Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

DC10 · 11 July 2017 at 2:00PM

Hello. Hoping somebody can give me some advice.

I've accumulated a lot of debt, almost all on credit cards (I have a car loan also that's almost paid off). I have never missed a payment and have always paid the amount in full or more.

My balances have increased as I took a year off due to being unwell that resulted in me being hospitalised for a week with depression and unfortunately a mental heath disorder which I am not being treated for, and medication for ADHD. It almost resulted in me taking my own life.

I was given medication and felt okay-ish for most of last year but I struggled and my depression became worse resulting in me having to leave my job.

I've avoided having to claim benefits of any sort, have used my credit and finances to support me, partly due to the stigma and embarrassment and partly because I find it too upsetting to discuss with a stranger. My home situation is mostly staying with friends - alternating every few months. I am in essence homeless and have no assets, such as a car or home.

My debt repayments monthly are now teetering over the £1000 mark and next month is going to be a struggle and thereafter I will have nothing. I am applying for work with nothing forthcoming and given my line of work, it's unlikely I will be able to return to it, given the nature and stress.

I have a tax bill due for my limited company that I know I cannot pay in September. My debts are in total £46,000 and I know I need to do something. My problem is one day I can be fine and the next I'm on a different planet ignoring the problem. Nobody has any idea what a financial mess I am in, I know they will be shocked beyond belief - but friends and family are aware of my poor heath in the past and are supportive of that.

Can somebody advise me what the best course of action would be given I have a limited company and huge personal debts with no assets and no real prospects of a job that will cover them. I've almost given up on my career, which means an income over £40,000. Would appreciate advice.

Thank you.

StepChange_Kirsty · 11 July 2017 at 3:49PM

Hi,

Thanks for your post and welcome to the forum.

I’m sorry to hear about the difficulties you’ve been experiencing and I can certainly appreciate dealing with debt on top of this can make the situation feel much worse.

First of all your health is definitely the priority here and if you haven’t already I would recommend speaking to your GP about all of the difficulties you’re experiencing. I understand you’re on some medication at the moment but you’re not currently being treated for everything.

If you don’t feel you can speak to your GP right now but would like to be able to talk to someone I would highly recommend giving the Samaritans a call. You can find their details here. They offer 24/7 confidential and non-judgemental support.

I understand your reluctance in claiming benefits but there is no stigma in applying. Benefits are designed to help people through difficult situations; it doesn’t need to be permanent but could help you for now. If you don’t feel confident to speak to someone about this at the moment you could use the Turn 2 us website where you can complete an online calculator to check your entitlement.

In terms of your debts, given that they relate to a limited company which is still active, I would recommend speaking to Business Debtline. Like us at StepChange they provide free, confidential and impartial advice but they specialise in business debts primarily. They can also give you advice regarding personal debts.

I hope this helps, if you would like to speak to us further at StepChange please do not hesitate to contact us for further help and advice.

All the best

Kirsty

DC10 wrote: »

Hello. Hoping somebody can give me some advice.

I've accumulated a lot of debt, almost all on credit cards (I have a car loan also that's almost paid off). I have never missed a payment and have always paid the amount in full or more.

My balances have increased as I took a year off due to being unwell that resulted in me being hospitalised for a week with depression and unfortunately a mental heath disorder which I am not being treated for, and medication for ADHD. It almost resulted in me taking my own life.

I was given medication and felt okay-ish for most of last year but I struggled and my depression became worse resulting in me having to leave my job.

I've avoided having to claim benefits of any sort, have used my credit and finances to support me, partly due to the stigma and embarrassment and partly because I find it too upsetting to discuss with a stranger. My home situation is mostly staying with friends - alternating every few months. I am in essence homeless and have no assets, such as a car or home.

My debt repayments monthly are now teetering over the £1000 mark and next month is going to be a struggle and thereafter I will have nothing. I am applying for work with nothing forthcoming and given my line of work, it's unlikely I will be able to return to it, given the nature and stress.

I have a tax bill due for my limited company that I know I cannot pay in September. My debts are in total £46,000 and I know I need to do something. My problem is one day I can be fine and the next I'm on a different planet ignoring the problem. Nobody has any idea what a financial mess I am in, I know they will be shocked beyond belief - but friends and family are aware of my poor heath in the past and are supportive of that.

Can somebody advise me what the best course of action would be given I have a limited company and huge personal debts with no assets and no real prospects of a job that will cover them. I've almost given up on my career, which means an income over £40,000. Would appreciate advice.

Thank you.

Bellassz1 · 12 July 2017 at 11:32AM

Hi,

I live with my husband and the mortgage for the house is in his name only, not joint names (he bought it before we were together.)

I'm currently facing possible redundancy, and due to the debts I have - this may mean I'm faced with bankruptcy.

If I do go bankrupt - how will this affect my husband's mortgage and our house?

Trying to get my head around possibilities and prepare myself before I find out the news.

Thanks very much for your help

Zoe

Former_StepChange_Richard · 13 July 2017 at 8:55AM

Hi Zoe,

Thanks for your message and getting in touch.

So in this situation the property could be affected if an OR believes that you have a beneficial interest in the property. A beneficial interest is seen as an asset in bankruptcy. If you have an asset and declare yourself bankrupt you are usually expected to relsease (sell) the asset.

Although you do not have a legal interest (you are not on the mortgage) you may have a beneficial interest. A beneficial interest relates is the money you would be entitled to if the property was sold without needing a legal agreement in place (mortgage).

Working this out is complicated and to give you a definite answer on whether you do or don't have a beneficial interest would require expert advice from someone involved in trust law. If you were to call and get some advice with us or any other free organisation we should be able to give you an indication as to whether we believe you may or may not have an interest. Ultimately though, the decision will lie with the OR if you decide to go for bankruptcy.

Other factors are important in this situation though. The amount of equity in the property will be a determining factor to see if the property would be affected. If you had a beneficial interest this would only affect the property if there is equity to be released. If there is no equity, there is nothing to be released.

The more important thing to be sure about is whether bankruptcy is the right step for you to take. If you haven't had advice on your financial situaiton already I would encourage you to go through the advice process with us. Calling would be best if you can so we can discuss your situaiton. You can use our online Debt Remedy tool if you prefer though.

I hope this helps.

Richard.

Bellassz1 wrote: »

Hi,

I live with my husband and the mortgage for the house is in his name only, not joint names (he bought it before we were together.)

I'm currently facing possible redundancy, and due to the debts I have - this may mean I'm faced with bankruptcy.

If I do go bankrupt - how will this affect my husband's mortgage and our house?

Trying to get my head around possibilities and prepare myself before I find out the news.

Thanks very much for your help

Zoe

dmcw · 13 July 2017 at 11:12AM

Hi Zoe

Also, the OR will go back five years for any other joint assets such as joint vehicles etc and will look to secure the bankrupts share of these assets. Please do get all the advice you can as this affects your credit worthiness for the next six years. Hope this helps with your decision. I had
joint debts and had filed for divorce when my husband declared bankruptcy and then I felt my hand was forced into bankruptcy. Most of the debts disappeared but the uncertainty of losing my home escalated and caused myself a lot of ill health. Please seek all the advice you need before making your decision. Step change are extremely helpful if you give them a call.

ll1979 · 19 July 2017 at 3:38PM

Hi there,

I am looking for some advice. I was sequestrated in March of this year and I have to be honest, I've really struggled financially since then. We pay a family member for looking after our children but my daughter is moving on to school and my son is going to a registered child minder. I had a look at the tax credits calculator and it looks like we might be eligible for quite a lot of our childcare costs to be covered. This would be a huge relief to us as the fee will go up from what we are paying our family member and I wasn't sure how I was going to manage to pay for it. My worry is that I am paying £140 a month to my sequestration and I have to inform them of any financial changes to my circumstances. I'm worried that they might up my payments. Over the last few months I have paid out a small fortune on school clothes, clothes for the kids, car repairs. I've had to borrow from my family and I've run out of money before pay day every month. I don't go out a lot and most of my money that is left over after bills is spent on shopping.

I just worry that they are going to take this extra money away when we really need it. I did not foresee some of the expenses that have come up before I completed the budget for the sequestration. I'm also worried that if I approach them about how much I am struggling that they will try to take my home as my partner has not paid the £500 fee to keep that safe yet although that will be paid as a priority once we get confirmation that they are happy for this to go ahead.

Thanks

LL - Scotland

StepChange_Rachael · 21 July 2017 at 10:22AM

Hi

Welcome to the forum and thanks for posting.

I’m sorry to hear that you feel you’re struggling since the sequestration was put in place. A debt solution is supposed to help you become debt free but in a way that means you’re able to keep on top of your regular household bills and general living costs.

Any changes to your situation should be discussed with the Accountant in Bankruptcy (AIB) and amendments can be made to the current agreement. What your budget needs to show is that you’re able to maintain your household bills and general living costs so that a payment into sequestration should be realistic and affordable, also taking into account unexpected expenses.

It’s important that any agreement made in the sequestration is maintained and if you feel this will be a struggle then contact the AIB to discuss it.

I know it may be daunting to contact them but it’s more likely that the solution may fail if you’re struggling. The AIB will be aware that changes may happen during the term of the sequestration and the budget can be tweaked to reflect these changes.

I’m not sure what agreement you have in place with the AIB in terms of the house, but if the £500 payment will protect the house then it’s really important that you stick within the terms of the sequestration or contact the AIB to discuss the option of an alternate agreement.

Take care
Rachael

ll1979 wrote: »

Hi there,

I am looking for some advice. I was sequestrated in March of this year and I have to be honest, I've really struggled financially since then. We pay a family member for looking after our children but my daughter is moving on to school and my son is going to a registered child minder. I had a look at the tax credits calculator and it looks like we might be eligible for quite a lot of our childcare costs to be covered. This would be a huge relief to us as the fee will go up from what we are paying our family member and I wasn't sure how I was going to manage to pay for it. My worry is that I am paying £140 a month to my sequestration and I have to inform them of any financial changes to my circumstances. I'm worried that they might up my payments. Over the last few months I have paid out a small fortune on school clothes, clothes for the kids, car repairs. I've had to borrow from my family and I've run out of money before pay day every month. I don't go out a lot and most of my money that is left over after bills is spent on shopping.

I just worry that they are going to take this extra money away when we really need it. I did not foresee some of the expenses that have come up before I completed the budget for the sequestration. I'm also worried that if I approach them about how much I am struggling that they will try to take my home as my partner has not paid the £500 fee to keep that safe yet although that will be paid as a priority once we get confirmation that they are happy for this to go ahead.

Thanks

LL - Scotland

MrsSheeps · 24 July 2017 at 7:16PM

Hi

So myself and hubby have been in a DMP for around 3 years. Most of the debt (£43k) is in his name, £15k in my name and 1 joint debt of over £1k with HMRC - overpayment of tax credits.

House is in hubby's name only. We are considering me going bankrupt, clearing that £15k, keeping hubby in DMP and, after I am discharged, throwing as much every month to the DMP as possible to clear the remaining debt. My main questions are:

1. Joint accounts - presumably I need to transfer them into his name before the bankruptcy?
2. I think the HMRC debt will remain his responsibility if I go this route?
3. Would they look at our allowable household bills and divide by 2 to get the amount I would be paying into the household to work out my disposable income?
4. Presumably as mortgage and house in his name, they wouldn't be able to take the house away? Will they allow me to pay half towards the mortgage or would they classify this as rent?
5. are there any pitfalls to this option?

One other bit of info is that hubby is self employed so pay goes up and down - we can only work off last years accounts. I am a partner in this business and a small amount of this money comes to me - on paper - and therefore I pay a small amount of tax on a yearly basis for this - we currently work out how much he earns by taking last years accounts, deducting all the tax paid and dividing by 12. I suspect it may be a little more complicated with the bankruptcy?

I hope you can help - finding it all a bit overwhelming!

Thank you
L

StepChange_Kirsty · 25 July 2017 at 12:29PM

Hello,

Thanks for your post and welcome to the forum.

I’ll try to answer each of your questions you have asked here.

1. Joint accounts – If these are joint credit accounts such as a joint loan or a joint overdraft, you will not be able to remove your name from the account. In Bankruptcy, the principle of joint and several liability will apply. This means that whilst your liability for the account will be removed because of the bankruptcy, your husband will remain liable for the full amount of debt which remains. On the other hand if this is just a joint bank account with no debt outstanding, the bank may or may not close this as a result of you entering Bankruptcy. Either way it is likely the account would be frozen for up to 72 hours to allow the Official Receiver to investigate. In this regard it may be easier for you each to have your own basic banks account, with a bank that you don’t have credit with, so that only your account would be frozen.

2. HMRC – You are correct, your husband would still need to arrange to pay the HMRC debt in full.

3. Share of household bills – The Official Receiver would normally want to see that each person is paying their fair share of the household bills. This is usually based on your individual income therefore the person who earns the highest percentage of income would pay the highest percentage towards the bills. If you both earn the same amount it would be a 50:50 split.

4. Property – The Official Receiver would investigate whether you have a beneficial interest in the property. Beneficial interest is where you would have rights to some of the proceeds if the property was sold even if you’re not the legal owner. If you are married and contribute towards the property (whether financially or indirectly such as providing childcare) it is possible you may have a beneficial interest and the Official Receiver may want to realise this asset. It would be at the discretion of the Official Receiver whether they would allow you to continue to contribute the mortgage.

5. Pitfalls – I would recommend getting in touch with us so we can give you further advice on whether Bankruptcy would be right for your individual situation. Our contact details can be found here. If you’re on a debt management plan with us already I would recommend calling the debt management team number for support and review of your DMP. Alternatively if you’ve not spoken to us before please call the debt advice number.

We hope to hear from you soon.

All the best,

Kirsty

MrsSheeps wrote: »

Hi

So myself and hubby have been in a DMP for around 3 years. Most of the debt (£43k) is in his name, £15k in my name and 1 joint debt of over £1k with HMRC - overpayment of tax credits.

House is in hubby's name only. We are considering me going bankrupt, clearing that £15k, keeping hubby in DMP and, after I am discharged, throwing as much every month to the DMP as possible to clear the remaining debt. My main questions are:

1. Joint accounts - presumably I need to transfer them into his name before the bankruptcy?
2. I think the HMRC debt will remain his responsibility if I go this route?
3. Would they look at our allowable household bills and divide by 2 to get the amount I would be paying into the household to work out my disposable income?
4. Presumably as mortgage and house in his name, they wouldn't be able to take the house away? Will they allow me to pay half towards the mortgage or would they classify this as rent?
5. are there any pitfalls to this option?

One other bit of info is that hubby is self employed so pay goes up and down - we can only work off last years accounts. I am a partner in this business and a small amount of this money comes to me - on paper - and therefore I pay a small amount of tax on a yearly basis for this - we currently work out how much he earns by taking last years accounts, deducting all the tax paid and dividing by 12. I suspect it may be a little more complicated with the bankruptcy?

I hope you can help - finding it all a bit overwhelming!

Thank you
L

AdviceSought · 2 August 2017 at 12:01PM

Hi

I could do with some initial advice...

The payment break on my DAS/DPP is coming to an end in a couple of weeks. I got this agreed due to losing my job and then ending up in a temporary role.

However, this role is coming to an end and it looks unlikely I will find alternative work in the near future either, so a spell of unemployment is likely.

I still have about 14 installments on this plan remaining, and an outstanding amount of around 9.5k.

At the same time, I still have just under 9k remaining on my car hire purchase. Obviously, unemployment will mean I can't resume repayments on my debt plan, and I would also be unable to make repayments towards my car.

I'd imagine this would mean I'm facing bankruptcy? The BIGGEST problem with that, would be losing my car. That would mean an already difficult situation in terms of trying to find work would be made even harder. So, losing my car is not really something I'd be able to cope with.

I'm hoping someone can advise on what options there are open to me in the event I'm unemployed for a while.

If it makes a difference, I'm in Scotland.

Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

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