in desperate need of good and correct advice

[chelle]

hi - i have a situation that im in debt with.
I have a mortgage with Northern Rock. This is £205,000. The house is worth £220,000 at the very most.
2 years ago i took out a secured loan with picture finance for £71,000. They leant me 125%. It was to consolidate smaller loans etc. however these smaller loans would have been reapid if i had continued with them in 3 years time - the 2nd charge has another 23 years left!
I rung picture today to find i have paid £15000 and yet my loan balance has decreased by only £950! Im devasted and thought picture were offering me the right advice to my situation 2 years ago.
( the picture loan was taken out through the funding Network)
Now ive had to borrow again another 2 loans of £9000 just to afford to live as my circumstances have changed - ive had a baby and no longer working full time.
My 2nd charge is £755 per month and my mortgage is only £710! (interest only)
I really feel i was misadvised on this so called perfect helpful loan - i cant move i cant afford to do much - and all i seem to do and any money i earn is on paying off debts!
Ive now got:-
£70,050 balance at picture
£9000 loan unsecured
£9000 loan unsecured
£5000 credit card
£2500 credit card
£1000 loan unsecured

Plus my mortgage of £710.

Im in desperate need of good and correct advice on what i can do about this picture loan - i have today complained to the FSA OFT and consumer credit people - im hoping to get the interest froze and the loan reduced to £47,000 which is what should be left after paying £15000.
what do you think my chances are?
I feel the fudning network took advantage of my poor situation back 2 years ago and never fully explained i could never move home - or the implications of moving unsecured debt to secured and prolonging the period to 25 years from 5 years!
do i have a case?

[Adam Davies]

Hi
I can't give you advice on your complaint regarding the sale of your secured loans but can try to help regarding your overall debts.
Can you afford to repay both your mortgage and secured debts plus all your unsecured debts ?
I'm guessing that you can't and you really need to consider bankruptcy.Are any of your loans,both secured and unsecured in joint names ?
Regards

[Reviva UK]

Hi there

Really sorry to hear about your situation. You have correctly made a complaint to the FSA ombedsman and they now have a specific process to follow to handle your complaint. I do wish you well with that however there are other things that I think you should look at as well and maybe get other advice from the forum.

Thoughts & Questions I have;-

1. Your Northern Rock mortgage seems to have very low payments for a mortgage of £205k. This would lead me to believe that you are on an interest only fixed rate of about 4.2% and you should consider that -if I am correct - when this finished it will take a huge hike and you will be unlikely to change lenders because of the negative equity and the employment position. If you can check your northern rock mortgage offer you will be able to see if and when this rate will change.

2. You now have a house with about £61k of negative equity and for the forseable future you are paying £1465 per month for secured payments plus another £500(estimate)pm in unsecured monthly repayments. this would indicate that your monthly outgoings are in excess of £3000 ( including food / utilities clothing etc ).

3. What is the cost of renting a similar house in your area?

4. Perhaps some more info on what type of job you do, are you likely to go back to work full time and posting your income expenditure would allow the forum to give you some solid advice.

5. An interesting site you might like is http://www.whatsthecost.com/snowball.aspx . You can use this to work out how long it will take to pay back debt and in wich order to do so.

Hope we can be of help if you want to post all the info

take care

[johnt]

Hi
I can't give you advice on your complaint regarding the sale of your secured loans but can try to help regarding your overall debts.
Can you afford to repay both your mortgage and secured debts plus all your unsecured debts ?
I'm guessing that you can't and you really need to consider bankruptcy.Are any of your loans,both secured and unsecured in joint names ?
Regards

god I hate these loan companies, the adds on TV make it seem so easy, and the reality is very different. My advice to anyone else out there is, if your considering a consolidation loan then don't. Your kidding yourself. It won't change your spending habits, and will just push you into far worst debt, which unfortunately brings us to this post.

I’m sorry to here your going through this, trust me I know how it feels. If your earnings can stand it, then try and pay of the main loan as fast as possible, really reign in the spending.

If not then total up your monthly outgoings, this will include your mortgage, food, electric bills broadband, yours/partners and children’s clothing (within reason), modest car. Don't include any credit cards and unsecured debt.

If your remaining incoming is insufficient to cover a modest excess of say £100.00 or so, and accommodate paying the main loan and minimum payments and interest on credit cards, then I'd say bankruptcy is a very real option. Although painfull in the short term, it could be the best long term solution. In this respect you will probably never fully repay your debt within your current situation.

However as Andy rightly points you really need qualified debt advice, as mine is based on only a small amount of professional/personal experience. The CAB although very busy is one port of call, and try and see if you can speak to a debt management firm, a smaller well respected company or charity.

Following the last post, I would also agree that your mortgage payments probably will go up signicantly based on the figures you've provided. This will obviously have a deep impact on your present circumstances.

You've come to the right place for advice, and your facing up too things.

[MelanieGiles]

That is a good practical post from JohnT, and also good points from Andy and Reviva. Borrowing on a secured basis at more than 90% loan to value has to be dangerousm, especially in these times of widely fluctuating property valuations, and I feel that sometimes that we British are far too focused on property ownership - Englishmen and castles and all that.

I would seriously consider whether a complete fresh start in rented accomodation is a better option for you, with a bankruptcy to deal with the unsecured claims and unsecured shortfall from the negative equity. In one year's time you will probably be free from these debts and, whilst it does take some time to rebuild you do have the rest of your life ahead of you to do this. Continuing to try and service unaffordable debts will get you nowhere.

[chelle]

hi - thanks for your help everyone.
My mortgage rate is 3.99% for 3 years fixed just before the rastes jumped last year. its interest only. We also have another house which we rent out - the mortgage on this is £170,000 - worth about £180,000. Theres no 2nd charge on this house.

Im really scared about bankcruptcy - what would happen - would all my debts including mortgages etc be wiped out?
Would i ever be able to buy a house again? My hubby would not be to happy about bankcruptcy either.

Does anyone think i will get anywhere with the complaint? Even if they froze the loan and let me pay it off - i could do it in 7 years!

If i moved into my other home - could i then let this one be repossessed and hence the picture loan be wiped out altogether?

i also agree that when my fixed rate finishes on thius house in 2 years i will be really desperate!

I have just been borrowing and borrowing to repay old borrowing!
Ive accumulated all this debt in just 5 years! i feel like a fool for doing it - when really what i should have done years ago is an IVA then at least id still have my home!

why are we let to do this - why can you get good advice to invest money which is regulated to the nines but if you get into debt which is far worse than "investing badly" there is no regulation or right and correct advice - these companies are out to make money - but when your in need you feel what they offer is the best and only option! they should be debt advisers and offer or at least go over other optiosn for you so you can make a proper and better informed choice!

Is bankcruptcy the only answer? If so how do i do that - will i still owe money and how much.

I run my own business also - its only small and isnt making any money just yet - but would this need to be wound up to?

also FYI - my outgoings per month are as follows:-
Northern Rock 710
Northern rock rented house - £800 (rate just finished got to sort it out)
picture loan 755
TV license 11.37
Car ins 24.36
Home ins 26.22
Wellwoman plans 24.3
Life Ins 21
Bupa 89
Life ins 21
bt 40
British Gas 80
water 40
sky 20
rented house insurance 35
Nursery 280
HSBC laon 1 192
HSBC loan 2 95
Black horse loan 212
Breaemr finance for daughters brace - 75
Egg CC - 55
Virgin CC 85
shopping - mother in law currently buys for us - but is £120 week
Travel to work - £400
Maintenance payment - 120

INCOME:
hubbys wage - 1750 take home
Rent - £800
WFTC - £500
Child Benefit - 170
Maintenance - £100
Freelance payments regular - 1200 net

i work as a model and do get one off lumps here and there between 300-1500 - maybe 5 times a year.

My husbbys wages are going up to £2000 net soon yet the wftc will drop to 300.

Not good is it?
I am really trying to do the right thing and dont want to palm off all my debt to bankruptcy but if its my only option then i guess its the best one to do?

Ahhh im so confused!

xx

[chelle]

hi again - i just thought - what if i reduce the term of the picture loan - on their website the terms start at 120 months? Could i ask for a shorter term of 5 years?

[chelle]

hi - ok ive been looking into banckruptcy and i really couldnt do that - my home doesnt have any equity in - but i really wouldnt want to loose my house!

what if i did an iva? and asked picture to freeze the loan and reduce the term?

Theres got to be something i can do to prevent bankcruptcy.

i can kind of afford the picture loan without all the other crappy things ive got - my unsecured debts are £212 192 95 85 45 per month - so if i ivad these - i could reduce monthyl outgoings by 700 odd -
we would not be able to get credit again either if we had an iva so couldnt borrow more to get us out any further trouble !?

what you think?

[jane.l]

I was in this position this time last year, in my experience Picture are not at all helpful when you are trouble financially.. We too consolidated to 125% LTV with Picture. BIG MISTAKE. They told me the repayments were fixed, they WEREN’T, they kept going up by large amounts! We also had a 120% Together mortgage with NR too!

Our mortgage and secured loan repayments were about £1300 per month, plus we had loads of unsecured debt too, and negative equity. I am now bankrupt. If the house is in negative equity, it is possible to keep it when bankrupt IF you can afford to pay the secured lending on it, we decided a clean break was best, it was killing us to try and pay all that huge amount out every month for the next 25 years!

These are just my thoughts, from someone who has been in that situation, but I would cut my losses and leave the house and then go bankrupt.

[MelanieGiles]

"why can you get good advice to invest money which is regulated to the nines but if you get into debt which is far worse than "investing badly" there is no regulation or right and correct advice"

You make a very good point there Chelle - and certaintly more thought shoudld be put into the consequences of borrowing by both lender and borrower before proceeding.

With regard to your situation, I make the following suggestions.

1 Ask Picture if they could reschedule the loan for you by extending it over a longer term. This way they will make more money out of charging you interest for longer, and you might free up some much needed cash to assist with paying your debts.

2 Put the investment property on the market and sell it. You are in no position to be gambling on the property market or with interest rates, and this could hardly be deemed to be an investment.

3 Cancel your medical insurances. The NHS is not that bad if you fall really ill, and you cannot afford to pay them and your creditors if it is important for you to avoid bankruptcy.

4 Cancel Sky TV. This will save you some money which could be offered to your creditors.

5 Work out a new budget to see whether you could afford to maintain contractual payments to creditors.

It certainly seems to me that with some careful budgeting, and a rescheduling of creditor payments that you can work your way through this without resorting to formal insolvency proceedings.

[Reviva UK]

Hi chelle

you don't have a simple case as there is a 2nd house - buy 2 let, variable income, self employed ( i assume you are Trading As rather than a limited company )etc etc. are the other loans in your husbands name also/

House & Equity in Bankruptcy ( melanie please advise if I have it completely wrong)

In the event of a bankruptcy your equity in the house would then belong to he official receiver "for the benefit of the creditors". However in the family home you have no equity so a family member or husband can apply to the Official receiver to buy back your equity share for £1 plus legals ( approx £550 ). So the family home would be safe. However I suspect that the rental property would probably have to go.

There is a lot to go over and you need to sit down face to face with a professional as if you get it wrong the roof will cave in. There are a number of professionals on this site that can help.

If your income is relatively predictable you may actually be able to look an an IVA - go and see melanie it has got to be worth the petrol for some peace of mind.

I would still go back to the mortgage siuation you are currently in. Your mortgage will probably increase significantly when the fixed rate runs out so you should also factor this into the equation before you make a decision. No point choosing solution 1 only to find that you can't afford the house in 2 years anyway.

[MelanieGiles]

Absolutely correct Paul - but Chelle has made it clear that she wishes to avoid bankruptcy like the plague.

And in line with my earlier post, unless I have missed something entirely, the unsecured debts are only about £30k so I feel that with careful budgeting and co-operation from creditors Chelle could actually pay her way out of the debts.

I agree that the investment property should be sold.

[chelle]

hi again - thanks for your further help.

im useless arent i!

i did try to sell the rental property but in the market and where i live it isnt selling - so ive done it up a little ie new carpets and im renitng again as its empty and i dont have the mortgage payment for that !
Long storey but basically i sold it in december 07 - tenant moved out - sale fell through ! now empty since then! costing me £800 a month! so ive got to rent it again as its costing me money!

You see my long term plan was buy 2 houses - have both on interest only mortgages and when the 25 yrs is up sell one and pay both mortgages off with the sale of the one!

My income at present is stretching just to pay everything but thats with my mum doing my shopping each week.

Im freelance so i could suddenly loose my income to so i cant guarantee it!

should i IVA the unsecured debt and shorten the length of time with the picture loan - i dont want to increase it - i want it paid off sooner! if id done it over 10 years initially then id only have 8 yrs left! but i have 23 yrs left!
It surely cant increase to much if i shorten the temr as i said ive paid £14700 over 21 months and only reduced the debt by 950 - so its a hell of a lot of interest. The rate is aloso 12.2% which has climbed from 10.9%.

If i can keep my home then id glady do bankruptcy - i dont really understand how i buy it back as you mentioned - would that be just the mortgage or with the 2nd charge attached to?

what id really like to do is get everything frozen - could a court freeze the 2nd charge with picture so i can get it paid?

thanks

[MelanieGiles]

From what you have said with regard to your income being uncertain, I am sure that bankruptcy would be a better option for you to be able to make a fresh start.

Under bankruptcy proceedings your interest in your properties vests in a Trustee in bankruptcy, who will want to sell it for the benefit of your credititors - so leave them to deal with the intestment property. Turning to the matrimonial home, you have no equity in it at present, so I would find someone who is prepared to offer a nominal sum of £1 for your share - ie a relative or someone you can trust - and then the house will be removed from the bankruptcy - leaving you with no unsecured creditors to worry about and only a mortgage and a secured loan to service.

A Court cannot freeze the interest on the secured loan.

[chelle]

hi - what if the court decided that i have an unreasonable contract with picture ? ive read that if they can decide on that and decide its not a fair contract that they can freeze the interest and reset the payment period etc.

so tell me more about the house thingy - i really dont understand - if i did an iva thats just for unsecured debt isnt it? it doesnt include the homes?

or if i go bankrupt it wipes the unsecured debt rather than the 5 year payback thingy? is that what you mean?

oh also there is a fee of 8500 on the other houses mortgage so theres probably only £3000 equity left after their expenses on that house to!

i think ill wait and see how my complaint goes with fsa and oft and then decide on what to do - ive got to do something though - to be honest without the 2nd charge im fine and can afford everything fine, if those gits hadnt lured me to believe i was doign the right thing!
hindsight is a wonderful thing!