wage and say lower than £10,000 a year and you have little hope of earning big money in the near future I would go bankrupt, then you won't have to pay it all back.

Seek professional advise though make sure that are INDEPENDENT and not on a commission to sell you a loan etc, good luck.

Just remember 10,000 is not a lot of money when compared to the average mortgage! The smallest flat will cost you £70,000 as you know. So don't get stressed about 10,000, as it is chicken feed to large loan companies, if you can agree a re-payment scheme. Make sure you are getting a good interest deal.

Now!!! As I said I don't know your situation, but If you earn £20,000 you could get a £70,000 mortgage OK, and add your debts to this (80,000 total), it is then a controlable debt. An 80K mortgage is about £650 per month to pay back! (At least then you wont be paying a landlord dead money every month. And you wont have to go bankrupt.

NOW IF YOU DID DO THIS! You will have become a landlord! As you have no children, you could let out two of the bedrooms in this property for around £200 per month each! Which will give you some tax free income! Also there is a good chance the property will increase in value too. So the remaining £250 you have to pay is most likely roughly your current rent. Also after 5 years you could sell the property, and break even. Even if you had a 30 year mortgage at the start you could shrink it over time and when you are around 50, you would own it outright!

If this was to fall flat on it's face then where would you be? To this I would say that you would be in the same situation you are right now!
So although part of me says "don't give up, and just go for it, and take a risk to make it all go in your favour",

It also depends on what sort of person you are and if you are ready to control your financies and change your lifestyle. Personally I would prefer rent payed to me, than me pay a landlord dead money.

You could easily get a mortgage even thought you have these debts! If you have a reasonable income!!!! And then put the £10,000 onto the mortgage. But I don't know what your income is like!!! Or even if you have a permanent job etc. Everything depends on your income. If you have finally taken stock of your life and taken control of your money then your advantage is not having dependants!

Everything hinges on you income and 'potential' future income.

Do seek good in dependant advise and get it sorted!

Answer 3

The sheer relief of getting rid of your debts is worth the loss of credit rating.
The courts appear to have the attitude that it is the banks and credit card companies fault in that they do not lend responsibly and thus are pushing many too hard to borrow money they can't afford to repay.
You can still have a bank account but one with only a cash point card.
The interest on £10,000 is approximately £2,000 to £3,000 per year so, just repaying the minimum 5% each month and spending nothing, it will take you about 20 years to pay off this balance. So depending on how much the courts allocate from your earnings you should be better off once the debt is written off.
You don't say if you are working, as there are some jobs where an un-discharged bankrupt can not be employed.
Don't forget, once you are discharged you can work on getting a new credit rating by saving.
Professional advice will usually be to set a budget ....... but really look at the figures and work out how long and how much you have to pay, if there is no chance of your money increasing then you will be burdened by your debt for many years. Also if you take this route you will still lose your credit rating
Good Luck

Answer 4

Hi - I know how you feel, I owe about £15K EXCLUDING my £120K mortgage and life is pretty tough at times, but I keep on working, doing overtime where possible and, to quote my current company, 'Every Little Helps'! DONT declare bankrupcy, not at your age. What if you wanted to get married or have kids in the next 5 years, or even buy a new car? Chances are youd need a loan for these and youd not be able to get one. So, heres what Id do (in no particular order, am just brain storming here!)

1) Contact the companies and tell them you cant repay the amounts and negotiate a new plan, this is ALWAYS an option as these companies would rather keep you as their customer than lose you
2) Contact Debt Busters or Debt Free Direct and get some advice
3) Citizen's Advice Bureau will also give great advice
4) Sort out your job, make sure youre in a job thats paying what youre worth
5) Dont panic! It will get better

Please do contact me if you feel I can help further, Im 26 and in pretty much the same position as you (Except Im married but I still have my own personal debts to sort)

Take care, Bex xx

Answer 5

Bankruptcy pretty much means you won't be able to do anything finance related for at least the next 5 years until you are discharged (i.e. no loans, credit cards, setting up a business or managing or running a business, no hire purchases etc). Any gifts you have made in the last 5 years can be recalled by the assignee and anything you own can be sold (including your clothes, but this would be pretty extreme). If your parents or anyone has ever gone guarantor for you on any loan or purchase you have made they may be responsible for some or all of your debt even if it isn't specifically what they were guaranteeing. After you are discharged you may still find some employers and creditors will ask if you have even been declared bankrupt before and you are pretty much always going to be seen as a bad credit risk.

Answer 6

That is not a large debt - you sound depressed. Bankruptcy would have long lasting problems. Best to talk to your creditors and try and work out a payment plan.

Have a look at this government web site: http://www.insolvency.gov.uk/

You should be aware that bankruptcy actually costs a lot of money - paid to the administrators and in fees.

At your age it will have long lasting effects. Try and get some financial advice as well as advice on how to manage your finances in the future. Don't let creditors bully your into bankruptcy but ask them for assistance in settling your debt to them. The larger companies will not want the expense of bankrupting you when you have no assets.

If you owe taxes or council tax - attend to these first as not paying these can land you in all sorts of legal trouble.

Take career advice as well so that you can get out of your current predicament.

Lastly don't despair - use this time to reassess where you want to be in life and use it as a stepping stone to the future. Good Luck.

Answer 7

DONE NOT bother going to the companys that offere you debt free soultions go to CAB first you can find the nearest one by going to www.yell.com, they give you the best advise, As with the debt free soultion that the companies offer you end up paying more than you debt is worth in almost 100% of the cases.
II you are a business then might end up paying £200 but if it is just a personal then i belive it is only £60 to get the bankruptcy to start pocessdures. Wantever you income, then you might be asked to pay a contribution out of you weekly/monthly money, If you are on low income/benafits then i would surgust no more than £1.00 a week.
Depending who the companies are then might not be interested in getting the money back (have already righten it off.).
Also a thing to note is that if you have not had contact with the companies for 5 years then they have no legal comeback to get the monies back (this depend on want type of debt it is thougt).

The best thing to do is to go to the Citizen Advise Breuro they give you upto date correct information.

Answer 8

get professional, impartial advice.. CAB may well be the most appropriate. id steer clear of companies advertising on TV.... they dont neccesarily work in your interest.

depending on how many you owe cash to, and how much it may be better to directly contact your debtors. work out what you owe, what you currently earn and how much you can put aside. then make an offer to your creditors

if you have some high intererst debts then get these paid off first... it may be sensible to consolidate debts (if you can onto lower interest bearing accoutns. oddly enough your bank may be able to help

going into Bankrupcy or an IVA may be the only way out if you have alrge debts or no hope of paying htem off. often banks will look kindly on people who do very hard to pay off debts rather than go into bakrupcy/IVA as a way of avoiding some or all of the debt.

Although the stigma of being bankrupt has laregyl gone (and rightly so) its still a very serious option, and one htat should be cosnidered as a last resort in my view... like an IVa it will hang around for a long long time.

the frist thing to do, which is what you seem to be doing, is to face up to the problem and genuinely work out the best way forward. then pay off the most expensive first. Accept that you have lived off borrowed money and that your future life in the short term is going tobe a real struggle. not nice but it needs facing....

Answer 9

Professional advice ? No need for that - go to Citizens Advice Centre - they have specially trained staff to help people like you.

What do you mean that you have no way of making a repayment plan ? Yes you have.

If you are working, a plan can be made, and the people you owe money to should be willing to listen.

If you are out of work, it gets even better for someone renting their home, because of the benefits you can get like rent relief, Council Tax benefit, etc.

Bankruptcy is definitely not a course you should take for such a small amount of debt.

Answer 10

Hmm! in betweeny this one, £10k is a fair sum of dosh but not huge in the bankruptcy stakes by any means.

Personal Bankruptcy has (I think) two levels - or at least did have,
ie up to £20k = 1 year then clean slate and up to £30k = 3years then clean slate.

The people that I have dealt with have all taken Bankruptcy as a last resort,the CAB or insolvency Practitioners will be only to pleased to help you set up a payment/budget plan to aid you.

While I cannot publicly endorse Bankruptcy I will say that if you decide this is the BEST course for you then go ahead as I am only to well aware of what stress can do to a persons mental and physical health long term.

If you do decide to bankrupt yourself please be aware of the fee you have to pay "up front" to initiate Court/Official Receiver proceedings - was £400 probably double that now.

Best of luck to you.

Answer 11

dude, just cleared off 15 k (uk) myself over a year and a half. its been a b.i.t.c.h but would i have gone bankrupt - HELL NO!
i remember feeling at first like giving up, dying, running off everything. but you know what i did? i knuckled down, created a budget, tried to do overtime, and cut down on everything that i could do. rent, food, going out etc.

Now heres the good bit, at first all you see is your debt right - 10k. seems a lot doesnt it??? well its actually not. You can get rid of that in very little time if you make the effort. DONT GIVE UP! dont go bankrupt unless its your only alternative!! I am 28 and we're round the same age. Going bankrupt will affect you wanting to buy a house etc - you will start a snowball effect!

Now there has been some very good advice given on this site for you. Go to the website posted by MUD - the moneysavingexpert.com site. go to the debt free wannabe section of the forum and write a post there. there are loads of good people who will help you! SEEK professional advice from FREE debt advice companies. PAYPLAN being one of them. SEEK citizens advice from the bureau.
There are IVAs to help you get out of debt, bankruptcy is not the only way. think carefully before you make any decisions, for your own sake and future!! Most importantly DONT GIVE UP - your not in a hole that you cant get out of!!! trust me!! Good luck