Michael and Laura

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Michael and Laura took out a loan which was secured against their property. At the time it was easy to borrow more than the value of their property and this was used for general home improvements, as they had recently purchased their first home.

They used credit for general living expenses and to supplement their income. They generally paid the minimum amounts due, this caused no issues for a while, however, the level of interest and charges began to accrue and they found it increasingly difficult to maintain the minimum payments. 

Despite paying £300 per month on their secured loan the balance did not seem to decrease. Along with their other credit commitments growing, they found it harder to make the minimum payments due. 

Michael and Laura had been in a debt management plan for 7 years, however, their house was in negative equity and the debt management plan did not seem to be decreasing the overall level of their indebtedness. 

To compound their situation further the business Laura was a director of a company that unfortunately had to be wound up. This meant she was now liable for personal guarantees given to the bank. Also, her income decreased dramatically, and she was only receiving job seekers allowance. Michael and Laura found that they were unable to make even the minimum repayments to both their secured and unsecured creditors. Between them, they had around £115,000 of debt which included potential shortfalls on secured debt of £67,000.  

The situation was extremely worrying and the most stressful thing to endure. Their health was beginning to suffer, the relationship suffered and the stress affected Michael’s effectiveness at work. 

The Business Debt Advisor team helped Michael and Laura pull together financial information on their assets and debts plus income and expenditure. We helped them complete their bankruptcy application online, family helped them out with the application fees of £680 each. Within days they were bankrupt.  

Michael & Laura’s comments: 

“Considering bankruptcy was very scary. It was however, a very valuable experience and we know are much more aware of the need to manage our income and expenditure. We have definitely put in place measures to ensure we never end up in that situation again. It has been a hard lesson to learn but have come through it as better more educated people.” 

Situation before Bankruptcy 

Shortfall on mortgage and secured loan: £67,000 
Personal debt: £38,500 
Personal Guarantee to leasing company £9,500 
Total Debt: £115,000 


Bankruptcy covered all their debt including personal credit cards and loans, business debt that Laura had personally guaranteed plus the element of their mortgage and secured loan that was not going to be settled when the property was sold. They moved into rented accommodation, their property was sold and because Michael and Laura had no surplus income after taking into account their reasonable monthly expenditure, they were not required to make income contributions. They obtained their discharge over 12 months and are now working on improving their incomes so they can look forward to saving a deposit for a new home in the future.

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