Bankruptcy question

mushio · 26 July 2017 at 9:15PM

Hi people,

HMRC are making me bankrupt for a debt of around 50k.
We have equity in our property of around 80k so 50% for me and the same for my wife.
My question is that a relative of mine has offered to release equity of 50k for my wife to purchase a property in her name. The funds will be transferred to her account direct from my relative.

The HMRC debt is in my name only and my interest in the property being sold will be used to settle some of the debt.

Can anyone foresee any issues with this. I'm aware that equity release can be gifted to anyone.
Any help greatly appreciated.

National_Debtline · 27 July 2017 at 11:40AM

Hi Mushio

Just to check I understand correctly, you have £80,000 equity and your 50% share is £40,000? If that’s the case when you are made bankrupt the OR will look to sell the property to release your share of the equity to be used in your bankruptcy. Your wife will also receive her share of £40,000. I’m unsure from your post if the help from your relative is a loan until your jointly owned property is sold, if it is your wife will be £10,000 short when paying them back.

As long as it is clear that this is all in your wife’s name, and assuming that neither your wife nor relative are a creditor in your bankruptcy, it appears that your wife can do it. But there are practical issues to consider, assuming your wife will need a mortgage as well as the £50,000. Your wife currently has a financial connection with you due to the jointly owned property. That means your credit history could affect her ability to get a mortgage. This could be more of a problem once you are bankrupt. But if she applies for a mortgage before you are made bankrupt (I’m unsure whether the bankruptcy order has been made yet) she could have problems borrowing because she will still have the joint mortgage on your current property and that will be considered as an outgoing in affordability checks.

Another possible option is your relative could make an offer to the OR to buy out your interest in the current property therefore avoiding the sale. However you would not then be in a position to pay them back (although your partner could pay instalments if it was affordable). I understand that may not be a viable option but worth mentioning. You would need to seek specialist advice from one of the free debt advice agencies before going ahead with this. Good luck with it all.

Susie
@natdebtline

silvercar · 27 July 2017 at 12:14PM

.....Another possible option is your relative could make an offer to the OR to buy out your interest in the current property therefore avoiding the sale. However you would not then be in a position to pay them back (although your partner could pay instalments if it was affordable). I understand that may not be a viable option but worth mentioning. ....

Or even the relative helping to clear your hmrc debts and bankruptcy avoided altogether.

mushio · 27 July 2017 at 6:08PM

Thanks for the reply susie. My wife is looking to purchase a new static home which is £50k and the relative in question is aware of the shortfall and is prepared to wait to be reimbursed.
I've not yet been made bankrupt but HMRC have informed me that this is what they will pursue and I'm expecting the letter any time soon.
The tax debt and some CCJ's are all in my name and I'm aware that these will be paid from the house sale using my beneficial interest and not my wife's share.
The relative was concerned that if they gifted the money to my wife that she would have to pay my debt.

mushio · 27 July 2017 at 6:10PM

Just to add that my wife will not need a mortgage and it will be solely in her name.

National_Debtline · 28 July 2017 at 11:29AM

Hi Mushio

Thanks for the extra information. Your wife cannot be held liable for your sole debts, and she will not be expected to contribute towards them in your bankruptcy. It will have to be clear that this is a gift from your relative solely to your wife and you cannot be considered to have any interest in it otherwise it could be impacted by your bankruptcy.

Silvercar is correct, if you wanted to avoid bankruptcy altogether the money from your relative could be used as an offer to HMRC. However the problem there would be how your relative would be paid back if you were not selling your property. It also possible HMRC might consider a payment plan coupled with a voluntary charge on your property to avoid the bankruptcy. I would recommend speaking to one of the free debt advice agencies for more advice on these type of options.

I also appreciate you may have already decided bankruptcy and a fresh start is your best option. I hope it all goes well for you.

Susie
@natdebtline

mushio · 28 July 2017 at 8:50PM

Thanks again Susie,
The relative in question was concerned that it would cause more problems.
Finally decided on bankruptcy as I have been dealing with HMRC for almost 4 years now and have had enough.
Tried to set up an I've but after months of getting everything the insolvency practitioners wanted I was told that they doubted it would be accepted so I gave up.
We're looking for a fresh start.

Thanks,
Mushio.

Bankruptcy question

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