Debt Doctors Archive

Speaking to an experienced money or debt advisor would be our immediate advice in order to assess your current financial position and potential options. This would not deal with your matrimonial or personal situation regarding the breakdown of your relationship other than to establish whether children are involved and/or whether any contributions have been agreed to their maintenance or household bills by your former partner. These would be requested by your mortgage provider as a matter of routine. It would be important to understand from your statement-of-affairs the shortfall in your monthly budget after allowing for reasonable expenditure. We would also need to look at your unsecured debts, both in your name and in joint names. It may be necessary to look at options like selling the property, renting the property (and you renting a smaller place) or finding a tenant to supplement household income, if these options are viable. If the advisor is not able to help directly then they will be able to sign-post you to the right place, which include a meeting with your mortgage provider. Ignoring the problem will not help, but have a strategy in place before talking to your mortgage provider and have all the facts at hand.

I suggest that you contact the Trustee directly to see who is now dealing with the solicitor’s case files.  You can get the Trustee’s details by doing a simply search on the bankruptcy register which can be found on www.insolvency.gov.uk – the Insolvency Service’s website.  It is usual, when a practising solicitor is made bankrupt, that the Law Society will appoint another law firm to intervene in the ongoing case related matters, and the Trustee will be able to tell you who is now dealing with this matter.  The funds should be held in the solicitor’s client account, or even a separate trust account, in your daughter’s name.

Council debts are priority debts and would not be specifically included in the Debt Management Plan (DMP), however, the Debt Adviser should make provision in your income & expenditure (or statement-of-affairs) for both payment of on-going council payments and any arrears on these. If you have sufficient disposable income then a reasonable allowance will be made for a repayment arrangement to the Council and model letters are available to assist you present your circumstances following the visit or call with the debt adviser. If there is disposable income (e.g. over £80) remaining after allowing for any repayment arrangement for priority arrears then a Debt Management Plan may still be suitable to deal with any unsecured creditors you may have. As a guideline, you would have over £3,000 of unsecured debt with more than 2 creditors, otherwise self-management may be a better option with some initial debt advice. 

I would suggest that your client consults an insolvency practitioner at the earliest opportunity who can help her to appraise her financial situation and determine whether any form of offer to creditors will be possible.  If your client has equity in her property, creditors will expect to see this addressed in part, and hopefully if she is able to offer ongoing payments to creditors from her trading profits this would avoid bankruptcy proceedings.  Alternatively, your client may wish to consider a sale of the property, using some of the equity raised to formulate an offer to creditors on a full and final settlement basis.

Most fee charging Debt Management Companies (DMC) charge a percentage of disposable income, with a minimum monthly management fee and a maximum monthly management fee applicable. Even the ‘not for profit’ sector (e.g. CCCS, PayPlan) charge the creditors a percentage of the client monthly payment – in their case 12% to 12.5% of disposable income.

In the commercial sector the percentage of disposable income (i.e. the amount paid to the DMC every month) ranges for the main players from 15% to 17.5%. It should be noted that Debt Management Companies are VAT exempt and should not be charging VAT. Some do! A percentage of 17.25% looks like 15% (plus VAT).

Alternatively, companies like EuroDebt charge a monthly management fee based upon the number of creditors and level of debt (i.e. fee based upon level of work required), but their minimum fee is lower than the norm at £27.50 and the maximum figure of £50 much lower than the rest of industry. Most players would revert to the minimum monthly management fee when disposable income levels drop below £100.