Bankruptcy: "isn't Going To Affect Me, It Only Lasts A Year,"

[Realistbear]

http://www.telegraph.co.uk/news/main.jhtml...06/nbroke06.xml

Going for broke

By Ross Clark and Karyn Miller

(Filed: 06/08/2006)

Page 1 of 5

Not everybody waiting in the clerk's office in the Bankruptcy Court at the Royal Courts of Justice, on Friday, seemed unduly concerned by the fate that was about to befall them. Several bored-looking women, seemingly oblivious to the cause of their troubles, were thumbing through lifestyle magazines, putting down their copies of Take a Break, Love It and Hello! only when called to pick up the papers formally declaring their bankruptcy.

"It's slightly embarrassing,"

said Rose Garner, a smartly dressed, 27-year-old single mother of two, who had discussed her situation with the Citizens Advice Bureau and then asked to be declared bankrupt, after running up debts of £15,000 on credit cards and goods from catalogues. The items were, she said, "necessities - but not always".

"But bankruptcy isn't going to affect me, because it only lasts for a year,"

Miss Garner said. "There aren't any consequences, if you don't own a house or a business. Why cripple myself with the minimum repayments when I don't have to?"

...../

The British economy has frequently been described in recent years as being powered by a ''buy now, pay later'' culture. It seems

it is quickly evolving into a 'buy now, pay never' culture.

It isn't just credit card companies that are left paying the cost: some people are even declaring themselves bankrupt to escape demands from the Inland Revenue to return overpayments of tax credits.

Gordon's "Miracle Economy" of HPI-MEW has created a new kind of wealth that is unreal and just opinion. House prices that are into the realm of the fantastic just adds to the surrealism that pervade's the average persons' concept of financial responsibility. Instead of a "Miracle Economy" we need to return to Maggie's idea of earning the pound in your pocket.

Edited August 6, 2006 by Realistbear

[Butthead]

Don't you have to state whether you've ever been declared bankrupt on applications for credit - especially a mortgage?

I'd like to think you do, and surely that would be a significant consequence?

[CrashedOutAndBurned]

Right, that's it. Screw being an honest sort of member of society.

Thanks to massive increases to my credit limit I never asked for from these parasite bankers, I'm going to buy as much gold bullion as I possibly can and bury it in the garden, get my wife pregnant, stop paying my rent until I'm evicted, leave wife and tell her to get her pregnant belly down to the council. Go bankrupt. Cash in gold. Move in to wife's council flat.

Live effort free.

Edited August 6, 2006 by CrashedOutAndBurned

[IwearShorts]

Don't you have to state whether you've ever been declared bankrupt on applications for credit - especially a mortgage?

I'd like to think you do, and surely that would be a significant consequence?

Yup, well the bank I work for does anyway, there is a question at a point in the process that asks "Have you ever been bankrupt?". If answered Yes you will be declined, doesn't even bother going through credit scoring to make a decision if Yes (If you lied and answered No credit scoring would pick it up).

[CrashedOutAndBurned]

Instead of a "Miracle Economy" we need to return to Maggie's idea of earning the pound in your pocket.

Er, I think it was Maggie who let all her rabid American banker mates into the UK market in the 80s, sowing the seeds of the current mess.

We need to re-regulate credit across the board. Excessive banking is killing society.

[othello]

Everybody has a credit rating and this exists whether you declare it or not. People such as this will find it hard to get unsecured credit again.

THe more interesting thing for me is that with banks writing so much down to bad debt, interest rates will rise to cover the costs - way above the rates people have enjoyed till now. People may find their mortgage interest rising a lot more than 0.25%...

[Butthead]

If answered Yes you will be declined, doesn't even bother going through credit scoring to make a decision if Yes (If you lied and answered No credit scoring would pick it up).

Fantastic!

Rose should wake up and smell the flowers.

[88Crash]

Don't you have to state whether you've ever been declared bankrupt on applications for credit - especially a mortgage?

I'd like to think you do, and surely that would be a significant consequence?

From the two people I know that have recently gone bankrupt, I know the following

They didn’t want to do it for the fun of it, both stalled it until the last minute and both were very nervous, the night before

Both were amazed at how easy it was (one even got a customer care survey afterwards, with regard to the service he had received)

One is already out of bankruptcy ,has a bank account and a credit card with a low limit, which can be used sensibly to build up his credit rating (he doesn’t want loads of credit cards again, as that contributed to his problem)

Yes, I know he shouldn’t have overspent, it is his fault, he is the first to admit he is to blame, however when a person on a 20K basic has many credit cards, including one with a 12K limit, that’s a temptation

Somebody on ‘average salary’ will probably never have 12K in a lump sum to spend in their lifetime – 12K on a piece of plastic is ‘spending money’ and for some people that is a hell of a temptation, especially when he was ‘making more money’ from his house then doing a proper, productive job!

In summary, there were some consequences but one went bust for aprox 100K and the other 200K

On balance the consequences were negligible

[Guest X-QUORK]

It's amazing isn't it? In just one week we have an interest rate hike and the media discovering The Debt Problem, a much needed shot in the arm for us bears.

The Independant today has an interesting article which explains the differences between bankruptcy and IVAs:

"All insolvencies stay on your credit file for at least six years. As a result, bankrupts are likely to find it particularly tough to get credit for an extended period after being discharged - the best case is they will have to pay substantially higher rates of interest. For these reasons, the CCCS says bankruptcy only makes sense for a small number of people with debt problems - of the cases it handled in the first quarter of the year, it recommended bankruptcy to just 12 per cent of borrowers. "If you're a young person without much in the way of assets, it can make sense," says Walker. "But bankruptcy does still have very serious implications."

A better bet, for many borrowers, may be to come to an agreement with creditors - either an informal pact to make fixed repayments over a set period, or an individual voluntary arrangement (IVA), a legally-binding deal that is less serious than full-blown bankruptcy.

The downside to IVAs is that it is likely to take much longer to be clear of your debt - five-year plans are common. But borrowers retain much more control of their assets, and their professional status is less likely to be affected. And the impact on your credit rating will also be less disastrous."

Debtors are warned that bankruptcy is no soft option

[CrashedOutAndBurned]

From the two people I know that have recently gone bankrupt, I know the following

They didn’t want to do it for the fun of it, both stalled it until the last minute and both were very nervous, the night before

Both were amazed at how easy it was (one even got a customer care survey afterwards, with regard to the service he had received)

One is already out of bankruptcy ,has a bank account and a credit card with a low limit, which can be used sensibly to build up his credit rating (he doesn’t want loads of credit cards again, as that contributed to his problem)

Yes, I know he shouldn’t have overspent, it is his fault, he is the first to admit he is to blame, however when a person on a 20K basic has many credit cards, including one with a 12K limit, that’s a temptation

Somebody on ‘average salary’ will probably never have 12K in a lump sum to spend in their lifetime – 12K on a piece of plastic is ‘spending money’ and for some people that is a hell of a temptation, especially when he was ‘making more money’ from his house then doing a proper, productive job!

In summary, there were some consequences but one went bust for aprox 100K and the other 200K

On balance the consequences were negligible

But people will fiddle this easy system. Any system open to fiddling is fiddled. I pay the balance on my cards every month and only have an outstanding balance on interest free periods where I'm using the intro offer as a free loan in order to keep my money in my savings until I have to pay it off. I only do this because I can and life wouln't be much different if I couldn't use the cards. So why not amass a huge amount of debt, get loads of stuff (gold bullion? antiques?), and then go bankrupt as a one-off boost to my standard of living?

If your a student, why not pay off your student loads with a personal loan and go bankrupt and start with a clean slate intead of hardship?

If you have that one off opportunity to rack up debts and largely get away with it, why not take advantage of this 'right'?

Don't you have to state whether you've ever been declared bankrupt on applications for credit - especially a mortgage?

I'd like to think you do, and surely that would be a significant consequence?

Yes.I think it is still six years. Still, there is the sub-prime market for you. Your rates won't be so good, but to think you're utterly restricted by your bankrupcy is nonsense. You can get a credit card and bank account within a year and work from there.

[patprimer74]

"But bankruptcy isn't going to affect me, because it only lasts for a year,"

You really think so?? Not only is she unable to run her finances, she's extremely naive, as well! Bearing in mind that the fact of her bankruptcy will be in the public domain and will remain so for ever, how does she think that people will treat her in the future?

Does she think that a bank or building society will give a mortgage to someone who walks away from her financial responsibilities? What about landlords? Will they be happy to let their property to such a person? Phone companies, utility companies, HP companies - the list goes on and on. Why would any of them risk their money on her? They simply won't.

Perhaps even more seriously is the effect on employment prospects. Would an employer give this person any job which has any connection with money, whether by way of responsibilities for profits, cash control? Hardly.

So, anyone who thinks that bankruptcy is an easy way out is well and truly mistaken. It may be the only option, sometimes, but it has serious and longstanding implications.

p

[Butthead]

Perhaps even more seriously is the effect on employment prospects. Would an employer give this person any job which has any connection with money, whether by way of responsibilities for profits, cash control? Hardly.

Good point. When I applied for my job (Financal Services) I had to state whether I had been declared bankrupt and I had a credit check done.

She's effectively closing a lot of doors for herself for life, and for what? A flash lifestyle for a few years?

Silly girl.

[dog]

Figures released by the Bankruptcy Service on Friday revealed that 26,021 people were made insolvent in the second quarter of this year, a shocking 66 per cent rise on the same period in 2005.

Just 13 per cent had owned their own home before their bankruptcy

A 66% rise on an already large number and only 13% of them were home owners. Since mortgages now consume such a big percentage of take home pay, one has to suspect that the true plight of home owners is much more serious than is being reported. The only difference between the renters and the home owners is that incubation period for disaster in the latter group is longer (since home owners have an equity buffer).

[FirstTimeBonkers]

So, anyone who thinks that bankruptcy is an easy way out is well and truly mistaken. It may be the only option, sometimes, but it has serious and longstanding implications.

As someone who was brought up to be an earner and a saver, I do tend to your point of view. The snag is though that bankruptcy is becoming destigmatized and easy to access, and ex-bankrupts will inevitably become more "mainstream" consumers and an increasingly lucrative market for lenders, who will give tighter spreads above "prime" lending because the ex-bankrupt group as a whole will actually be a better risk as it draws in an increasing number of "ordinary" people.

I think the most likely scenario is lenders becoming much more restrictive in the size of the loan they offer to all consumers, ex-bankrupt or not, since this reduces the effect of the consumer just deciding to go bankrupt. When you put this together with the steadily increasing wholesale cost of money we're now seeing, there has to be only one possible effect on house prices.

[Butthead]

The snag is though that bankruptcy is becoming destigmatized and easy to access, and ex-bankrupts will inevitably become more "mainstream" consumers and an increasingly lucrative market for lenders, who will give tighter spreads above "prime" lending because the ex-bankrupt group as a whole will actually be a better risk as it draws in an increasing number of "ordinary" people.

I'm not sure this will be as significant as you think. Ex-bankrupts may well grow substantially in number but are unlikely to ever be a 'large' proportion of the population. Financial institutions will be able to ignore their business and will likely choose to because it doesn't make business sense to lend to someone who has a record of walking away from their responsibilities. The social stigma may well diminish, but banks and lenders won't see it that way (they have shareholders to keep happy).

[MarkG]

Excessive banking is killing society.

No, fiat currency is killing society. There would be no need for lending restrictions if the banks couldn't create new money from nothing.

As for bankruptcy, it may be fairly easy to get credit after bankruptcy now, but as the banks tighten lending restrictions because of bad debt, you can guarantee that bankrupts will be pretty damn low on their list of desirable customers.

[DEATH]

The bankruptcy notice and all defaults on the credit file totally disappear after 6 years, so how would they find out if you answered "NO" after waiting for it all to vanish?

From Experian:

"details of your bankruptcy will usually be removed from your credit report after 6 years"

From Equifax:

"A credit report does not include information about your current or savings accounts, bankruptcies that are more than 6 years old, charged-off or debts placed for collection that are more than 6 years old"

Land Registration Act 2002

"Bankruptcy entries are automatically removed from the Land Charges registers five years after the bankruptcy order was registered"

I am surprised so many of you think it stays around forever, even people who work in a bank!

[delboypass]

6 years is a long time but not if i was writing off 200k...

Im sure if someone went personal bankrupt for 200k with no equity in house surely someone must turn around and say...so where did you spend the 200k then???

And if it is that easy to write off 200k i might give it a go then - at least I can buy my house outright after a year (or less - many are only 3 months now) dischargeed!

[OnlyMe]

Dog,

A 66% rise on an already large number and only 13% of them were home owners. Since mortgages now consume such a big percentage of take home pay, one has to suspect that the true plight of home owners is much more serious than is being reported. The only difference between the renters and the home owners is that incubation period for disaster in the latter group is longer (since home owners have an equity buffer).

An equity buffer which they can draw down as long as sticker prices rise. Hence the push by lenders to inject ever more lending into the system - both to increase fees and to further inflate the bubble and hide the existing excesses/potential defaults. There is no reason to belive that the secured market is in any better shape than the unsecured market as the factors affecting both - company and personal excess are essentially the same and potenitally pushed to the same critical point.

Edited August 6, 2006 by OnlyMe

[CrashDive]

you probably have to pay over the odds when it again comes to other finanical products such as a mortgage.

Yes if you are a Discharged Bankrupt (6months to a year usually after bankruptcy), but only relatively slightly higher, 0.25% probably.

There are quite a few lenders willing to offer mortgages for discharged bankrupts immediately, provided they have a 10% deposit, smaller as time goes by. Its surely a lot easier to save a deposit when any debts are wiped out.

Bankruptcy for many with debts that they cannot hope to pay back, is usually the best option by far. All debts wiped clean within a year.

Many debtors who plump for the IVA solution (paying back as much as they can over 5 years) end up going bankrupt anyway as very few can sustain large payments for 5 years and if you default any payments the agreement is void. With an IVA your credit is still adversely affected.

If you want credit(financial products(lol)) after accruing large debts and going bankrupt/IVA/payplan etc - then you probably are a lost case anyway.

If you own your own home/paying a mortgage then bankruptcy may still be your best option, investigate further.

2 good sites;

http://www.debtquestions.co.uk/forum/index.php

http://www.theba.org.uk/

Don't believe the propaganda from the banks and money lenders, bankruptcy is the best option for most people who have debts they are severely struggling with.

Edited August 7, 2006 by CrashDive

[CrashDive]

Does she think that a bank or building society will give a mortgage to someone who walks away from her financial responsibilities? What about landlords? Will they be happy to let their property to such a person? Phone companies, utility companies, HP companies - the list goes on and on. Why would any of them risk their money on her? They simply won't.

Perhaps even more seriously is the effect on employment prospects. Would an employer give this person any job which has any connection with money, whether by way of responsibilities for profits, cash control? Hardly.

So, anyone who thinks that bankruptcy is an easy way out is well and truly mistaken. It may be the only option, sometimes, but it has serious and longstanding implications.

After she is Discharged (6months to a year) and probably before in most cases;

She will get a mortgage once she has a deposit with a small surcharge, 0.25%

She will be able to rent from private owners, also thru letting agents if she stumps up 3/4 months rent in advance.

She will have no problem with getting a phone.

She will have no problem with the utility companies.

She will have be able to get HP for cars etc - should she be crazy enough to do so.

There are only a relative few careers where bankruptcy is a problem.

She does not have to declare her bankruptcy once she is discharged and is very unlikely to be checked for employment purposes in the vast majority of jobs. Even then, it is unlikely to be held against her once she can show an improvement in her control of her finances.

Bankruptcy is the easy option for most people who have large debts they cannot expect to pay off.

The consequences are irritating and annoying and embarrassing probably immediately after bankruptcy but after a year they are relatively minor.

Certainly negligible compared to worrying about huge debts.

Again, don't believe the propaganda from the VI's - investigate Bankruptcy as an option if you have debts that are a real concern.

http://www.debtquestions.co.uk/forum/index.php

http://www.theba.org.uk/

Edited August 7, 2006 by CrashDive

[I'M WITH STUPID]

mmm this has given me an idea - I'm gonna sell my house, transfer as much cash into my bank account from my credit cards as I possibly can - stick it all in a swiss bank account where nobody will find it - get myself a rented house (on a 12 month let) and declare myself bankrupt - sorted - then in six years time I'll get a mortgage and start all over again - hell, wot am I waiting for....Byeeeeeee

[AwaitingFairPrices]

mmm this has given me an idea - I'm gonna sell my house, transfer as much cash into my bank account from my credit cards as I possibly can - stick it all in a swiss bank account where nobody will find it - get myself a rented house (on a 12 month let) and declare myself bankrupt - sorted - then in six years time I'll get a mortgage and start all over again - hell, wot am I waiting for....Byeeeeeee

Surely it can't be that easy? Doesn't anyone investigate where all the money has gone?

Its no wonder people take this route as there seems to be very few drawbacks. Live the good life for years (and maybe stash some cash/assets away in other peoples names) and then clear it all away.

What an amazing Country we live in

AFP

[Bankrupt Idiot]

After she is Discharged (6months to a year) and probably before in most cases;

She will get a mortgage once she has a deposit with a small surcharge, 0.25%

She will be able to rent from private owners, also thru letting agents if she stumps up 3/4 months rent in advance.

She will have no problem with getting a phone.

She will have no problem with the utility companies.

She will have be able to get HP for cars etc - should she be crazy enough to do so.

There are only a relative few careers where bankruptcy is a problem.

She does not have to declare her bankruptcy once she is discharged and is very unlikely to be checked for employment purposes in the vast majority of jobs. Even then, it is unlikely to be held against her once she can show an improvement in her control of her finances.

Bankruptcy is the easy option for most people who have large debts they cannot expect to pay off.

The consequences are irritating and annoying and embarrassing probably immediately after bankruptcy but after a year they are relatively minor.

Certainly negligible compared to worrying about huge debts.

Again, don't believe the propaganda from the VI's - investigate Bankruptcy as an option if you have debts that are a real concern.

http://www.debtquestions.co.uk/forum/index.php

http://www.theba.org.uk/

I would agree with everything that cashdive has said, speaking with experience.

You will also find that you can rent a property on the same terms as a "credit Worthy" person as they never do any checks on you for your money any how. LA Rip Off.

I would say that you will probably find it hard to get a mortgage/Loan/Credit card.

I went Bankrupt in Oct 2004 Discharged in April 2005. Not borrowed a penny since and have built up some savings to buy a house eventually.

So people do actually learn from their mistakes.

[patprimer74]

After she is Discharged (6months to a year) and probably before in most cases;

She will get a mortgage once she has a deposit with a small surcharge, 0.25%

She will be able to rent from private owners, also thru letting agents if she stumps up 3/4 months rent in advance.

She will have no problem with getting a phone.

She will have no problem with the utility companies.

She will have be able to get HP for cars etc - should she be crazy enough to do so.

Perhaps I should have worded it differently. Would you have any concern about lending money to someone who's recently walked away from all her debts? Would you want the bank that you have your hard-earned money deposited with to do so? Is there not a great deal of difference between those who handle their financial affairs fairly well and those who have got themselves into a complete and utter mess. If that isn't recognised by lenders, then they need their heads read.

p

...don't believe the propaganda from the VI's ...

So, who are these 'VI's'?

p