Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

StepChange_Rachael · 29 August 2017 at 9:26AM

Hi

Thanks for posting on the forum.

Being discharged from bankruptcy is the end of the bankruptcy. Provable debts included in the bankruptcy will now legally be written off and any restrictions that were put in place will end. This usually lasts for 12 months, unless the official receiver sets a bankruptcy restriction order, in this case the restrictions may last longer.

These restrictions include not being able to borrow more than £500 without letting the lender know they’re in bankruptcy, it can affect types of employment, particularly self-employed clients and there are also restrictions on a person’s right to buy from a local authority.

Three months after discharge the bankrupts details are removed from the insolvency service register.
At this stage the bankrupt can ask for a letter to confirm they are now discharged, this might be needed for future employment, mortgage lending etc.

I hope this helps.

Thanks
Rachael

doorstep54 wrote: »

Hi stepchange wanted to ask when you become discharged from bankruptcy what does it mean I know its you don't owe any one money any more, but what else does it mean

Domjen · 2 September 2017 at 7:54AM

Hello
I am thinking of declaring myself bankrupt but I am unsure of how this will affect the following:
1. My pension- I have paid into an employer's pension plan since 1991. I am 48 years old and continue to be in a full time job.
2. I live in a shared ownership place, I pay 50% mortgage and 50% rent to a housing association since 2015.
I am not in rent or mortgage arrears. My total credit card debt is however the reason why bankruptcy is the only option. I have completed the online form at the stepchange website and bankruptcy was recommended. Please would you be able to assist me? I don't want to lose my home and pension. Thank you.

Former_StepChange_Linsi · 4 September 2017 at 9:35AM

Good morning,

Thanks for coming back to us.

I don’t think you’re being fobbed off, but I’m also not sure who has the power to remove a default from a credit file. Credit files aren’t something we deal with directly, so for more information you may want to look at the following credit reference agencies websites: Noddle, Clear Score and Experian.

As Barclaycard haven’t been able to resolve this for you, I’d recommend you contact the Financial Ombudsman Service to raise a complaint with them.

All the best,

Linsi

jen1784 wrote: »

Hi Kirsty, Thank you for your response.

My husband has now spoken to Barclaycard, although he hasn't spoken to anyone in the Default department as no one is answering the phone.

The person he did speak to did advise that his account was in deafult from the date he phoned up to say he could no longer afford the minimum monthly payment (around January I think). It was agreed at that time that he would pay a smaller amount each month. There was a letter sent out by Barclaycard confirming the lesser amount and then they say the account was closed. It was at this point that the account was put into default.

However, they never amended the direct debit and continued to collect the higher amount from my husbands bank account. In addition, the account was still accessable online. When my husband cancelled the March Direct debit Barclaycard demanded payment of the full minimum payment arrears in the next month (April), and this was also shown on my husbands account online. The March and April amounts were paid via thier website in April and the direct debit was set up. It is our understanding that although Barclaycard set up this agreement for the lesser amount they never actioned it, therefore we have always stayed within the terms and conditions on the orginal contract, apart from 1 late payment.

As we had already complained about the way this has been handled and received a token amount of compensation Barclaycard say they can no longer deal with any complaint as the account is now closed. They have told to us to complain the Financial Ombudsman instead as they are the only ones who can get the default removed. Is this correct or are we being fobbed off again?

StepChange_Rachael · 5 September 2017 at 9:33AM

Hi

Thanks for your post.

Bankruptcy can affect assets so it’s important to know how these might be affected before you decide to go ahead with this solution.

You pension pot shouldn’t be effected as you’re only 48 and pension pots can’t be accessed until your 55. If you were looking at bankruptcy nearing 54 then we’d suggest you speak with a regulated independent financial advisor. You can find one through the Money Advice Service.

Regarding your property this is difficult to give an exact answer because it depends on how much equity is in the property. Properties with as little as £1000 equity can be at risk in bankruptcy as the Official Receiver will look to release the equity into the bankruptcy.

As you’ve mentioned you’ve completed Debt Remedy, our online self-help tool, I’d suggest contacting us directly and the team can discuss this with you further taking into account your individual financial situation.

You can find our contact details by logging back into your Debt Remedy budget and clicking the ‘Need Help’ button or by following the link here.

Thanks
Rachael

Domjen wrote: »

Hello
I am thinking of declaring myself bankrupt but I am unsure of how this will affect the following:
1. My pension- I have paid into an employer's pension plan since 1991. I am 48 years old and continue to be in a full time job.
2. I live in a shared ownership place, I pay 50% mortgage and 50% rent to a housing association since 2015.
I am not in rent or mortgage arrears. My total credit card debt is however the reason why bankruptcy is the only option. I have completed the online form at the stepchange website and bankruptcy was recommended. Please would you be able to assist me? I don't want to lose my home and pension. Thank you.

Skintnorthernmonkey · 7 September 2017 at 12:54PM

Dear Stepchange

I have had advice from you recently, and am deciding between bankruptcy and IVA.

However, I have a question. I got a breakdown of my mortgage from the provider to make sure my figures were correct. I had not twigged, but there are three accounts with my mortgage. Two are secured, one unsecured. I had not included the unsecured element in the original budget or correspondence.

If I go for an IVA or Bankruptcy, in either case since there is unsecured debt with the mortgage lender, what would be the knock-on effect for the two secured loan accounts? Will the mortgage lender be likely to take action on the remaining accounts? (House is in negative equity).

Avocadotoast · 7 September 2017 at 3:33PM

Hi, I was wondering if you could help clear something up for me.

I was declared bankrupt (in Scotland) earlier this year. I'm a bit worried that this is more complicated than I thought/was explained to me. This is because I am on benefits due to long term illness and will not be able to start making repayments, if any, for the foreseeable future. When I am able to to back to work it will be a graded return so I am likely to be earning very little for quite some time.

My confusion is, say two years down the line I do well and get into better paid employment, does this kickstart a whole four years of repayment at this point? I've not been able to get a clear answer on this and I'm worried now about an infinite number of years that I could potentially be eligible to continue to pay depending on when I earn enough.

Hope my question makes some sense! Thanks for advice in advance.

Avo

StepChange_Rachael · 7 September 2017 at 3:58PM

Hi

Thanks for posting on the forum.

When deciding on a debt solution it’s important to make sure you’re fully aware of how it will impact your individual situation so i'm glad you've got in contact.

The unsecured part of the debt would be separate from your mortgage and secured loan.

An unsecured debt doesn’t have the same impact as secured debt when the contractual payments aren’t met, which means the impact is different when going ahead with a debt solution.

In terms of an IVA, the unsecured part would be included in the IVA and this won’t have any impact on your property or secured debts. The payments to these would continue as normal.

If you decide to go Bankrupt and the official receiver (OR) allows you to remain in the property, due to the negative equity, then the unsecured debt would be written off and the secured debt payments would need to be paid as normal.

It’s important to remember that the OR has 3 years to decide what to do with the property. If within this time the property has equity then the OR could try and release this to form part of the bankruptcy. This could mean by forcing sale of the property to release it.

If you haven't already, I'd also suggest to check the original contract to make sure the debt is unsecured and seperate from your secured lending.

If you’d like to discuss this debt in relation to your recommended solutions in more detail then you can find our contact details here.

Thanks
Rachael

Skintnorthernmonkey wrote: »

Dear Stepchange

I have had advice from you recently, and am deciding between bankruptcy and IVA.

However, I have a question. I got a breakdown of my mortgage from the provider to make sure my figures were correct. I had not twigged, but there are three accounts with my mortgage. Two are secured, one unsecured. I had not included the unsecured element in the original budget or correspondence.

If I go for an IVA or Bankruptcy, in either case since there is unsecured debt with the mortgage lender, what would be the knock-on effect for the two secured loan accounts? Will the mortgage lender be likely to take action on the remaining accounts? (House is in negative equity).

StepChange_Rachael · 7 September 2017 at 4:23PM

Hi Avo

Thanks for your post.

I can understand your concern; however, the chances are small that you’d have to make payments into the bankruptcy/sequestration if you haven’t had to begin with.

If you return to work then the accountant in bankruptcy will look at reviewing your finances, however, it’s likely if you’re returning to work you’ll have additional expenses to include to your household expenditure also.

The four years where your budget could be reviewed will begin from the date of bankruptcy up to four years after.

If you went back to work after five years and there’s money left over at the end of the month, which I’d call a surplus, you won’t need to make a payment.

The accountant in bankruptcy won’t set a payment that would mean you would struggle to meet your household bills and general living costs. They won’t set a payment that would cause a detrimental impact.

I hope this helps.

Thanks
Rachael

Avocadotoast wrote: »

Hi, I was wondering if you could help clear something up for me.

I was declared bankrupt (in Scotland) earlier this year. I'm a bit worried that this is more complicated than I thought/was explained to me. This is because I am on benefits due to long term illness and will not be able to start making repayments, if any, for the foreseeable future. When I am able to to back to work it will be a graded return so I am likely to be earning very little for quite some time.

My confusion is, say two years down the line I do well and get into better paid employment, does this kickstart a whole four years of repayment at this point? I've not been able to get a clear answer on this and I'm worried now about an infinite number of years that I could potentially be eligible to continue to pay depending on when I earn enough.

Hope my question makes some sense! Thanks for advice in advance.

Avo

Avocadotoast · 7 September 2017 at 10:34PM

Thank you for that advice, that all makes perfect sense now. I didn't quite understand how it would work with regards to covering living expenses etc but now I see that it's all taken into account. I was worrying about paying for things that I am not having to pay for now like increased travel as you mentioned.

Thanks for putting my mind at rest.

Avo

Former_StepChange_Linsi · 9 September 2017 at 9:18AM

Hi Avo

Thanks for your post.

I’m glad you found Rachael’s advice helpful and that she’s been able to put your mind at rest. I’ll pass your message onto her.

All the best,

Linsi

Avocadotoast wrote: »

Thank you for that advice, that all makes perfect sense now. I didn't quite understand how it would work with regards to covering living expenses etc but now I see that it's all taken into account. I was worrying about paying for things that I am not having to pay for now like increased travel as you mentioned.

Thanks for putting my mind at rest.

Avo

Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

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