[taihunggao]

hello-
this tale is about my lovely, hard working girlfriend (who I shall call Miss X), who broke down in tears suddenly last week on her pay day, finally unable to keep up with a situation she'd kept from me since we met nine months ago.
It seems three years ago, she borrowed a large amount of money ($70k) to get her then-boyfriend out of a big gambling debt. The lowlife, a mainlander who had no ID card, promised to make the repayments every month - but the moment his debt was paid off, told Miss X he didn't love her any more (after 5.5 years together!!) and disappeared.
Miss X is not very financially astute; she soon ran into trouble making the payments, and so borrowed more from another company six months later, and again a few months after that. Typical debt spiral story.

She's been paying $10k/month (on an $18k salary) for the last two years, and has around four years still to go! Do the maths, but that original $70k is really costing her dear, and the outstanding amount is now $200k. After paying the loans each month and rent she has very little left... hence the sudden breakdown on payday - working long hours with no reward and no end in sight for four years just got to her too much I guess. I'm amazed she kept it from me so long, a real trooper.

ANYWAY. I would like to help her sort this out, so some advice from any legal/finance experts would be greatly appreciated. My first reaction was, let's track down this &*&?&$ who ran away and beat him to a bloody pulp... but this wasn't appreciated. She loved the guy and borrowed the cash to stop him being beaten up in the first place anyway! What's done is done, says Miss X. So please, no posts suggesting likewise!!

I also want to say, Miss X is really a wonderful person, and while if I read a tale like this on the internet I'd smell a scam, I can say this is all genuine. Also, while I myself have been in a horrible debt position before, it was all my own fault (boozing, fast cars and the like), while Miss X lives a very simple honest life, and just doesn't deserve this horrible burden. (sorry that's probably irrelevant, but I can't show her how angry I am about this, I'm just getting it out with some GeoExpat therapy!)

SO: help: 1. legal eagles- we're thinking it's unlikely, but is there any legal way this debt could be relieved, mitigated, or the interest cut, because of the situtaion in which it arose? Miss X and her ex had a verbal contract that he would make the repayments, but, alas, it's Miss X's signature on the form - any advice on this? Also the guy cannot be found; could be anywhere in the world. Who to approach first? Anyone want to extend some free professional help?
2. assuming we're stuck with the now-$200k debt... and bearing in mind most banks will only lend 6x salary ($108k), what would be the best way to go about restructuring it. We have no assets apart from a workshy dog, and I'm quite low-paid freelancer with no availability of credit in HK. So it's all down to her credit file and 18k salary...
Right now, payments of 10k for another 4 years seem almost criminal to me, especially after two years similar payments. Which banks would be amenable to restructure? Since she could only borrow $108k from most places, will the existing loans and remaining $92k outstanding affect the credit decision? And how to handle that?

ANY helpful advice appreciated. Or if anyone living in DB wants to extend a low-interest $200k loan to Miss X for 40 months, get in touch! $5k a month is manageable but $10k is just crippling the poor gal. And I'm broke and can only help with a shoulder and some common sense.

Cheers.

[PDLM]

Well one obvious solution would be for her to get a court to endorse an Individual Voluntary Arrangement (a sort of halfway house to avoid bankruptcy: http://www.oro.gov.hk/eng/publications/ivaguide.htm ) or, if that proves impossible, to declare herself bankrupt (http://www.oro.gov.hk/eng/publications/bankguide.htm ). That has consequences if she has assets, plans to own assets (for example if she might inherit some within the next few years) or any plans to be a company director.

I am a long way from being an expert on this, but is certainly something for her to consider.

One other thing to look at: it isn't clear how her debt would have got so big without some hefty interest rates. You should check that none of the loans she has taken have been at interest rates of more than 5% per month - that would be illegal loan-sharking and she should be able to get those agreements struck down in a court.

[KnowItAll]

What sort of interest rates are we talking about?

[taihunggao]

thanks PDLM.
bankruptcy/IVA not such a great option, because it will leave her with practically the same money per month, probably less, plus the black mark, for the same period of time (4 years), and it costs around $7-10k. it's the final solution really, if we can't get it sorted another way.
interesting if the rates are "loan-shark"... PDLM and KIA i'm just trying to get all the paperwork together. Typical head-in-sand approach of debt problems, there are NO statements or paperwork! gal is on the phone all morning chasing such stuff.
Here's something else, she was frightened to call up the companies because, she thought, merely enquiring in any depth about a loan would cause the company to get suspicious and foreclose. Don't know if that's true in HK, but it sounds unlikely to me... where does she get such ideas from? nevertheless, this is the poor gal's perception of the finance industry and probably why she's gotten in so much trouble.

[KnowItAll]

Like PDLM said ... some of those loans might be illegal contractually depending on the interest rates and who she has borrowed from.

Needless to say, you can get them invalidated, but the folks who have loaned the money are probably not the types you want to mess with.

First step would be to collect the paperwork and figure out who is owed how much and at what rates.

[Mat]

How about extending the period of reimbursment say to 6/8 years (Even tho it increases the rate a little) you might be able to reduce the amount paid on a monthly basis (but of course you will have to pay for a longer time) hence allowing her to have a little more every month

Other option migth be to increase your actual income. Maybe by getting more job done on your side (if that is possible), or any other alternatives (ie getting a second job or else)

[freeier]

i think her debts are from the credit card companies. and the cost of credit from these ppl are around 25% per year. that is going to blow up the loan.

my suggestion is to declare bankrupt. its not such a big deal. unless she's going to lose her job doing it.
go to the bank that she borrowed money from, and the other 3 banks, get them to sit down and give her a proper payment schedule. restructure the loan into something fixed and not the crazy credit rates.

the other way is of course to pay everything.

[shilo507]

I tend to agree that given Miss X's circumstances declaring personal bankruptcy may be the best option especially if she has no assets such as property.

IVA's (Individual Voluntary Arrangements) or DMP's (Debt Management Plans) are only really suitable when the debtor has assets such as property to protect. Also, you need to bear in mind that IVA'a are expensive to set up because the Insolvency Practitioner will charge a fee to set the arrangement up. Most importantly, if an IVA is in place but the debtor defaults, the Insolvency Practitoner will have no option but to force the debtor into bankruptcy.

On the plus side an IVA can legally write off the majority of all debts BUT at least approx. 75% of all creditors must agree to the IVA proposal. If one creditor has the lion share of bad debt they might not agree to the proposal although if the debtor has no assets and no prospect of repaying the debt then the creditor will realise that an IVA is the best option if in bankruptcy they will get nothing.

In the UK, IVA's have been chronically missold and many debtors would have been better off filing for bankruptcy.

It seems a very tough situation for Miss X and if the situation really is as you paint it and if (this is important) she has no assets and does not work in a profession which precludes undischarged bankrupts) then I sincerely believe bankruptcy is the best option for her. Once bankrupt she will have the protection of the court and an Insolvency Practitioner will administer her financial affairs. She will at leaast be able to get on with her life and sleep at night without fear of opening her mail or harrassing 'phone calls from creditors.

However, bankruptcy is not without its knock-on effects: any bank accounts Miss X has will be closed down and she will only be allowed to operate a basic account and will certainly find it very difficult to obtain credit in future for around 6 years. However, this may be no bad thing in the circumstances.

I strongly recommend that Miss X visits an Insolvency Practitioner to get professional advice. Only a Judge can make a bankruptcy order (on a debtor's petition or a creditor's petition) and one question the judge will ask is whether the debtor has received professional advice regarding the serious nature of bankruptcy. Unless the debtor replies in the affirmative the bankruptcy order will not be given.

Miss X has a tough choice to make but IMHO declaring personal bankruptcy would be her best option (but take professional advice!) Good luck!

[PDLM]

Originally Posted by freeier

i think her debts are from the credit card companies. and the cost of credit from these ppl are around 25% per year. that is going to blow up the loan.

To get from a debt of 200K from 70K in 3 years whilst paying off nothing would require an interest rate of 42% per year. Assuming she was paying off, say, 5K per month on average then that would require an average monthly interest rate over 3 years of 8.25% per month. Which is illegal.

A 70K loan on which interest is charged at the maximum permitted 5% per month (on the outstanding balance) would be paid off by monthly payments of 5K in 26 months.

So either we don't have the whole truth or something illegal was going on here.

But starting where she is, 4 years to pay off 200K at 10K per month is a monthly interest rate of 4.35% per month which is outrageous, but not illegal, so the problem is how she got to be where she is. There may not be much she can do about her current situation except try to find someone to give her a cheaper unsecured loan.

[freeier]

Originally Posted by PDLM

To get from a debt of 200K from 70K in 3 years whilst paying off nothing would require an interest rate of 42% per year. Assuming she was paying off, say, 5K per month on average then that would require an average monthly interest rate over 3 years of 8.25% per month. Which is illegal.

A 70K loan on which interest is charged at the maximum permitted 5% per month (on the outstanding balance) would be paid off by monthly payments of 5K in 26 months.

So either we don't have the whole truth or something illegal was going on here.

But starting where she is, 4 years to pay off 200K at 10K per month is a monthly interest rate of 4.35% per month which is outrageous, but not illegal, so the problem is how she got to be where she is. There may not be much she can do about her current situation except try to find someone to give her a cheaper unsecured loan.

ok fair. have not look into the numbers.
but thinking back for a ger with income of 18k to get 70k loan, it is obviously unsecured and at high interest rate.