Debt Help Services
CASE STUDY NUMBER 1 : APPROVED 1 FEBRUARY 2007
MR A.A.K. : SINGLE MALE
Mr K is a twenty-six year old financial adviser employed by one of the high street banks.
At the age of eighteen he obtained a personal loan to buy his first car. He found it very easy to obtain the credit and was able to make the monthly repayment from his salary. Because that had been easy, he then took advantage of more and more credit card offers and he began to spend more and more money, using those cards. Eventually his monthly repayments totalled almost as much as his monthly salary and he began to use one card facility to make the payment on other balances so instead of ever achieving repayment of any card balance in full, he was only shifting the balances between all the cards.
For seven years Mr K made payments to his card suppliers and he estimates that he has paid out a total of approximately £100,000 but has never been able to clear his debts and was not able to move on with his life.
His girlfriend and her family have been supporting Mr K by allowing him to live with them in their home, free of charge. His girlfriend has had to use her own income to support Mr K also.
Mr K’s girlfriend and parents eventually gave him an ultimatum, stating that he would have to start contributing or move out.
Because Mr K is a financial advisor and would lose his job if he had resolved his situation by declaring himself bankrupt, he turned to Bond Partners LLP, who reviewed his circumstances and gave best advice. At that time, his unsecured debts still totalled approximately £70000.
Mr K decided to propose an Individual Voluntary Arrangement and in February 2007 his creditors accepted his proposal. Mr K had previously been paying the best part of his £2300 monthly take home pay to his creditors, without being able to contribute to his living expenses.
His proposed contribution of £500 per month over five years will repay his creditors just over 32p in every pound, he is now able to contribute to his living expenses and he has been able to continue his employment as a financial services adviser. He will be debt free in five years and will have achieved writing off over £45000 of his unsecured debts.
CASE STUDY NUMBER 2 : APPROVED 21 JULY 2006
MR G.J.W. : TWICE-DIVORCED POLICE OFFICER
Mr W has been a serving police officer since 1979. He had always made use of credit card facilities for minor expenses, more as a convenience that a necessity. He was therefore always easily able to honour the monthly repayments.
His first marriage ended in divorce after his wife had an affair and incurred massive debts for which Mr W was jointly liable. Mr W remarried three years later, whilst still in debt. He decided to sell his former matrimonial home to reduce his monthly commitments but the property sold in negative equity and his debt total increased. He remained in debt from then on and never had sufficient income to enable him to service his general living expenses and repay his debts at the same time. In fact, he unwittingly increased his overall debts totals by trying to repay existing debts with new borrowing.
The final blow fell when his second marriage broke down irretrievably and his wife withdrew her financial contribution towards joint expenditure, whilst remaining in the matrimonial home incurring expenses.
Mr W came under increasing pressure from his creditors and as a serving police officer, did not want to consider the option of bankruptcy although he believed that sooner or later one of his creditors would seek to make him bankrupt. Mr W moved into free police accommodation but found that a huge lump of his monthly salary was still being eaten up by payments to creditors, not leaving him enough to support himself properly each month.
Mr W had no assets remaining other than his pension, which will not become available to him until he retires in 2010 and from his monthly basic take home pay of £1650, he was making payments to creditors totalling well over £1000 and not reducing his debts, because of interest and late payment charges and penalties being added.
Mr W spoke to Bond Partners LLP who reviewed his case. With information provided from Mr W Bond identified that he needed just over £900 per month in order to adequately support himself. He was therefore advised that if he were to propose an Individual Voluntary Arrangement, he could reduce his monthly payments to his creditors just £655 per month. Because he would have a lump sum payment upon retirement, he proposed to make the monthly payment for only three years and then complete the IVA by offering a proportion of the lump sum pension as a final payment.
In July 2006 Mr W’s creditors accepted his proposal of monthly contributions - towards debts totalling over £96000 - for three years, with a final lump sum payment in the fourth year. The total contributions will provide creditors with just over 89p for every pound owed. As a result, Mr W has achieved a massive reduction in his monthly payments to creditors, all interest and charges have been frozen so his debts will not increase, he is now able to afford to properly and adequately support himself, he will be debt-free within four years and he will have written off more than £10,000 of his debts.
CASE STUDY NUMBER 3 : APPROVED AUGUST 2002
MR S.T.W. : SOLE TRADER
Mr W is a divorced man, now living with his partner and her daughter from a previous marriage. He was unemployed for three years from 1996, until he started trading as self-employed aerial contractor. He has no employees, he works alone.
In 1991 Mr W had his own limited company, which was increasingly profitable but which traded from his matrimonial home in order to minimise overheads. In 1994 Mr W’s ex-wife insisted that the business be relocated elsewhere, or a divorce would ensue. Despite acceding to her wishes, Mr W’s company failed later on after a very acrimonious and costly divorce. Subsequently Mr W also suffered a full psychological breakdown and was unable to work full-time until 2001. Between the failure of his company and starting his self-employment, Mr W should have been in receipt of benefit income. However, his ex-wife falsely reported him for claiming benefits whilst running a business and for a long time he had no income whatsoever. During that time he had to make extensive use of credit facilities just to be able to live.
Mr W accumulated unsecured debts totalling just over £28000. He thought about bankruptcy but was advised that he would not be able to get legal aid if bankrupt and he required legal aid so as to fund his petition for a contact order in respect of his son. He therefore sought alternative advice and elected to repay creditors through an Individual Voluntary Arrangement. Upon a review of his circumstances, it could be seen that out of his personal drawing from his business of just over £900 per month, Mr W needed just over £620 to cover all his reasonable living expenses. The surplus income remaining of £290 was offered to creditors through an IVA of five years, offering a total contribution of just over £17000 and providing an expected dividend of almost 38p for every pound owed.
Creditors accepted Mr W’s proposal in August 2002, so Mr W was from that point onwards easily able to afford to live and to repay all his creditors from one monthly affordable payment. All interest and penalties were frozen and the creditors, in accepting on 38p in the pound, had written off almost 62p for every pound owed, equating to a total of more than £17000 being written off. Subsequently, in 2005 a lump sum became available to Mr W and creditors were circularised with a revised offer, which was accepted. Mr W’s IVA was therefore completed in August 2005, some two years earlier than originally proposed.
CASE STUDY NUMBER 4 : APPROVED MARCH 2001
MR AND MRS B – JOINT AND SEVERAL AND PERSONAL LIABILITIES
Mr and Mrs B live with their three children, who were aged 14, 13 and 9 at the time Mr and Mrs B came to see us. Mr and Mrs B were both salaried employees who had, like most couples, small credit card and loan facilities that they were servicing quite happily, until Mrs B had an accident at work, seriously injuring her back. Mrs B’s accident gave rise to a greatly reduced family income and it became increasingly difficult to maintain payments to the creditors whilst trying to support a family of two adults and three children. Mrs B has never been able to realise her earning potential since her accident because she is severely restricted in what she can do and she receives benefit income. The family’s situation worsened as Mr and Mrs B began to spend more and more of their income on repaying creditors, leaving them a meagre amount to live on, whilst never clearing any of their debts because of interest and charges being added to their debts.
Mr and Mrs B sought our help and advice and we identified that Mr B’s take home pay was approximately £1260 per month, Mrs B’s Disability Living Allowance was £800 per month and child benefit and child maintenance payments totalled approximately £270 per month. The total income of just over £2300 needed to service a total family expenditure of just over £2000 and the credit repayments were detracting from that.
We identified that Mr and Mrs B could only afford to offer monthly contributions of £150 each, which we felt might not be sufficient to offer over two Individual Voluntary Arrangements. However, we were made aware that there would be increased income arising periodically and therefore MR and Mrs B each proposed a Voluntary Arrangement based on each of them offering £150 per month for the first twenty-four months, with annual increased on each anniversary for the following three years.
In total, Mr and Mrs B offered a pool of funds totalling £10800 in each of their Voluntary Arrangements. Mrs B’s personal unsecured debts totalled almost £19000, Mr B’s personal unsecured debts totalled just over £19000 and there was one joint and several liability of almost £1500. The couple owed, between them, approximately £39500. Mrs B’s personal creditors were offered a dividend of just over 37p in the pound and Mr B’s were offered almost 37p in the pound. The joint creditor was offered a dividend from each proposal, therefore could expect to receive just over 74p in the pound.
The creditors accepted both Proposals in March 2001 and Mr and Mrs B maintained the payment schedule as proposed throughout the five years of their Arrangements.
Each Arrangement completed satisfactorily in September 2006 and Mr and Mrs B are now debt free, having written off debts of approximately £12300 in Mrs B’s case and approximately £12300 in Mr B’s case.
CASE STUDY NUMBER 5 : APPROVED JANUARY 2001
MR B, DIVORCEE
Mr B was adjudged bankrupt some years ago, which left him psychologically devastated and in practice, with no income or employment. As a result his marriage of twenty-four years also ended in divorce and he had to leave his home and two children and rebuild his life.
Mr B met a new partner and started working on a self-employed basis for a driving agency. He later suffered serious injury in a car accident and for a while had no income. He then found salaried employment as a sales representative.
In December 1999 Mr B reviewed his financial situation as he realised that he was not making any headway in repayment of debts that arisen following his divorce and accident, whilst he was still trying to maintain his own living expenses and adhere to child support payments in respect of the children of his former marriage. He realised, with the benefit of hindsight, that he had actually been using one credit card facility so as to service the monthly payment towards another, thereby merely shifting his debts around instead of clearing them.
We looked at his case and circumstances and assessed that his reasonable living expenses totalled just over £850 per month. His take home pay was in the region of £1130 per month, which left a reasonable surplus of £285 per month. This was far less than the total monthly minimum payments he was being chased by creditors for and he elected to propose an Individual Voluntary Arrangement. We did identify that Mr B’s income would increase annually and his Proposal offered creditors £285 for the first twelve months with annual increases on each anniversary. The total funds becoming available over the proposed five-year term was almost £21000, whereas his unsecured debts totalled almost £67000.
Creditors accepted Mr B’s Proposal in January 2001, which offered them a dividend of 24p in the pound, thereby agreeing to write off 76p in the pound. As a result, Mr B would have effectively saved almost £51000 in repayments. However, in 2002 a lump sum became available to Mr B and a revised proposal offering full and final settlement was sent to creditors. Although creditors accepted the revised offer they did require that a further three months’ contributions should be paid, which Mr B agreed to.
The final dividend payment to all unsecured creditors was 10p in the pound, so ultimately Mr B had actually repaid approximately £6700 thereby saving over £6000 when his Arrangement completed in June 2003 and he became debt free
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