Benefits & Bankruptcy - Will they take money from the benefits?

yorkiepudd

Hi All

I am trying to help my brother-in-law. Basically, he has a long term illness, never worked (and not ever likely to). He receives Incapacity Benefit, Income Support and Disability Living Allowance.

He is in around £27000 of debt, getting real hassle from most of the creditors (even thought the CAB tried to help with voluntary arrangements) and no hope whatsoever of ever paying it off. Oh!, and he lives in a council flat, with little or no possesions, and certainly nothing that could even remotely be described as an asset.

I think he would be better of getting himself declared bankrupt and freeing himself from the pressures of it all ( it is having an adverse effect on his mental and physical health) and have offered to pay the £310 deposit for him.

He is currently paying about £80 a month out of his benefits to his creditors (which he really cannot afford), but what I don't know is if a court OR or IP would expect him to continue to pay this (or even more) as his DLA (although it is for his illness) is obviously more than the government would consider the minimum to live on normally.

Anyone any experience in this area, as although I have offered to help him financially, I cannot afford to pay for financial advice, and the CAB seem to be dead set against bankruptcy in any situation.

Cheers

Ade

file_wizzard

Forgive me for asking the obvious question but how has the 27k of debt arose, what has it been spent on if there are no tangible assets?

If this is purely cost of living / social spending then this has obviously been utilised with the knowledge that he would have limited means to re-pay it?

Perhaps if you can post full details of his income and expenditure, and the creditors concerned then we can attempt to offer some help and advice

Harassed_2

No. It's very unlikely any IPO (income payment order) would be made. I don't see any need to be judgmental, if banks and others give away money without proper checks, then that's their problem.

He should seek some advice from the Citizens Advice Bureau before committing to such action to confirm the above.

file_wizzard

Harassed wrote:

No. It's very unlikely any IPO (income payment order) would be made. I don't see any need to be judgmental, if banks and others give away money without proper checks, then that's their problem.

He should seek some advice from the Citizens Advice Bureau before committing to such action to confirm the above.

As far as i am aware no bank "gives away" money, they only lend it dependant on the information they are provided, and when a contract is signed promising repayment.

yorkiepudd

The money went on many daft things, and daft people.

Because of his mental state, he was an easy touch for many, trying to buy friendship and love, if you like.

He also learnt to drive (which took him 100's of lessons and 5 tests) and then, when he bought a car, he started have fits, lost his licence (through unfit to drive) and couldn't sell it because of the HP so just let them take it back under the impression that was the end of it - it wasn't, they sold it for peanuts and he still owes 000's. (It was one of these companiies that guarantees finance on the vehicle - all he could get on benefits). Then he got store card after store card, and the charges just spiralled out of control as he couldn't pay the balance of each month.

A lot of this has come about through the state of his mental health and none of it was deliberate in that he set out to do this.

His income now is approx. £76 a week in Incap. benefit and £56 in DLA. He also gets housing and CT benefit, but has to pay about £6 in water rates/ tennants !!!!!!. levy.

He is single, lives on his own, no dependants.

Is that any help?

file_wizzard

From what you have said then it is obvious your brother-in-law has little option but to petition for bankruptcy, as Harassed has said it is exceptional unlikely than an IPO would be made, and he has no realistic chance of repaying his creditors.

Also other than the fact that this would releave his current anguish, it will also prevent him from obtaining any further credit in the short term and getting into the same situation again.

Dora_the_Explorer_5

Could I suggest that if he has an approved social worker or community psychiatric nurse that he speaks to them? He would also find it useful to speak to a mental health advocate. His debt problem is not unusual for people who have mental health problems.
Hope this helps and best wishes to you both.

yorkiepudd

Thanks for the advice everyone.

I suspected pretty much what you have said - that it is unlikely he will have to pay anything (although we all know nothing is guaranteed).

I never thought about getting help from his CPN though I'm not 100% sure he is still seeing one (I know he was during his worst period in his mid-20s). He has been using the CAB and despite their best intentions, in my opinion they are wrong in this case (they are basically saying that no one should ever consider voluntary bankruptcy despite their circumstances) and my B-I-L is hesitant as he is worried that........

1) He will still end up paying money out anyway (so he will have gone through the humiliation of bankruptcy for nothing)

2) The court / OR will refuse to make him bankrupt, so he (I think he means me) will be paying out £310 and get nothing in return.

I don't believe either of the above are a major concern (but I'm not an IP obviously) - the only issue I can see is his bank accout (Natwest current plus I think) being frozen - all his benefits are paid directly into it. I'm not sure how to get round this yet.

Again, thanks for the advice, any extra is more than welcome.

Cheers

Ade

Thefunkygibbons

Does he have to have his benefits paid into his bank account, can he collect them via the post office?

Jen_Jen_5

if he owes money to natwest he should get a new account, the OR is likely to allow this new account to continue for the payment of benefits. i would make sure in the short term that he has withdrawn this weeks/months money before the bankruptcy incase it takes a few days to unfreeze it. A basic account is likely to be the best option as no facility for credit.

i think you are right about the other issues, it is very unlikely he will not be declared bankrupt and income support is a sustinence payment by the government at the minimum they think somebody in these circs can live on, the court wont take a penny.

also on the plus side, if his credit is affected he is less likely to be taken advantage of by either individuals or companies.

Fran

yorkiepudd wrote:

..........He has been using the CAB and despite their best intentions, in my opinion they are wrong in this case (they are basically saying that no one should ever consider voluntary bankruptcy despite their circumstances) ......................

CAB advisers are supposed to be non-judgemental and would not normally have the opinion that no-one should ever consider it. Is there someone who could go to CAB with him to find out what they have said to him? Also it could be that he has seen an advisor who has let personal opinion come into it or a new adviser who hasn't come across this before. Is he seeing a debt specialist at CAB or a general adviser?