advice

maxmycardagain · 24 October 2017 at 10:05PM

Should BR be considered?

He owes about £2000 on credit cards and about £4000 on a loan
He is expecting a termination fee from a lease car of about £4000
He has nil assets, nothing, zilch

His total debt amount excluding car/insurance is £13,000

On top ........
He has a car insurance policy costing £150/month (owes £2000)
He has a car on HP costing about £400/month (owes £20,000)

Having the car/insurance gives him an income of upto £400/week after costs

So.... BR, DRO, or is there anything else out there available that i dont know about?

His outgoings per month are about £1400

National_Debtline · 25 October 2017 at 4:52PM

Hi maxmycardagain

Can I ask what this person's intention is with the HP car? That seems to be the thing that is costing a lot of money at the moment. If the car is worth more than £1000, which I'm assuming it must be, he couldn't have a DRO and continue with the payments. If he applies for bankruptcy it's likely they'll be a clause in the HP agreement saying he has to hand the car back.

If we assume he no longer had the HP car (even if it was replaced with one of a much lower value, that was much cheaper to run) that would make a big difference to his outgoings. That may also open up the option of a DMP or IVA.

It's a good idea for this person to complete a statement of affairs (SOA). That will give a clearer idea of their financial situation and we'll be able to see which options they qualify for. You'll find one in the sticky on the Debt Free Wannabe board.

Susie
@natdebtline

DorisTrousers · 25 October 2017 at 5:28PM

He doesn't own the car, therefore it is not an asset. There are many DRO AI's on here, myself included, who have had DRO's approved where there is a car on HP. Saying you cannot have a DRO due to Car HP is just wrong, please examine your advice again.

That said, £400 per month is way beyond what anyone would consider reasonable, so a DRO does not apply in this case, but not for the reasons stated. BR is out of the question if the car is wants to be kept, and no creditor in his right mind would countenance an IVA if the car was still wanted.

A DMP may be favourite, but all that changes if the car is going back. Other options then become available.

debt_doctor · 25 October 2017 at 10:05PM

Didn't NDL say that "he couldn't have a DRO AND continue with the payments"? That's how I read it, meaning a DRO would be possible but the payments wouldn't be an allowable expense.

DD

maxmycardagain · 25 October 2017 at 11:11PM

The £20k car and £2K insurance are providing his income as its a taxi, hence losing them would see him without income

National_Debtline · 26 October 2017 at 2:07PM

Hello again

I certainly agree with DorisTrousers that the HP car is not an asset yet because the agreement has not been paid off in full. This person could choose to exclude the HP debt from the DRO as long as the payments are up to date. However the Insolvency Service guidance specifies that the HP payments are not an allowable expense unless the vehicle is worth less than £1000 and it is necessary to satisfy the domestic needs of the applicant and their family.

On that basis this person could not have a DRO and continue with the current HP payments. Whilst a third party could take over the payments, the reduction in this person's outgoings would mean there's a real risk of them having more than £50 per month surplus income, and therefore still not qualifying for a DRO.

Even as a taxi driver, it's really unlikely that this person could keep the car in bankruptcy. They would almost certainly be expected to be able to use one of a lower value. It's worth getting more detailed advice from of the free debt advice charities before taking further action.

Susie
@natdebtline

maxmycardagain · 26 October 2017 at 6:47PM

However the Insolvency Service guidance specifies that the HP payments are not an allowable expense unless the vehicle is worth less than £1000 and it is necessary to satisfy the domestic needs of the applicant and their family.

Not even as a tool of a trade? theres no need for family needs, he is single

Even as a taxi driver, it's really unlikely that this person could keep the car in bankruptcy. They would almost certainly be expected to be able to use one of a lower value.

Thats not possible, he would have to replace it with a car less than 6 years to comply with licensing requirements.

Debtor80 · 28 October 2017 at 7:12PM

maxmycardagain wrote: »

Should BR be considered?

He owes about £2000 on credit cards and about £4000 on a loan
He is expecting a termination fee from a lease car of about £4000
He has nil assets, nothing, zilch

His total debt amount excluding car/insurance is £13,000

On top ........
He has a car insurance policy costing £150/month (owes £2000)
He has a car on HP costing about £400/month (owes £20,000)

Having the car/insurance gives him an income of upto £400/week after costs

So.... BR, DRO, or is there anything else out there available that i dont know about?

His outgoings per month are about £1400

You say that his income "after costs" is £400 a week but you do not give a picture of his outgoings.

We know he is single but how much rent does he pay, what are his other costs.

His Taxi business is effectively insolvent if it is not bringing in enough income to service not just the costs but a reasonable salary for him, so the issue here surely is whether there is anything he can do to change that.

For example if he were in the Home Counties and there was insufficient business then he could go where the money is and drive in London.

He could focus on airports, do airport runs.

He could sign up with Pizza Hut or Deliveroo for night work.

Another option might be to rent his car to another driver to drive at night or drive nights himself ( I know it will be against all sorts of lease rules but if they can get insurance then it can be done).

He can't take an insolvency option if he does not deal with the debts that are causing the problem, he would have to put up a budget and the numbers would not add up.

So really his options are to completely abandon the taxi business, let all the debts fall, then find work and choose the appropriate debt solution based on his ability to service the debts, or find a way to increase income (maybe even a night job).

In any struggling business you either increase profits or cut costs, so maybe he can go live with parents to cut costs?

As I understand it DRO's are really about not being in a position to service the debt and the situation unlikely to change, Bankrupcy the same just bigger, IVA's etc are going to have him on the hook for years.

If he truly has nothing he can let the consumer debt stew for 6 years and go off statute if he is prepared to live "off radar" have no credit and ride it out. He will need to cease payments to loan and credit cards and not acknowledge those debts, this may affect his ability to replace the car if it is on say a 3 year lease.

I think he can only consider that if his dumps the taxi, the insurance will then be terminated and there will probably be some debt but what will be will be.

When considering his position, if he wants to keep the taxi he really needs to be able to generate enough income to service the debt or else abandon it.

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