Mum plans to go bankrupt due to £20k debts – despite having £420 a month to spare and this is why everyone’s warning her not to
A MUM of one is is considering going bankrupt despite having £420 in disposable income left each month, which she reportedly says is "only just enough" to pay for her lavish lifestyle.
The tale has been shared by a so-called friend who is asking for advice on what to do on forum Mumsnet.
Bankruptcy usually lasts a year and it can take the pressure off you because you don’t have to deal with your creditors and the money you owe can usually be written off.
But if your income is high enough, you’ll be asked to make payments towards your debts for three years - you may also have to sell your home and some of your possessions to cover the debts.
If you are approaching pension age even your pension can be use to pay off loans.
Plus, it will be more difficult to take out credit while you're bankrupt and your credit rating will be affected for six years.
Despite having this extra cash leftover from her part-time job as a GP, JemimaPyjamas writes that the friend thinks she is "better off just going bankrupt as it'll take forever to pay off".
The original comment has now had 193 replies.
But many forum users point out in response that bankruptcy isn't an easy option. One user said: "Bankruptcy is the nuclear option. It will affect her life a great deal.
"No one will stop her from going bankrupt, but equally she shouldn’t imagine it’s the “easy” option."
Another wrote: "My experience renting with a partner who still had a bankruptcy on record was that some letting companies flat out refused us.
"And some would only consider us if everything went in my name (and my single income meant we could only be assessed for very poky little places) and we had a guarantor - not everyone would be able to do this."
While someone else commented: "If the debt is unmanageable she may be best to default and go into either a debt management plan, an IVA, or bankruptcy. In this she needs support from a debt advice charity like StepChange.
"Doing any of these will not "wipe the slate clean". They will do enormous damage to her credit rating. She may not be able to have a credit card, mortgage, car loan etc for at least six or seven years."
Bankruptcy is often considered as a last resort for people in debt as it can have long-reaching consequences on your finances.
Often the first thing you should do is to contact all of your lenders to see if they'll agree to more affordable repayment plans.
You can also try and shift your debts onto a 0 per cent balance transfer card as then you'll only be servicing the debt rather than price interest rates.
HOW TO CUT THE COST OF YOUR DEBT
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
In this week's My First Home series, we talk to a first-time buyer who overcame a £5,000 debt nightmare to buy a £233,000 four-bed house.
If you're struggling, here's how to get out of debt in eight simple steps – and get advice for free.
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