Clearing credit card debt by borrowing against our French house

[Dug1]

Hi to all:
My wife and I live in a rented house in England and work in England too, I'm very nearly 60, my wife's 54. To safeguard our retirement years and because we could not afford to buy a house in England we cheaply bought a building plot in France and had a wood framed kit built house built for us on the plot. However due to the £s fall against the Euro the staggered payments for the house build went £1000s over the allowed for costs.
We now have a (finally) finished house that we own totally with no mortgage or loans against it that needs furnishing and kitting out but don't have resources to cover.
We're fully maxxed out on credit cards and have 2 other unsecured loans, but it's the credit cards that are really hurting as we're paying interest only.
Could anyone recommend the best course of action for us to clear our credit card loans by using the French house as collateral and if so can anyone recommend a lender?
Regards
Doug Smith

[Quillan]

Welcome to the forum.

You can try but I rather think it will be a 'no go'. Don't forget that loans in France are based on your ability to pay and the repayments of your total loans (which living in the UK they may or may not take in to account your loans there) cannot have a total repayment amount greater than 1/3 of you monthly income. To make it simple this means that if you had an income of 900 Euros per month the total repayments per month on all your loans cannot be greater than 300 Euros. Its French law I am afraid.

If you don't  mind me saying so (and you probably won't like it) I think your best bet is to cut your loss's and sell the house. Pay off your debts and look around at some bonds in the UK and put the balance there. If you want you can get 5 year bonds with a 5.3% rate (Yorkshire Building Society). By the time you have sold the place the rates may be even higher. Thats just me, you should do what you think is the right thing.

[Dog]

Sell the French place quickly - interest rates and the economy in UK will go even more pear shaped after the elections. Rebuy in France later but loose the UK goggles.

[AnOther]

If you search long and hard enough you just may be able to find a UK lender willing to advance money against a foreign property but even if you do unfortunately your present indebtedness is unlikely to enhance an application. Also interest rates could be punitive, possibly equal what you are paying on credit cards.

Selling may be your only realistic option but watch out for possible CGT.

[sunny]

Another option might be declaring banckrupcy in UK, to clear your credit card debt. If you can protect your France house (e.g., the cards are in your name and the house in your wife's name), you might be able to start with a clean slate.  Paying a major chunk of your income on the interest portion of the cc debt is unsustainable - talk to a bankruptcy lawyer to see if you can get this sorted asap.

[sunny]

Doug,

I also found this doing a search for you online: http://www.associatedcontent.com/article/834841/serious_about_getting_rid_of_credit.html?cat=3

I am not sure how effective it is, and whether it applies to the UK as well.

In any case, my advice would be to resolve this ASAP

• Option A - sell the house - hardly a quick option, and in the meanwhile, the debts keep adding up because of the cc interest rate. 
• Option B - talk to a lawyer (not some of the 'free' resources who might actually be working for debt collection agencies) - costs a bit, but might be worth a lot of savings for you in the longer run. 
• Option C - discuss settlement based on the method in the link above.

B and C will seriously impact your credit history, but if you don't plan to take out a mortgage or major loans in the future, you might be better off cutting your losses at this stage.

Be judicious in the information you share regarding your France property  - e.g., while talking to the lawyer, you might jusk ask about implications if you have an overseas/EU property, without getting into specifics. Do not mention it at all to the cc company.

Wish you all the best.

Sunny

[cooperlola]

Visit your local Citizens' Advice Bureau too.  A close friend did this and they negotiated a reasonable monthly repayment amount direct with all the cc companies who wrote off most of the interest charges.  Yes, it means you lose your credit cards and yes, it reflects poorly on your credit rating but as you have a home in France waiting for you, this really won't matter in the long run.  It's worth trying as the CAB costs nothing to visit - it exists to help you and will give impartial, informed advice.

[Northender]

How much would it cost for you to get the house in a state whereby you could offer it as a long term let?

[Russethouse]

I'd have a look at Money Saving expert which gives advice on paying off CC debts quickly

[Théière]

So you have no mortgage in the UK and an unencumbered property in France.

You both have incomes, following Quillans information and providing the french house is of a mortgageable type of construction then arranging a mortgage should not be too much of a problem as your cards and other loans will be paid off with the mortgage and the house will be the security for the lender. Or have I missed something?

If you do contact someone for advise start with the Consumer Credit Counselling Service, they are a registered charity and the Citizens advice will tell you to contact them anyway. Using an insolvency practitioner is always risky as they act as a go between with neutrality and you have no rights of confidentiality so the French house could be taken into account too.

Good luck

[AnOther]

[quote user="sunny"]Another option might be declaring banckrupcy in UK[/quote]I don't think you can just choose to 'declare' or 'go' bankrupt at

will.

Bankruptcy is pretty much a matter of fact based on the state of

your affairs and simply struggling to pay your debts does not

automatically qualify, on that basis half of UK would be at the door of

the bankruptcy court!

Bankruptcy is normally brought on either by a petition from a creditor

or by personal petition by an individual who has overwhelming debts which

they have little or no prospect of being able to pay. I do not think

this is so your case. Also I don't think you can go bankrupt as a couple so you'd both have to go through it.

I do not think this is a realistic option for you at all because it will

involve a very detailed investigation into your affairs in the course

of which it's almost impossible to imagine that your foreign interests

will not come to light. The simple fact that you are both in work and

don't own a UK property will prompt questions as to where all your

money has gone and if you try to pull the wool over their eyes I fear you would risk losing

everything, including any saleable assets which includes any cars worth over £3000.

[Théière]

[quote user="AnOther"][quote user="sunny"]Another option might be declaring banckrupcy in UK[/quote]I don't think you can just choose to 'declare' or 'go' bankrupt at will.

[/quote]

You can via the Individual voluntary arrangement (IVA) route if your debts are more than £15,000. As I said and you explained further very risky as the insolvency practioners are forensic accountants and "the truth will out"

Can't see at the moment why the mortgage route would not work.

[Jay]

Don't you think you are flogging a dead horse when someone posts once with a stupid question for a forum such as this and doesn't respond again?

[krusty]

[quote user="Jay"]Don't you think you are flogging a dead horse when someone posts once with a stupid question for a forum such as this and doesn't respond again?
[/quote]

No .........this is how the forum works ..........someone asks a question , and a lot of useful information is then posted for anyone to use.

[Théière]

Could be, the post is not that old and the O/P may have access from work computer only and it has been a weekend. I like to people the benfit of the doubt or I would give up [:)]

Flogging a dead horse, well France is probably the best place to flog a dead horse as it would make a good lunch for someone. (flogging = selling in this instance)

 

[Quillan]

Sometimes we need somebody else to tell us what we really already know. Perhaps in this case it is to sell the house in France and pay of the debts. Also some people find it very difficult to talk about debt and its even worse in public. It must be very painful to see your dream effectively going down the pan one way or another. Posting further by the OP on the subject might be like extracting teeth without an anesthetic, extremely painful, and thus they may not want to.

The other thing is that it sadly shows others the pitfalls of building/renovating a house when you don't really have all the funds to do so or may of not thought it through properly. Perhaps in hindsight (a wonderful thing) the OP should have considered getting a loan (or mortgage) up front at a much lower interest rate rather than attempting to use their CC's and arranging expensive unsecured loans but then its so easy to be judgemental from a distance.

Whatever the OP decides to do I hope it works out as well as it can for them.

[mint]

[quote user="Théière"]

So you have no mortgage in the UK and an unencumbered property in France.

You both have incomes, following Quillans information and providing the french house is of a mortgageable type of construction then arranging a mortgage should not be too much of a problem as your cards and other loans will be paid off with the mortgage and the house will be the security for the lender. Or have I missed something?

If you do contact someone for advise start with the Consumer Credit Counselling Service, they are a registered charity and the Citizens advice will tell you to contact them anyway. Using an insolvency practitioner is always risky as they act as a go between with neutrality and you have no rights of confidentiality so the French house could be taken into account too.

Good luck

[/quote]

Wouldn't the mortgage people (UK or France) want to know details of all existing loans and, on that basis, not want to make an advance?

After all, it's not the best of times for trying to get a mortgage?

[Théière]

Yes they would, with an undertaking that the loans would be paid off with the mortgage (usually with proof) the only remaining debt would be the mortgage and providing it meets the criteria as Quillan explained it should be ok.

[Mikep]

Surely the key to resolving these problems is well-paid employment, rather than borrowing more? Even a mortgage still needs to be repaid. Unless the OP has an excellent pension (and maybe a tax-free lump sum) coming in the next year or so, I would have thought he/they would have a better chance of earning in UK rather than in France.

Living in France can be wonderful, but it's still in the real world.

[Russethouse]

 My own feeling is that taking out a mortgage in France to cure this problem is just putting off the evil day...better to tackle the problem now and here.

We paid off substantial CC amounts by just paying the minimum on some  cards and as much as we possibly could on the card charging the most interest, once that was gone we started on the next one etc.........if you can't service the debts in that way then it's time to look at 2nd jobs, and other ways to make money.......it is hard, but think of arriving in France debt free!!!

[Théière]

Sorry Mike and RH, have I got the wrong end of this?

If you have expensive (credit card) debts and you decide to transfer (consolidate) them to a much lower mortgage rate loan, which does not have to be twenty five years it can be set at a much shorter term allowing for affordability that is just good financial sense allbeit a bit late.

You still have the same amount of borrowing, you are not increasing it just paying it back at a much lower interest rate and therefore quicker to target the retirement date.

 

[Russethouse]

Without knowing actual figures its hard to know isn't it.......how many cards etc, how much is 'maxed out' and so on?

[Scooby]

Théière, I completely agree - if you can replace unsecured debt with secured debt you will save a substantial amount on interest (provided you repay at the same or similar rate).  The only caveat would be to try to get an arrangement with your creditors to waive or reduce your credit card debt prior to consolidating and replacing with secured debt. IMHO it's a 'no brainer'.

[sunny]

[quote user="AnOther"] Also I don't think you can go bankrupt as a couple so you'd both have to go through it.

I do not think this is a realistic option for you at all because it will

involve a very detailed investigation into your affairs in the course

of which it's almost impossible to imagine that your foreign interests

will not come to light. The simple fact that you are both in work and

don't own a UK property will prompt questions as to where all your

money has gone and if you try to pull the wool over their eyes I fear you would risk losing

everything, including any saleable assets which includes any cars worth over £3000.

[/quote]

So i don't understand that how a credit card can charge 25%+ interest because the risk is high as it is 'unsecured'.  If the insolvency practioner can use your home to pay off your credit card debt, then it is hardly 'unsecured', is it?  In that case what is the justification for such exhorbitant interest rates? 

In any case, my advice in the future (and sorry this may not be a help in this case), is that if you are paying cash, you should consider buying your home through a limited liability company or trust, and you would not have to face losing it against unsecured loans (where the lender should righly bear the risk given their high interest rates).

If you do decide to go through the route of consolidating your cc debt, you might want to consider the advice in the link I sent - the article suggests that cc companies slice and dice your bad debts  and sell to collection agencies  after six months.  It seems the best time to negotiate is at after five months of non-payment, as you might get the interest written off and a substantial reduction in the capital amount (depends on how many pennies to the dollar they can sell your debt for, in the market).

As someone else suggested, do check with CAB and other advice sources, but remember, they may be trying to be 'impartial' and may not act in your best interest. 

 

 

[Théière]

[quote user="sunny"][quote user="AnOther"] Also I don't think you can go bankrupt as a couple so you'd both have to go through it.

I do not think this is a realistic option for you at all because it will involve a very detailed investigation into your affairs in the course of which it's almost impossible to imagine that your foreign interests will not come to light. The simple fact that you are both in work and don't own a UK property will prompt questions as to where all your money has gone and if you try to pull the wool over their eyes I fear you would risk losing everything, including any saleable assets which includes any cars worth over £3000.

[/quote]

So i don't understand that how a credit card can charge 25%+ interest because the risk is high as it is 'unsecured'.  If the insolvency practioner can use your home to pay off your credit card debt, then it is hardly 'unsecured', is it?  In that case what is the justification for such exhorbitant interest rates?  Legally speaking the credit card company can never force you from your home as the debt is un-secured. If you do not pay you will get a default notice and possibly a CCJ which will make it very hard to get any credit in the future. You can by arrangement get the interest frozen to help with payments and to reduce the loan size but they will usually register a default. Insolvency practitioners cannot force you to do anything either but will try to leverage an agreement between you and the creditors.

In any case, my advice in the future (and sorry this may not be a help in this case), is that if you are paying cash, you should consider buying your home through a limited liability company or trust, and you would not have to face losing it against unsecured loans (where the lender should righly bear the risk given their high interest rates). I cannot say whether a bank or building society will still lend to limited companies as the market has changed so dramatically, some used to as buy to let portfolios were popular although the rates were often higher. Buying a property to put into your pension (Sipp) could possibly be one way of putting it into trust away from creditors. 

If you do decide to go through the route of consolidating your cc debt, you might want to consider the advice in the link I sent - the article suggests that cc companies slice and dice your bad debts  and sell to collection agencies  after six months.  It seems the best time to negotiate is at after five months of non-payment, as you might get the interest written off and a substantial reduction in the capital amount (depends on how many pennies to the dollar they can sell your debt for, in the market).
The likely discount is arround 20% of the capital owed although I know of one person who managed to get 50% off as she told them quite bluntly take it or leave it, or let the court decide! Once sliced diced and sold you would be at the mercy of the debt collectors and the baliffs, although the interest would have stopped, so will your chances of obtaining anything by credit for a long time 6-12 years. the baliffs will remove goods which is a very poor way to solve the problem.
As someone else suggested, do check with CAB and other advice sources, but remember, they may be trying to be 'impartial' and may not act in your best interest. 

 

 
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