Scottish bankruptcy through LILA

Raphael

After years of avoiding creditors' calls and ignoring the mountain of letters that came through my door, not using a bank account, and struggling to make ends meet, I finally took advice last month and took steps to sort my situation out.

First achievement is I got my Housing Benefits decision yesterday and I'm entitled to £65 a week, which is really gonna help! Got the first cheque through the post today, except that I don't have a bank account to pay it in yet, but I'm hoping to have that sorted before my next rent is due...

Yesterday I also finally sent my application for bankruptcy through LILA, and I've been wondering about a few things:

1. I was gonna open an RBS key account (because I have a branch pretty much on my doorstep and I prefer to be able to use counter services, so the Coop maybe isn't ideal for me), is it worth doing so just before going bankrupt, I've read in various threads about people who were able to keep their account after bankruptcy, has anyone managed that with the RBS?

2. I am waiting on a decision about my HB possibly being backdated, if it's successful, it could amount to quite a substantial sum of money (£65 x 26 = £1690), so I imagine I'll have to declare it, but is it likely I'll be able to keep any of it?

3. From what I've read in other threads, people going through LILA haven't necessarily been asked for an SOA, but I tried preparing one anyway as it's always good for my own budgetting: based on my average earnings for the current tax year (I'm self-employed) + housing benefits, I would have very little (if any) surplus, but I know that from 6th April onwards I could be earning up to an extra £20-30 a week more, and also get about £50 a week WTC, which means my HB entitlement will go down, but after checking on entitledto, I think I should still get at least £13 a week so all in all I'm likely to receive an extra £27 a week, which would obviously take me over the £99 limit for surplus income.

If that is the case, is it true they could ask for as much as 50% to be paid with IPA no matter how much you are over the limit (it sounds a bit unfair if it means that someone with a £99 surplus doesn't have to pay anything, but someone with a £100 surplus has to pay £50 thus leaving them with just £50)?

Also, as I'm self-employed and income can fluctuate quite a lot throughout the year, how would they work that out, would they take my March or April figures when it's not necessarily representative of what I'm gonna earn on average over the whole year (April, May, October and November are typically the best months whilst January, and June through to September are the worst)?

What if they decided I have to pay say £50 a month based on my current circumstances, but I ended up earning a lot less from June onwards?

Or if they based it on estimates, or the previous year's income, and it turned out I made more than that, which I wouldn't know for sure until the end of the next tax year, would they try to backdate the IPA?

IF

Hello Raphael, Sorry don't know much about the scottish bankruptcy system. Just bumping for you x

IF

Another bump.......x

TDMum

Raphael wrote: »

After years of avoiding creditors' calls and ignoring the mountain of letters that came through my door, not using a bank account, and struggling to make ends meet, I finally took advice last month and took steps to sort my situation out.

First achievement is I got my Housing Benefits decision yesterday and I'm entitled to £65 a week, which is really gonna help! Got the first cheque through the post today, except that I don't have a bank account to pay it in yet, but I'm hoping to have that sorted before my next rent is due...

Yesterday I also finally sent my application for bankruptcy through LILA, and I've been wondering about a few things:

1. I was gonna open an RBS key account (because I have a branch pretty much on my doorstep and I prefer to be able to use counter services, so the Coop maybe isn't ideal for me), is it worth doing so just before going bankrupt, I've read in various threads about people who were able to keep their account after bankruptcy, has anyone managed that with the RBS? I have no experience with RBS but I don't think they are BR friendly. Do you have a Barclays bank near you? You can get a BR friendly account with them.

2. I am waiting on a decision about my HB possibly being backdated, if it's successful, it could amount to quite a substantial sum of money (£65 x 26 = £1690), so I imagine I'll have to declare it, but is it likely I'll be able to keep any of it? I'm not 100% sure but because this is due to you for payments you have made before BR you may be able to keep it all. Hopefully someone else with more knowledge will come along soon and help out. It's not a windfall as such.

3. From what I've read in other threads, people going through LILA haven't necessarily been asked for an SOA, but I tried preparing one anyway as it's always good for my own budgetting: based on my average earnings for the current tax year (I'm self-employed) + housing benefits, I would have very little (if any) surplus, but I know that from 6th April onwards I could be earning up to an extra £20-30 a week more, and also get about £50 a week WTC, which means my HB entitlement will go down, but after checking on entitledto, I think I should still get at least £13 a week so all in all I'm likely to receive an extra £27 a week, which would obviously take me over the £99 limit for surplus income. There is no £99 threshold in Scotland so it all depends on the Trustee appointed to you on if you pay an IPA and how much.

If that is the case, is it true they could ask for as much as 50% to be paid with IPA no matter how much you are over the limit (it sounds a bit unfair if it means that someone with a £99 surplus doesn't have to pay anything, but someone with a £100 surplus has to pay £50 thus leaving them with just £50)? As above

Also, as I'm self-employed and income can fluctuate quite a lot throughout the year, how would they work that out, would they take my March or April figures when it's not necessarily representative of what I'm gonna earn on average over the whole year (April, May, October and November are typically the best months whilst January, and June through to September are the worst)? If your income increases or decreases you send in a new SOA and then the Trustee will look over it and recalcuate any IPA payment to be made or, if indeed one should be made.

What if they decided I have to pay say £50 a month based on my current circumstances, but I ended up earning a lot less from June onwards? As above

Or if they based it on estimates, or the previous year's income, and it turned out I made more than that, which I wouldn't know for sure until the end of the next tax year, would they try to backdate the IPA?

They can't backdate an IPA, you have to agree to it too as it's voluntary. They can impose an IPO but in the usual course of events an amicable agreement can be made as to wether an IPO is fair.


I am in no way an expert, I have just picked a few things up from here and from speaking to the AIB. Have you spoken to any professionals about this?

Raphael

TDMum wrote: »

I am in no way an expert, I have just picked a few things up from here and from speaking to the AIB. Have you spoken to any professionals about this?

Ok thanks, yes I did get some advice, but had not thought about all those specific questions at the time, it's only after reading up here that I thought of that.

There's no Barclays bank near me, I'd be just as well with the Coop in that case (you can use the Post Office with them, is that right?).

I didn't realise there were no set thesholds in Scotland, I guess I'll just have to wait and see. I'll have to work something out for my income too, at the moment sending a new SOA every time it changes would not work out at all as my income varies pretty much all the time - for instance in January I only made £277 whereas in February I made £767, over the whole tax year it works out at £533 on average but say based on my February figures I could be asked to pay £100 as an IPA, and then I could be left with not even enough to live on the following month (even if they did cancel the IPA at that point)... Does that make sense?

Here's a quick SOA if anyone wants to have a look at it. That's only based on what I'm getting just now, as I said things will change slightly in my income from April onwards.
I still need to enter a figure for medical bills, but not sure how much that would be, so I'll have to look into it more.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned....................

Monthly Income Details
Monthly income after tax................ 533
Partners monthly income after tax....... 0
Benefits................................ 302
Other income............................ 0
Total monthly income.................... 835

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 325
Management charge (leasehold property).. 0
Council tax............................. 49
Electricity............................. 55
Gas..................................... 10
Oil..................................... 0
Water rates............................. 22
Telephone (land line)................... 0
Mobile phone............................ 5
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 150
Clothing................................ 25
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 50
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 6
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 5
Haircuts................................ 5
Entertainment........................... 0
Holiday................................. 25
Emergency fund.......................... 0
Laundry................................. 25
Total monthly expenses.................. 757


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Total unsecured debts..........0.........0.........-


Monthly Budget Summary
Total monthly income.................... 835
Expenses (including HP & secured debts). 757
Available for debt repayments........... 78
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 78

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -0
Net Assets.............................. 0

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using Firefox browser.

coolcait

Hiya Raphael

If you're applying for bankruptcy under LILA, and your income is variable, then you have to make sure that your average income is under the minimum wage level. From what you have told us, it looks like you'd be OK, but it might be worth a quick phone call to the AiB to check that one out.

Like TD Mum says, there's no set formula for surplus funds under the Scottish system. Generally, people in LILA bankruptcies wouldn't be able to pay an IPA, simply because their income is so low! The exceptions tend to be people who are earning a wage and also getting some other source of income (eg working tax credits) which meets the LILA rules, but which pushes their actual income above the minimum wage.

If your income varies a lot, they might ask you to send in your wage slips every week or every month. (Apologies for appearing to shout ) DO IT!!

I know it's a hassle, but it's a lot less hassle than trying to persuade your Trustee that you don't earn £767 every month. And how would you persuade the trustee about that? Well, you'd have to hunt down all your wage slips and send them in anyway!

Raphael

coolcait wrote: »

Hiya Raphael

If you're applying for bankruptcy under LILA, and your income is variable, then you have to make sure that your average income is under the minimum wage level. From what you have told us, it looks like you'd be OK, but it might be worth a quick phone call to the AiB to check that one out. I did check before sending in the application, and I was well below, and even if I earn a bit more and get my WTC in April, I'll still be below that level.

Like TD Mum says, there's no set formula for surplus funds under the Scottish system. Generally, people in LILA bankruptcies wouldn't be able to pay an IPA, simply because their income is so low! The exceptions tend to be people who are earning a wage and also getting some other source of income (eg working tax credits) which meets the LILA rules, but which pushes their actual income above the minimum wage. As I said above, even with WTC I shouldn't be earning more than the minimum wage defined by LILA, but then again, it's not just my income that's low, my expenses are low too, and after April I might have too much surplus.

If your income varies a lot, they might ask you to send in your wage slips every week or every month. (Apologies for appearing to shout ) DO IT!! I'm self-employed so I don't have any wage slips! But I could send them my detailed accounts every month I suppose...

I have since found a great link posted in another thread, I don't think it's specifically for Scotland but I'm sure most of the same rules will apply, as it only makes sense.
This is from
http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter31/part7/part2/part_2.htm#8

"Bankruptcy cases where the bankrupt is in paid regular employment and has a surplus of income over (reasonable) expenditure will be the most likely source of any IPA/IPO. However, where a bankrupt is self-employed, although the income he/she receives may be a variable amount each month, it should still be possible for the official receiver to identify if the bankrupt is likely to have a surplus of income after allowing for reasonable expenditure. This may be done in a number of ways and may require the official receiver to review the bankrupt's circumstances more frequently than in cases where the IPA/IPO is based on income received as a result of being employed.
Examples of possible means by which surplus income can be claimed from a bankrupt who is self-employed include considering an average of the bankrupt's income received over a given period, through analysis of any records or accounts supplied to the official receiver, and then agreeing a monthly repayment with the bankrupt based on the average surplus income calculated.
In other cases where the bankrupt's income varies on a seasonal basis, it may be possible to agree an IPA which covers only the specific period when the bankrupt is in receipt of surplus income (e.g. for a six month period in the summer or winter depending on the nature of the seasonal income).
In circumstances where the bankrupt is in receipt of staged payments (such as those received by building contractors) or is paid on a commission basis (such as a self-employed sales person) their basic salary may provide insufficient income for an IPA, but in conjunction with staged payments/non monthly commission income received may provide adequate surplus to agree an IPA. In these circumstances if appropriate, the official receiver could propose an agreement with the bankrupt for him/her to pay (for example) bi-annual or annual contributions. In these cases the official receiver can agree the particular payment terms within the IPA, to be signed and agreed by the bankrupt."

There's also a mention of benefit arrears, which is something I was wondering about:
http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter31/part7/part2/part_2.htm#10

"Occasionally, where a bankrupt is in receipt of benefits he/she may receive arrears of benefit payments as a post bankruptcy receipt (prior to discharge). Where this happens, because state benefits are excluded from the bankruptcy, the arrears of benefit (including tax credits) cannot be claimed as a vested asset because they are state benefits. It may however be possible to claim the monies under the income payments provisions of the Insolvency Act by agreeing a single payment agreement with the bankrupt as a voluntary contribution. N.B. official receivers must ensure when dealing with arrears of benefit in this way as a voluntary contribution, that the payment does not represent an overpayment, which has been paid to the bankrupt post bankruptcy and which can be recovered after discharge in specific circumstances."

kazza75

Hiya Raphael

I went through Lila bankruptcy last June, my local cab helped me with the forms and advised me to tell my bank that i was going to be made bankrupt. RBS was my bank but they were not one of my creditors, as i got benefits paid into this account i was worried incase i wouldnt have access to them. I went and informed them about my situation and they werent sure how it would go, well a few days after i was awarded bankruptcy they froze my bank account even though i didnt owe them any money.

I went in to see them and within a day or so they unfroze my bank account and that was it, also what baffled me was that i had £100 overdraft with them that hadnt been used. And when they called me to inform me that my account was back up and running the lady told me that i could KEEP the overdraft and that i could keep my solo card. Oh when you are awarded lila bankrputcy the AIB send you a letter stating that they are not interested in your bank account as long as you dont have a balance more than £1000. So i showed RBS this and it was a day or so after that my account was unfrozen. But i guess this will differ from person to person and also if RBS is one of your creditors.

I got a co op cashminder account just incase i couldnt have my RBS account back, i have found the CO-OP very easy to use , only thing is my local one is about 8 miles away in Glasgow so if i need to put money in i just go to the local post office and the money is in your account almost instantly. I think i remember something when i got the account , they said something about a week to put a cheque in through the post office.

Anyway hope this helps

Raphael

kazza75 wrote: »

I went in to see them and within a day or so they unfroze my bank account and that was it, also what baffled me was that i had £100 overdraft with them that hadnt been used. And when they called me to inform me that my account was back up and running the lady told me that i could KEEP the overdraft and that i could keep my solo card. Oh when you are awarded lila bankrputcy the AIB send you a letter stating that they are not interested in your bank account as long as you dont have a balance more than £1000. So i showed RBS this and it was a day or so after that my account was unfrozen. But i guess this will differ from person to person and also if RBS is one of your creditors.

Yeah same as you, RBS were not one of my creditors.

I got a co op cashminder account just incase i couldnt have my RBS account back, i have found the CO-OP very easy to use , only thing is my local one is about 8 miles away in Glasgow so if i need to put money in i just go to the local post office and the money is in your account almost instantly. I think i remember something when i got the account , they said something about a week to put a cheque in through the post office.

Anyway hope this helps

Yeah it does, considering a Coop account myself at the moment.

Is this message too short?

Raphael

Updating since I just had the interview earlier today, they just said I should send them updates of my income either every month or quarterly, whichever is most appropriate. What surprised me though is that they asked me to pay £75 per month as an IPA, ie. the full amount of my surplus income, and not a percentage!

scppbysti

Defo ask for that to be re calculated . i mean that leaves you with nothing at all which imo counts as hardship.