Taking control of my finances

When I went bankrupt, the long-term consequences were far from my mind. I was so desperate to unload a burden of £20,100 credit card debts, that bankruptcy seemed the only way to stop my situation spiralling out of control.

Now, two years on, while I have been forced to take a firm grip on my spending behaviour, I wonder whether going bankrupt really was the right course of action.

Our crisis had begun when my husband and I moved lock stock and barrel so he could take up a new job in a different area. The future looked bright enough for me to give up my job. Then he was let down and our nightmare began.

It was hell. The stress was unbelievable and although I realise it might be hard for others to understand, by going bankrupt, we were taking responsibility. It stopped the debt from escalating wildly out of control and forced us to live within our means.

After my last article, some readers believed I was encouraging people to go bankrupt and that I was irresponsible. All I can say is that it was not a place we chose to be. We did not take the bankruptcy lightly. It meant losing dignity and self-respect and I'd tell others it should be avoided.

What I would also say now is go and get advice as early as possible - as soon as you have an inkling that your debt could go out of control. You will have to learn to live within your means at some point, so you might as well do it earlier rather than later when the consequences are higher.

Our friends were shocked - there's still a lot of stigma attached to bankruptcy - but were respectful. Now, two years later, they comment on how much we have changed and how we have turned our lives around. We sleep better, are happier, friendlier, more positive and have hopes for the future.

Would we do the same now? No. Can you imagine living without direct debits, credit cards, store cards, debit cards, cheques and guarantee card or loans? We have, however, found it liberating and in some ways are in a stronger position than we were before we went bankrupt.

The biggest single draw back is what bankruptcy has meant to our hopes of one day being able to buy our own home. Just before Christmas, my husband emerged from his bankruptcy (his was for two years) and my bankruptcy becomes history in November this year.

But it's not a history we can walk away from. Perhaps I'm being silly to even think of buying a home - our joint income is no more than £30,000 - and even if we had never become bankrupt it would still be very tough to afford to buy.

I nonetheless made some inquiries, through Edinburgh-based financial adviser Paul Fraser, of Rowanbank Financial Consultants Ltd, and the internet. Both provided me with the same answer: that to secure a mortgage I will need to pay an interest rate 3% over the norm at 8.39% as a fixed rate for two years, and provide a 25% deposit.

In mortgage jargon, having a bankrupt past means I'm "sub-prime". That means that even if I could locate a small, dilapidated two-bedroom house that we and our toddler could live in for £100,000, the mortgage of £75,000 would cost us around £250-£300 per month more than someone who was borrowing without our sort of history.

I would also need to stump up a deposit of £25,000, which is an immense task for someone in my position. And then there's the stamp duty and legal fees to think about.

You might think I would be despondent, standing at the bottom of a vertical path to my home that seems impossible to climb, but I am not. The challenge is to look into alternative ways to make cash, such as selling some of my artwork.

The alternative - but not one I am seriously considering - is to take out a large personal loan to cover the £25,000 deposit. My golden rule is that I will never take out another loan until I can afford it.

Until I have my discharge papers, which will cost me £60, loan companies say they will not assess my likelihood for a loan and what it would cost me. By my calculations, the monthly repayments on a £25,000 loan taken out over six years, with a higher interest rate of 8.9%, would be £524.

The mortgage quote we've had is for £775 per month, so to buy a very small home we'd have to stump up a total of £1,300 a month - before all the other outgoings. Yet our combined take-home pay is only around £2,000.

That said, the higher interest rate which we'll have to pay does not in itself put me off. In 1989, when I first thought of buying a flat, the interest rate was 13.25%. That interest changes with inflation makes me philosophical. It's a matter of working the amount into the budget and just accepting it.

Added to that is a softener. Paul, my financial adviser, said that after a year or two of proving myself to be a good payer at the higher rate, I would be eligible to shop around as a normal competitive customer with a good credit history.

Reaching that point would be climactic. Going bankrupt is a long and hard road. My first step once we were made bankrupt was to find ways to cut my expenditure by streamlining utility bills and cutting out unnecessary ones. We did that by moving to a house with a cheaper heating system, not using mobile phones, eating home-made meals and rarely going out.

People before us have lost everything and successfully started over. The trick seems to be a dynamic optimism and determination. It's about taking control. I just wish I learned that earlier.

When our debts were spiralling, it felt unreal and completely out of my control. And we followed the advice given to us by our local Citizens Advice Bureau that our best option was to go bankrupt.

In hindsight, I feel we could have frozen our spending much earlier and worked out a plan of realistic repayments to our creditors.

Although I was terrified of not having the safety net of credit, I was desperate to cut loose and start again without the incredible burden. But there is a price to pay for not taking responsibility for that burden. All I can say is that we were not in a strong place then and we are much more so now.