Bankruptcy and future earnings

mike_L

Was declared BR yesterday and am wondering if the OR may seek to take money from my earnings via the tax system for my creditors until I’m discharged.

I’m a sole trader (Carpenter) but not working at present due to a long term injury and am claiming IBJSA. Besides I’m 55 and a bit too old to do the heavier and better paid site work anyway. In fact I’m considering ceasing being self employed as I’m not sure it’s worth it at the moment.

As a self employed person in the construction industry I'm actually taxed at source and therefore receive all payments already taxed.


Be grateful for any advice as to how the OR might see things.

rog2

You should receive a 'zero' tax code - the 'idea' being that any tax you should pay is paid to the OR for distribution to your creditors.

Other than that, any IPA will be based on your current earnings - should these change, then you are obliged to inform the OR, within 21 days of the change, so that the IPA (if one is imposed) can be amended.

If your earnings are not sufficient to warrant the imposition of an IPA during your bankruptcy period, then once you are discharged - whether early discharge or full term, then you are no longer obliged to inform your OR/Trustee of any change in circumstances and no IPA can be imposed after discharge.

Theoretically, if an IPA has been imposed during your bankruptcy period, you will still be liable to inform the OR/Trustee of any change in circumstances for the full period of your IPA - usually 36 months - although, even this seems to vary around the country.

nervousmother

Mike, I really dont know how it will work for you! sorry im not much help but it is interesting, I presume your on CIS and pay tax to different companies? (if you just worked for one they would be forced to paye?)
The CIS scheme is supposed to benefit the tax man and yourself by taxing you from every employment, so whereas you are self employed you have restrictions of been employed,
I would like to see how they would put a CIS on a nil tax code when they can do work for maybe 200 companies. interesting. My guess would be they would claim the tax back from the taxman when your accounts were due..
Even though you are self employed you can still get income payments order, they will look at your earnings and average them out..

rog2

mike_L wrote: »

I’m a sole trader (Carpenter) but not working at present due to a long term injury and am claiming IBJSA. Besides I’m 55 and a bit too old to do the heavier and better paid site work anyway. In fact I’m considering ceasing being self employed as I’m not sure it’s worth it at the moment.

Have just seen your 'modification' - by the sound of it you are most unlikely to have an IPA imposed on you, anyway. :beer:

mike_L

What's an IPA? Some sort of attachment to earnings thing I assume?

Like all self employed CIS (construction industry scheme) workers I can either work for a different company every week or the same company for months on end.

Either way my tax is deducted, as I said, at source (20%) and paid direct by the company to the tax man, all pay is received with tax already deducted. I never see it. Can't see how the OR or the tax people could give me a zero tax code and monitor or enforce it, I'd need a special certificate exempting me from the CIS scheme. very unlikey.

I suppose taking any tax rebate would be the easiest way for them to tax any earnings above that for my needs. It would be impossible for me to be forced to go, or be paid PAYE especially if working for about 20 companies a year!

I think for the time being I should retain my self employment status not least cause I stand a much better chance of keeping my van (worth about £3,200) and because going back to being employed PAYE would maybe make the OR consider an IPA (whatever that is) or a zero tax code.

beentheredonethatstilhere

Here's a link for you from the Bankruptcy Help sticky

Income Payment Agreements/Orders.

• IPO / IPA (Income Payment Orders and Income Payment Agreements) (IS)
• FAQ - Income Payment Orders / Agreements ( IPO / IPA ) (IS)
• OR's Case Help Manual - Income Payments Agreements (IS)
• OR's Case Help Manual - Income Payments Orders (IS)
• OR's Technical Manual - IPAs Assessment of real disposable income (IS)
• Nil tax (NT) coding/IPAs (MSE)
• Income Payments Calculator (Excel spreadsheet) (IS)

I strongly advise that you have a read of this sticky as there is lots of good info. on it.

mike_L

Thanks.

Bit surprised about the posssible 3 year length of the IPA/IPOs. I'd also be a bit surprised if the OR doesn't impose some sort of income deductio on me.

beentheredonethatstilhere

If you pop up a SOA for us we can give you some idea at what you could be looking at.

http://www.makesenseofcards.co.uk/soacalc.html

nervousmother

mike_L wrote: »

What's an IPA? Some sort of attachment to earnings thing I assume?

Like all self employed CIS (construction industry scheme) workers I can either work for a different company every week or the same company for months on end.

Either way my tax is deducted, as I said, at source (20%) and paid direct by the company to the tax man, all pay is received with tax already deducted. I never see it. Can't see how the OR or the tax people could give me a zero tax code and monitor or enforce it, I'd need a special certificate exempting me from the CIS scheme. very unlikey.

I suppose taking any tax rebate would be the easiest way for them to tax any earnings above that for my needs. It would be impossible for me to be forced to go, or be paid PAYE especially if working for about 20 companies a year!

I think for the time being I should retain my self employment status not least cause I stand a much better chance of keeping my van (worth about £3,200) and because going back to being employed PAYE would maybe make the OR consider an IPA (whatever that is) or a zero tax code.

I would be very interested to hear how it works! I have known guys on cis work for 200+ companies during the year so I doubt very much they could put a nil tax code on you, I think they would have to re-claim from the tax man when you did your accounts.

mike_L

nervousmother wrote: »

I would be very interested to hear how it works! I have known guys on cis work for 200+ companies during the year so I doubt very much they could put a nil tax code on you, I think they would have to re-claim from the tax man when you did your accounts.

To be honest I found doing my SOA on here a bit of a waste of time. Most people advised me to make all sorts of cuts when my situation was ‘way’ beyond being solved by cutbacks and economising. Don’t get me wrong, people have been very helpful overall with loads of good advice.

I was on a DMP with Payplan (still am technically) and struggling to make the payments but in truth my DMP was never sustainable, it allowed no margin for illness, holidays, or lack of work. Any work lost immediately left me short of money to meet payments. Even with work I would have to maintain the DMP without any break for 17 years until the age of 72!!

What’s more the credit card companies never stopped the interest accruing on my debts so despite making payments of £180 a month I was actually getting further behind each month. I went through this with Payplan but they always advised me to stay on my DMP and seemed scared of the BR option when I mentioned it.

I followed my DMP for 8 months before I realised what a hopeless prospect this was and suddenly I started using my own brain and BR seemed the best (only) solution and so I went for it.

I had a meeting with the CAB today and they also seemed amazed that I’d gone for BR on my own accord, asking me if I knew the implications of doing that. The fact that my DMP ran for 8 years beyond my retirement age with me needing to work non-stop with no margin for holidays, or illness until that time didn't seem didn’t to bother them. Why are these people so scared of people going BR.

As a matter of interest I owe approx £25,000 on Credit cards plus my mortgage inc’ arrears of £90,000.

beentheredonethatstilhere

If you put your SOA up on the DFW board then that is the sort of advice you will get. On the Bankruptcy board we look at how much the OR will possibly allow you for essential living expenses.. It's a completly different thing on here.

http://www.makesenseofcards.co.uk/soacalc.html