any benefits to bankruptcy..?

[joko]

my friend has had a debt with the bank for a good while now and has been paying back £30 a month... £20-odd of whoch goes back out instantly in interest and fees...
however now he cannot afford it as he is unemployed due to ill health etc ...

he contacted some sort of debt advisors and told them all his spends etc and they say his outgoings are bigger than incomings so therefore he cant afford the payments...
on their advice he wrote them a letter offering £7 and asking them to freeze the interest - they refused saying it would be unethical of them to continue to take money from him knowing he cant afford it.
they told him to go back to the debt people and arrange a debt management service and then they will be able to deal with the situation on his behalf.

they have apparently advised him to go bankrupt! -
this being that he doesnt have to pay a penny for a year and if by then he still cant pay the debt is written off... but stays on record for 6 years and affects any future loans etc
or
to offer a nominal fee of £1 to them... but that also stays on your record... ( i am not sure of details about this option actually, hes not here, but ill ask him to give me more deatils soon)
but if the bank wouldnt take £7 why would they take £1...?

the thing is, this is only one debt for only £900 ... and it seems a bit drastic to saddle yourself with a bankruptcy for that amount...?
as stated he is happy to just pay them the £7...(£6 more than the token fee they suggest)

he is concerned why theyre trying to force him to do this... his said they also tried to 'rack up' his debt level higher, by adding his other banks minimal overdraft facility - that hes uses all the time and doesnt view it as a debt at all... and its not what he was involving the debt people about - but they insited on adding it.

so whats the best thing to do here? what are the negatives effects of bankruptcy?

thanks

[sherrardk]

From a personal point of view the negative effects are - can only get a basic bank account (and even then it is really hard to get one), if you need to rent a house it is difficult as you will have a bad credit reference so no one will want you as a tenant, inability to get future credit if you are fortunate enough to find yourself in the position of getting back on your feet, costs you money to go bankrupt (it was £500 - but if you are so strapped for money you need to go bankrupt it is unlikely that you will have £500).

[pretty_snowdrop]

£900 is a tiny amount to go bankrupt for. If you go bankrupt you officially will not be given any credit for 6 years in some cases even longer. I can't believe he has been persuaded to go bankrupt for 900 quid. Your friend needs to get independant professional advice.

[bednobs]

i would agree with sherrard k, if the costs of bankruptcy are over half of what he owes, it seems ridiculous to do it. Perhaps he owes more than he's letting on?

[sherrardk]

You can get credit of up to £500 in the first year of your bankruptcy and any amount that someone is willing to lend you after that period (presuming that you are discharged within a year which is the normal amount of time).

[ubasses]

He should go and talk to citizens advice, where he will receive free unbiased help. They may even have someone who will negotiate with the Bank on his
behalf.

[MarkRae]

Recommending bankruptcy for £900 is ridiculous. Your phrase "some sort debt advisers" speaks volumes. Who on earth are these people? Tell your friend to seek professional help...

[sherrardk]

Surely the bank would go for a County Court Judgement first to try and get the money back. Obviously your friend will then be forced to pay. He can get a form (not sure what it's called) which he fills in stating how much he can afford and the court usually accepts that and he can pay a lesser amount back per month. That way he will avoid bankruptcy although the CCJ will show up on his credit files and affect his credit score thing.

[chrissa1]

The CAB are the people to go to for advice. I know, trust me. They're fantastic.

[joko]

its the cccs, and he showed me it and it said debt £914 on it.

they are a charity so i am assuming there is nothign in it for them.

discharged from what within a year?

apparently the bank woudl not do much unless he went through a debt agency..! bit weird.

I havent a clue about any of this stuff, which is why i am asking on here for him, so please speak as though i know nowt thanks.

he said she said the offer is only available to people with debts of this kind of amount!
it all sounds bizarre.
he is going to bring round the forms tomorrow for me to view properly and ill write more then, and he can answer some of youe questions.

safe to say though that agreeing to bankruptcy is no a good idea.

i had considerd looking into them myself but i think i will steer clear now.

[chrissa1]

This maybe a better way of tackling what is really quite a small debt as has been said on here before me.

http://www.adviceguid...ebt_relief_orders.htm

[themas]

This advice is absurd for such a small debt. I'm surprised if CCCS have told him this as they are usually good. Chrissa's ref. to debt relief orders is a possible route provided he doesn't own (or part own) any property & doesn't have a car worth more than £1K. However, CCCS know about these orders so it may be they have told him he doesn't qualify.

It is most unusual for a bank to tell him to go back to a debt adviser, but if he can't get more help from CCCS he should go to CAB, who should be able to help him prepare a financial statement and write to the bank for him with an offer of £1 p mth. with interest frozen. For people who are unemployed such offers are very frequently accepted.

[joko]

i havent seen him to get more info yet but i mentioned that link and he said they had told him about that option, but seemed to be trying to convince him to go the bankruptcy route...they seemed convinced it was a better option and made him feel uncomfortable ... but he wanted to check if perhaps it wasnt a better option after all...

i am going to show him this next time i see him an will hopefully get better info

thanks all

[themas]

There is absolutely no doubt that, if he qualifies, a Debt Relief Order is far far better for him than bankruptcy. The procedure is simpler & - most important - the cost is £90 instead of £700. If CCCS won't play ball with him he really must go to CAB.