BANKRUPTCY!! Pushed to the edge....

[anotherbrokepilot]

Thanks everybody, especially those who took the time to PM me.

Anybody else out there have first hand experience of taking the plunge ?

[Tenminutes]

Hi there anotherbrokepilot,
I declared myself bankrupt last year after completing CPL IR etc 1 year previously. The day I sat in front of the judge was the most nervous and also the most relieving of my life. With one stroke of his pen £64000 of debt was vanished. I walked out of the county court a free man as if just completing two years hard labour only to be told that it was not my fault and here is another chance. I, like many pilots and others found myself in a position of terminal decline financially, robbing peter to pay paul with credit cards, constant negotiation with banks and later debt collection agencies and worst of all it effected my personality and relationship with my family. Defered proffessional studies loans that were eagerly handed out to start became a torment. The most frustrating thing about all of my creditors (about 10) was that none were prepared to negotiate beyond original agreed terms. They instead sell bad debts to debt recovery units who are nasty people who send bailiffs around to beat down the door and climb through open windows. Crunch for me came three months prior to bankruptcy when I realised that my situation was unrecoverable, rather like what I imagine must run through the minds of guys in a deep stall. You can bankrupt yourself from all debts except those incurred by a court fine or a government loan. This includes situations where a bank takes you to court and you are ordered to pay fines etc. To prevent this from happening and to completely free myself I took the plunge. £250 was all it cost (which I had to borrow) as the court waved the discretionary £90 costs due to my lack of funds. The appointment took one week to come through. Two hours in the court house talking to the judge and the official reciever on the phone who deals with your case there after. They send out a huge questionaire requiring about a day to complete including everything financial. Then a mutual day, time and telephone number is agreed for the official reciever to ring you to discuss your case. This was the last time I spoke with him, we never met. From day one, leaving the court house, any creditor who was informed of my bankruptcy, would break the law in contacting me, what a relief especially after a year of horrible telephone calls and letters. I was working for an airline at the time, the same large well known airline that currently employ me on the ground. There is no need for them to know and infact it is none of their business what my financial status is. If they asked I would tell them. It does not effect my airside pass or my disclosure (why would it) and the only way in the future that it may effect me would be in signing a bond or with Easyjet where the help you arrange a loan, as a bankrupt you must declare your bankruptcy to anyone lending you more than £250. This of course is then up to them if they risk it. My bankruptcy is very much one of misfortune as I borrowed the money in good faith with every intention of repayment, indeed had the banks agreed easier terms they would still have been paid, any airline would have to either take you on a bond or leave you. I have a post office account now with no overdraft, deal only in cash and have nothing of any value (which helps prior to bankruptcy) it also helps to be married as the other half is not effected in any way. There are jobs that I can't do such as return to my original profession as a financial advisor or become an estate agent, oh well, thats not why I spent the money in the first place. I have no regrets, enjoy answering the telephone and love opening the post, I don't earn enough to contribute to my estate, and I can concentrate 100% on my future airline career. I will never borrow again out of choice (even though tescos, one of my creditors sent me a credit card application recently, how daft is that), the other options to bankruptcy are costly and still involve a noose. My advice is that no problem is worth loosing your health over. Good luck.

[anotherbrokepilot]

Did anybody see "Tonight with Trevor McDonald" last night ?
They did a half hour special on bankruptcy, following somebody through the process of going bankrupt.

I was very interested as to what slant the programme would take, but having watched it I was amazed at how positive everybody was about it. I think with the new rules now in force I'll be hard pushed to get an appointment !!
Seriously though, I found the programme had quite a calming effect on me, and I feel even closer to taking the plunge.

Any other pilots out there in the same situation ?

[Aero Sid]

Tenminutes,

Thanks for a very good thread about your dealings with Bankruptcy. I am now in the position you were in, most of my debts have now been sold to Recovery Agencies and I now dread the postman or a withheld number on my phone!!!
This week I am looking into following in your footsteps and it's nice to know they could be light at the end of a very dark tunnel.
Do you know the implications in the future for a mortage??

If you have anymore advice please don't fail to PM me.

Thanks again.




Anyone else in the same position?

[Wee Weasley Welshman]

What a very interesting thread. I can see this becoming a Wannabe issue - which it hasn't been I don't think until now.

Is it a viable strategy for someone say 18yrs old to secure all their £70,000 of training via credit and then go bankrupt? They quite possibly would not need a mortgage or anything for 10 years and a £1,500 car need not be a massive burden.

Its highly unlikely to be 'a good thing to do' but nevertheless - is it a viable strategy?

I know for a fact that my girlfriends 19yr old student brother has been mail shoted at least a dozen credit cards, has a personal loan for a car, has a student loan and has been offered a 'friends mortgage' to "get on the property ladder early". Seems credit really is pathetically eager to find users...

Cheers

WWW

=============

Hmmmmmm. I have just followed some of the links to gen up on this.

It does seem a viable strategy - particularly for the younger Wannabe unlikely to own much in the way of property.

It becomes even more painless if you are going to complete and FI rating and spend a period as a Flying Instructor. A job that often entails driving a knackered old car and living hand to mouth in a caravan somewhere - exactly what bankruptcy can drive you to anyway.

So, our intrepid 18yr old moves out of home into a nasty little student rent; Dad covers the rent just to have his home free from a teenage

So, Kevin (for it was he) happily says Yes, he would like to take advantage of your credit card - to all 12 of the mailshots that come through his door about a week after he moves in. Kevin, registers as a partime student at the local poly and fills out a student loan application. He also goes to the High Street and takes out an unsecured loan 'for a car'.

I reckon Kevin could get 12 credit cards with £3,000 limits (they seem to start at that these days). So that £36,000. The student loan would be £4,000 and I reckon the High Street banks would drop you £10,000 for a car. Kevin has now got £50,000 of credit and he hasn't really tried yet....

He might be even cleverer and get a full time job - any job there's plenty about and lets say it pays him £15,000 a year. For a couple of months he lives of his cards and promtly pays them off - maybe whilst he's starting the ATPL's via distance learning. Bingo he asks and gets his credit limit raised to £5,000.

Anyway, he gets this money and its enough to do the whole CPL/IR ATPL exams and a FI rating. He has barely spent a penny of his or his parents money.

He now spends about £400 declaring himself bankrupt. He can tell the judge he's just a stupid teenager who thought he'd get a job with BA and didn't realise it was so hard. With the stroke of a pen the young mans debts are removed. The Judge likely thinking that if these companies will lend such huge sums to teenagers they deserve to get burnt.

Kevin now gets a job as a Flying Instructor. His wages for the next 3 years barely covers his living expenses - leaving him free to pay nothing back to his creditors.

After one year the bankruptcy is spent, after three you are scot free. Kevin would only be 21 or 22. He can apply for a mortgage and get one and have a credit card and start repairing his credit history.

By the time he's got his airline job and needs to buy houses and flash cars he is free to do so. Meanwhile he is not having to pay off those loans and his parents.

They can't take your rented house off you, your cooker, telly, armchair or <£1,500 car or clothes. Well - as an 18/19/20yr old I didn't have more than that to my name and the same when I was a PPL flying instructor.

I don't see the drawbacks. A free CPL IR FrznATPL and FI rating, three years of living as a flying instructor, then a period of repairing your credit profile.

Interesting.


Cheers

WWW

[Tenminutes]

Hi Aeor Sid and all,

Credit companies use what ever means possible to acquire potential customers details with which to prospect them for business. A classic example of this presented itself about one month after my declaration of bankruptcy. I recieved more interest from credit companies than ever before, including offers from mortgage lenders. All bankrupts have their details printed in a local press and a London newspaper. This being the medium of information retrieval of choice for greedy and arguably stupit finance companies. Or maybe not, after all you are now back in the market, they even offered to buy my bankruptcy which basically involves you reversing the order and borrowing the full amount from one lender, why you would do this is beyond me. The best thig you can do with all of these financial solutions is throw them in the bin and contact your official reciever who has now become your official free rock solid financial advisor who is completely impartial and really is there to help those who wish to be helped.
I am so glad that this thread is attracting interest because it shows me that not every one has a bottomless pit for training as the TRTO schools and certain airlines seem to think.
I am a born again and fully reformed creditaholic and would go to meetings if I thought it would help to inform others of the total releif that I have now. I am happy to answer any other question in my experience.
Good luck

[anotherbrokepilot]

Fantastic thread guys !

Keep'em coming !!

ps sixmilehighclub check your PM

[Chaffers]

It makes sense if you understand how banks work. They are there to increase the amount of money in the system, hence they will lend out anything up to ten times the amount of capital they have as assets.

That means that a bank with £1000000 worth of assets can lend out £10m, though always spreading the risk by lending lots of smaller amounts.

If you do your sums its obvious that the bank only has to reclaim 10% plus administration fees to break even on each debt. So if you owe £40000 I assume you must have paid back well over £4000 to have ramped up to that much debt in the first place.

A combination of very low interest rates and massive competition in the market place (everyone is getting in on the act, supermarkets, storecards etc) has led to the scramble from credit companies to offer credit as widely as possible. However with the new bankruptcy laws it does make the credit companies rather vulnerable to the (somewhat) unscrupulous. Its not as though the poor babs make any profits....

It's worth noting that student loans from after (worth checking) 1998? are not exempt from bankruptcy due to an oversight in the bill. This means that many students can leave university, declare themselves bankrupt, and rid themselves of anything up to £20k worth of debt. They will also be more attractive to future lenders due to a clean slate than those who choose to remain encumbered.

With the rediculous tuition fees and massive overdrafts this would appear to be a very sensible option given that most degrees are now barely worth the paper they are printed on. Indeed an MSc nowadays is probably worth a degree of old. If a student thinks that paying off £20k over three years is likely given their realm of employment then fair enough, though surely a further £10k (depending on the course, many MBAs require £15k+ tuition fees rather than the standard £3k for an MSc, though often along with plenty of time in industry) spent on a deferred post graduate loan to cover tuition costs and living expenses for a year long MSc would be a more viable option.

This would increase potential earnings with the catchall option of bankruptcy should the poor dear be unable to keep up with repayments. With a 50% target for school leavers entering University I would think this to be one of the few ways to stand out from the crowd.

After a single year in gainful employment said student could then be in a high earning job with plenty of spare cash to spend on flying.

Just another option.

[Tenminutes]

Hi Chaffers, I'm not really sure where you are coming from. This is a thread for Pilots who for what ever reason have fallen into a tough financial situation, one which is serious enough to claim innocent lives and ruin others. You seem to be talking about university situations which are quite different in there content, duration and cost, we on the other hand are pilots who trained with the sole purpose of being pilots. I have an honors degree which I worked very hard to get, this I did for my own personal challenge, not to obtain a particular job. As per my previous thread, indeed government loans are exempt from bankruptcy, but then no government student loan will ever match the quantity of debt involved with pilot training or justify contemplating bankruptcy in the first place. You didn't make your position clear as to qualification or bankruptcy but I think you need to experience that which you belittle before you offer advise on the subject. I have zero sympathy for lenders nor do I care how they operate any more, I realise that my bankruptcy is somthing that I arrived at due to my blind desire to complete my training without a proper consideration to employment but there is no use crying over spilt milk, the only thing to do is take the now and move forward, a situation that I would assume most people reading this thread are at. If bankruptcy is the only way to do this, then great after all we are not talking about paying off grandma.

[anotherbrokepilot]

Anymore for anymore ?

(AKA back-to-the-top....)

[bazzaman96]

To some of the people who have suggested it's a 'viable strategy' to intentionally take out huge loans and then declare bankruptcy (such as the 18 year old) - don't. The courts will find it as fraud. The source that suggests otherwise is wrong.

[Chaffers]

Tenminutes,

Nothing I said was intended to be belittling or derogatory. Quite the opposite. My point, following on from WWW's regarding the possibility of a young student learning to fly mainly on unsecured credit card loans, was simply to show how the system works and what options are available. Many wannabes will do a degree and then put the proceeds of their higher earning jobs towards flying training.

I too, as implied in my post, have zero sympathy towards lenders and the utmost sympathy with anyone in dire financial straits, I have been there myself.

There have been many recent cases (as I recall 600 in a single year from an article I read) where university leavers have declared themselves bankrupt upon graduating due to the recent student loands not being exempt. Using loans towards the procurement of luxuries is exempt from bankruptcy but to the best of my knowledge training is not.

Worth checking out and maybe not directly applicable to all those on this thread, though it was given for information only and in good faith.

I personaly see nothing belittling or derogatory about someone entering bankruptcy. I only wish the best to any who tread that path.

[niknak]

Bankruptcy should be your very very last option, it is not the panacea that some may have given you the impression that it is.

Don't try and get a bigger loan or overdraft facility to cover the outstanding debt, and for God's sake do not put your affairs in the hands of a debt management company - all you'll get is 7 years of penuary and they will make a huge amount of cash from you.
I am not being patronising, I've seen this situaton at very close quarters before, clearly you can't manage your financial affairs, you need advice from people who have your interests at heart no the profit margin involved.

Go bankrupt and you will lose everything - house, credit rating and normal banking facilities. You will be assigned to a court appointed bankruptcy officer/iquidator, who will rule your financial life with a rod of iron. All your earnings will be assigned to them, they will then decide how much you will need to live on, the rest goes to the people you owe money to. This will continue until either your creditors give up, or you repay them in full - neither is a quick or realistic fix.

Take the advice given, go to your local CAB, look inthe Yellow Pages under debt, but do something now , because you haven't got much time.

[Wee Weasley Welshman]

But what if you are, say 19, don't need normal banking facilities, won't own a house for years anyway and have no possessions worth taking?

It seems a lot of judges will take the view that if credit companies are foolish enough to lend to teenagers with unrealistic notions then its their own fault they got their fingers burnt...

What is the worse financial position - 21 Frzn ATPL and owing £50,000 to the banks or 21 Frzn ATPL, ex-bankrupt and owing nothing to the banks?

I'm a long way from advocating the strategy but it does seem from my fairly limited reading up on this that the latter option is logically better.

But lets here all views and arguments on this important Wannabe issue.

Cheers


WWW

[Sally Cinnamon]

niknak, typical pprune poppycock. "All your earnings will be assigned to them" what a load of crap. A maximum of 50 to 60% of any available surplus (after all your living costs have been taken out) can be used as an income order. After this order has been made you are highly unlikely to hear from the receiver ever again unless there is a change in your earnings which you need to inform him about.

Once you declare yourself bankrupt the receiver deals with all of your creditors directly, they are no longer allowed to contact you. So your statement that "this will continue until you repay them in full" is also crap. The income order will continue for a maximum of three years after which point nobody will have any further interest in your financial affairs.

Undischarged bankrupts CAN get basic bank accounts very easily, the Nationwide offer an account to undischarged bankrupts that you could open on the same day you declare yourself bankrupt. This will allow for direct debits, and come with a cash card but no overdraft will be permitted.

[sixmilehighclub]

Niknak, you make it sound like bankruptcy is a lifelong illness!!

Your credit rating is NOT permanently damaged, you DON'T lose 'everything' and as Sally says, you CAN have perfectly normal banking facilities with the choice of at least three UK banks. Just don't expect a huge overdraft facility.

You CAN still borrow money, subject to credit checks, but over £500 anyway and the lender must be made aware of your bankruptcy. Besides, if you are wiping out thousands of pounds worth of debt, thus taking the stress with it, would you be worried if you cant get credit for a few years? Credit records typically last only 6 years. There are so many companies now who credit discharged bankrupts at slightly higher rates if they were needed later anyway.

Receivers are human, they understand, so therefore excercise a level of flexibility and compassion. Your salary does NOT go to your creditors until they give up. This is typically for a year. If you break the rules, dont declare a windfall or have been bankrupt before then they can extend this period, but even then they are reasonable and allow enough basic outgoings for a decent standard of living, plus at least around half of any surplus.

I heard recently of a lady wanting to declare herself bankrupt over £2k worth of debt. Not wise to pull the plug for that amount, but I have seen the CAB suggest going bankrupt for a significant debt.

It is independent to each person as to whether is the most suitable option, and yes, it should be the final resort but it certainly is not the end of the world. Just a fresh start.

[robione]

Where do i sign ?,very interesting thread some well informed comments,and makes a good read some eye opening stuff,keep it comin i love this one

[Fair_Weather_Flyer]

What worries me about going bankrupt is the issue of "Reckless Bankruptcy." I know very little about it and it hasn't been mentioned in this thread yet. As far as I know, if an individual borrows money with no intention of paying it back, the creditors can chase the debt for ten years. I'm not sure if this "Reckless" thing only applies to certain purchases; maybe it only refers to those funding a champagne lifestyle and funding flight training might not be considered reckless. If you declare yourself bankrupt straight after training though you've not shown much willingness to pay the the money back. Could you imagine being pursued for £60,000 plus interest and debt chasing bills for the next ten years?

If you could convince a court that you've attempted to pay the money back and they give you the one year discharge, great! I'm not saying bankruptcy is a certain no no. I'd just like the "Reckless Bankruptcy" thing explained before I max out my plastic on A320 time building.

[sixmilehighclub]

If you have been on an income where you can resonably balance your spending and earning, then something happens, like you lose your job and cant keep up repayments, then its clear you havent done it on purpose.

(eg: £2k coming in, verses outgoings of £1k rent, £150 bills, £300 food & fuel, and say £200 credit card/ loan repayments).

You go max out your card with no evident means of repaying it when you used the credit, you may find yourself in a major crosswind, with no avionics and your arms strapped into your harness.

So if you know you cant repay the debts you take on, dont take them on.

[Wee Weasley Welshman]

If you were 19 and got your Frzn ATPL via reckless bankruptcy then went onto to be a flying instructor, TP freight hauler etc for a number of years would it be so bad? You really don't need much credit until you want to buy a house and that isn't going to be for quite a well from the age of 19.

Cheers

WWW