confused by bankruptcy

[eddo241]

hi after a lot of thought i moved out of my owned property which had a charge and rented. now the property has been disposed of the shortfall and other unsecured debts come in at over 80k all just in my name so would bankruptcy take my wifes tax cred/child benifit into account?
the other problem is that im living in a 3 bed house and theres 10 of us so we have looked at renting a bigger house but i dont know how this would affect bankruptcy as it would increase my rent? could anyone clarify what could possibly happen all the debts were on a payment plan but we couldnt pay and had to stop to enable us to move?

[DebtSanity]

Re: confused by bankruptcy

Hi eddo

If you live with your wife and child then the Official receiver wants to see a household income and expenditure account. That will include wife's tax credit and child benefit. If there is a surplus of income over expenditure then the OR is only interested in your own proportionate part of that surplus. Let's say the total household income is split 50% each then logically the surplus income needs to be split 50% each too. The Official Receiver is only interested in your 50% share of the surplus.

There are a few caveats to throw into the mix in some circumstances but that's a general overview. I am not assuming that any such caveats do or do not apply to you because I don't know your circumstances. There is also a clever tactic that can be employed where you might, in some circumstances, be disadvantaged by the split of surplus income.

I would just add that the Official Receiver is very keen indeed on looking closely at income and expenditure these days-VERY KEEN! Careful attention to the preparation of this is strongly recommended.

As for ten people moving to a bigger house I assume that is because you need to-there's 10 of you!

As for stopping a payment plan to afford to move I would say this...

I don't know the nature of the payment plan-whether it is formal/informal etc but presumably by stopping it you are breaking the terms of whatever agreement you have. That would also result in you losing whatever protection the agreement gives you. Ie. if you keep paying I assume the terms of the agreement are that creditors won't take any action against you. So it follows logically that if you stop then you are at the mercy of your creditors again.

I don't know all your circumstances but it might be at that level of debt and if you have no assets, bankruptcy needs looking at as an option. Everyone's situation is different and there may be something in your situation that makes it a bad idea.

[Debt Camel]

Re: confused by bankruptcy

hi Eddo,

with 80k of unsecured debt bankruptcy must be very high on the list of good alternatives for you.

would bankruptcy take my wifes tax cred/child benifit into account?

As DS has said, the Official Receiver will expect your wife to contribute her reasonable share to the household expenses from her income, which includes benefits which she is getting.

The other important point is who else is living with you? If it's you and 8 dependent children, fine. But if any of the other 8 are adults, then they would also be expected to contribute to the household costs. If say you have a 24 and 26 year old who are living at home because they are trying to save up for a house deposit themselves, then they are going to start having to pay a reasonable amount of rent. Or move out so you don't have to have such a big house.

the other problem is that im living in a 3 bed house and theres 10 of us so we have looked at renting a bigger house but i dont know how this would affect bankruptcy as it would increase my rent?

In general as I have said here http://debtcamel.co.uk/bankruptcy-qs-or-make/ the OR is not going to query any rent if you are renting somewhere which is a sensible size for your family - you are allowed the costs for your "reasonable domestic needs" and 10 people in a 3 bed house is not reasonable, indeed probably statutorily;y overcrowded.

could anyone clarify what could possibly happen all the debts were on a payment plan but we couldnt pay and had to stop to enable us to move?

Your everyday expenses, including housing, food, eating etc are top priority. If you haven't got enough to pay your debts, then you can't pay them. The Official Receiver is unlikely to think you have done anything wrong here.

Do you have the money for the bankruptcy fees?

[DebtSanity]

Re: confused by bankruptcy

Deleted post.

[FlamingParrot]

Re: confused by bankruptcy

hi after a lot of thought i moved out of my owned property which had a charge and rented. now the property has been disposed of the shortfall and other unsecured debts come in at over 80k all just in my name so would bankruptcy take my wifes tax cred/child benifit into account?
the other problem is that im living in a 3 bed house and theres 10 of us so we have looked at renting a bigger house but i dont know how this would affect bankruptcy as it would increase my rent? could anyone clarify what could possibly happen all the debts were on a payment plan but we couldnt pay and had to stop to enable us to move?

Bankrupcty is a big step and should be the last resort when dealing with debt. I know someone with £150k worth of unsecured debt who wouldn't be looking at BR due to being a property owner so everyone's circumstances are different. BR can be a way to get a fresh start but it can also have serious consequences that will impact your life in more ways than just your ability to obtain credit.

• Bankruptcies are a matter of public record, unlike defaults, where only certain companies can search your credit files, anyone can search insolvency records.
• You may be asked in the future whether you've ever been insolvent, for example I had to answer that question the other day just to apply for public liability insurance. It's a common question when it comes to insurance applications
• If you're thinking of moving, you really have to do it before making yourself BR as being BR will make it very hard to be accepted as a tenant in private rented accommodation.
• Depending on what you do for a living, bankruptcy can affect your current job as well as future employment prospects. For example:
  
  • You may not practice as a Charted Accountant or Lawyer.
  • You may not act as a Justice of the peace.
  • You may not become a member of parliament.
  • You may not become a member of a local authority.
  • BR is likely to stop you from finding any sort of work in the financial sector, even in non-financial roles such as HR, IT, marketing, etc.
  
  
• You will be expected to make payments towards your BR debts for a period of time, usually three years. If you have more income than you need for your family’s day-to-day expenses, the OR will ask you to make payments under an IPA (Income Payments Agreement).
• You will usually have to close your bank account and most banks will not let you open an account when you are bankrupt. Existing bank accounts will be frozen, leaving you with no access to your money.
• Utility and telecoms companies will want you to pay in such a way that involves you not having credit.
• You won't be able to act as a company director while you are undischarged. If you are currently a director, you will have to resign.
• You may not be able to carry on running a business.
• You lose control of your assets and some of your possessions may have to be sold.

[FlamingParrot]

Re: confused by bankruptcy

hi after a lot of thought i moved out of my owned property which had a charge and rented. now the property has been disposed of the shortfall and other unsecured debts come in at over 80k all just in my name so would bankruptcy take my wifes tax cred/child benifit into account?

The OR will ask for details of your partner's income, as it is assumed that they will contribute to the household expenses. The OR will also need details of contributions from any other household members, for example, grown up children living at home if they work.
Normal monthly expenses, would include rent or mortgage payments reasonable for the area you live in and the size of your family, food, heating and lighting, etc. Below are some examples of things that can also be treated as reasonable expenses;

• TV licence
• Household insurance
• Car tax and insurance if you are allowed to keep your vehicle
• AA/RAC or similar membership if you still have your car
• Membership of a professional body, needed for your job (unless your employer pays for this)
• Prescriptions/dental treatment/opticians
• Payment under a maintenance order or Child Support Agency assessment
• Mobile phone -a reasonable monthly cost
• Dry cleaning

The following items could also be considered reasonable expenses:

• Clothing
• Holidays
• Hairdressers
• Extra curricular activities for children
• After school clubs
• Pets

This is not meant to be a complete list, and other expenses could be allowed.
The following are not likely to be allowed, except in exceptional circumstances:

• Gym, sports or club membership
• Additional pension contributions to enhance a pension
• Private healthcare insurance
• Gambling, alcohol or cigarettes
• Satellite TV
• Regular payments to charitable and religious organizations.
  

[FlamingParrot]

Re: confused by bankruptcy

As DS has said, the Official Receiver will expect your wife to contribute her reasonable share to the household expenses from her income, which includes benefits which she is getting.

This subject can get rather complicated, as can be seen here: https://www.insolvencydirect.bis.gov.../Annex%20A.htm

This is the full guide to IPAs (Income Payment Arrangements): https://www.insolvencydirect.bis.gov...troduction.htm

Do you have the money for the bankruptcy fees?

There is a deposit of £525 for managing your bankruptcy and £180 for court costs. The court fee could be waived in certain circumstances such as if you are in receipt of the following

• Income Support;
• income-based Jobseeker's Allowance (JSA);
• the guarantee credit element of Pension Credit;
• income-related Employment and Support Allowance; or
• Working Tax Credit (if you are not getting Child Tax Credit as well).

You need to give the court proof that you are getting the benefit and will need to fill in form EX160A. The form can be found at the end of this guide: Court fees, do I have to pay them?
There are charities and other organisations that may be able to offer help with paying the deposit:

• Funding bankruptcy fees - a list of various organisations that may be able to help
• British Gas Energy Trust
• Severn Trent Trust Fund
• Charis Grants
• Royal British Legion
• Turn2Us
• Christians Against Poverty
• Rowland Hill Fund

[Debt Camel]

Re: confused by bankruptcy

Bankrupcty is a big step and should be the last resort when dealing with debt.

Indeed. But for alomost everyone with 80k of debt and no house to protect it is usually the most sensible option. To get things into perspective, I'll add a bit of colour your statements:

Bankruptcies are a matter of public record, unlike defaults, where only certain companies can search your credit files, anyone can search insolvency records.

Things like CCJs are also a matter of public record and are searchable.

You may be asked in the future whether you've ever been insolvent, for example I had to answer that question the other day just to apply for public liability insurance. It's a common question when it comes to insurance applications

Indeed. But being insolvent also covers the other main debt solution for very large debts, an IVA. And it rarely causes any problems in practice.

If you're thinking of moving, you really have to do it before making yourself BR as being BR will make it very hard to be accepted as a tenant in private rented accommodation.

It makes it harder but not impossible. I agree moving first is often preferable.

Depending on what you do for a living, bankruptcy can affect your current job as well as future employment prospects.

Again let's have a sense of proportion here. Most people who are in jobs that would be badly affected will be well aware of that fact.

You will be expected to make payments towards your BR debts for a period of time, usually three years. If you have more income than you need for your family’s day-to-day expenses, the OR will ask you to make payments under an IPA (Income Payments Agreement).

Actually more than 80% of people who go bankrupt do not make ANY monthly IPA payments. And the amounts allowed for living expenses are higher than those normally used in DMP and IVA calculations.

You will usually have to close your bank account and most banks will not let you open an account when you are bankrupt. Existing bank accounts will be frozen, leaving you with no access to your money.

Sorting out a suitable bank account is best done before you go bankrupt, see http://debtcamel.co.uk/bank-accounts-after-bankruptcy/. AT the moment the best options are Barclays or the Co-op but this list should be getting wider this year.

Utility and insurance companies will want you to pay in such a way that involves you not having credit.

This isn't usually a problem. Most people carry on with their normal quarterly utility billing and can pay for car insurance monthly rather than up front.

You may not be able to carry on running a business.

If you are running a business, I recommend discussing your options with Business Debtline https://www.businessdebtline.org

You lose control of your assets and some of your possessions may have to be sold.

A house, savings, investments, yes. A car if it is worth more than £1000. Other possessions? Very rare. I've tried to answer a lot of questions about this here http://debtcamel.co.uk/lawnmower-bankruptcy/

[Nibbler]

Re: confused by bankruptcy

Great post by debtcamel.

I understand that FlamingParrort was trying to say that it is not without significant downsides, but from the other perspective it is also not as bad as a lot of info sources and websites suggest. It's a balance.