Failing IVA facing bankruptcy

lucyh60

Hi All
I'll try to keep this brief as it has been a long few years! I entered into an IVA with Blair Endersby in August 2008. I was happily paying in £373 per month from my surplus income until I fell pregnant in August 2009. I continued my payments until two months after I had my daughter. I had informed the company of my pregnancy in September 2009 and had asked them to be aware that I would need a payment break in 2010 as I would only be receiving SMP. I contacted several times during my pregnancy to ensure that the IVA wouldn't fail and that the payment break was in place and they confirmed it was. I was contacted later in August 2010 to ask why I had not made any payments and that they would need to conduct a I&E report to initiate a payment break which I did and they found (surprise) I had no surplus income! I did not intend to return to work full time and made them aware of this. They then put me through to their bankruptcy team who asked me for a payment of £75 per month to cover their fees not to mention £600 bankruptcy disbs. I was upset by this obviously them knowing full well that I have no surplus income. So I sent a letter of complaint but it didn't really answer any of my questions or find a resolution. I had heard nothing from them since save for letter telling me that they are now failing my IVA.

So anyway I have been researching going bankrupt and there are a few things I don't understand:
1. There is a bit about HMRC tax code 0 I don't understand and wonder if it will affect me if I have to make IPA payments.
2. I already have a Natwest step account and wonder if I will need to open another account?
3. I don't have any paperwork from my creditors, they were all given to IVA company so will the OR request these direct?

Any help is greatly appreciated, sorry for the ramble on at the beginning but thought it best that you know the background also.

debtinfo

Hello and welcome

to answer your questions
1. The tax part is different from normal IPA surplus payments, Basically you are given a zero tax code which lasts from when it is given until the start of the new tax year or earlier if you chage jobs, you pay no tax and so your take home pay increases. The OR will then ask you to pay that increase into the bankruptcy. You may not get one if you go bankrupt soon because we are near to the end of the tax year so there may not be time to set it up. It is complicated but not something you need to worry about, it either happens or not, it doesent disadvantage you in any way.

2. Possibly, the OR wont be interested in it but after that it is down to the bank and the natwest has mixed reports

3.As you have been in an IVA since August 2008, the paperwork is less important as it is not very recent, so the OR might not even ask for it

Hope that helps

lucyh60

Thanks for answering my questions Debtinfo. I still don't understand why I would be given a zero tax code, I know I have to pay tax - am I reading too much into this? I return to work part time in January and I don't think my tax code will change.

dojoman

lucyh60 wrote: »

Thanks for answering my questions Debtinfo. I still don't understand why I would be given a zero tax code, I know I have to pay tax - am I reading too much into this? I return to work part time in January and I don't think my tax code will change.

Any tax you would have paid will now be claimed by the OR, that is why you will have zero tax code. All you will have to do is pay the extra amount in your wages that would have been taken in tax. Hope that makes sense?

lucyh60

It sort of makes sense Dojoman - are you saying that when I go bankrupt my tax code will change to zero and whatever I paid in tax will go to OR - what happens to the tax that should have been paid, will the HMRC start chasing me?

dojoman

lucyh60 wrote: »

It sort of makes sense Dojoman - are you saying that when I go bankrupt my tax code will change to zero and whatever I paid in tax will go to OR - what happens to the tax that should have been paid, will the HMRC start chasing me?

Yes that is right, but it will be in your pay packet and you will have to put the extra aside for the OR. No the HMRC will not chase you as this is normal practice and the HMRC will have seen it many many times.

fermi

HRMC puts a claim into your bankruptcy for any tax paid to the OR under the NT code. So in respect of that tax, they have the same status as any other creditor in the bankruptcy.

In other words, HMRC have to wait until they see if the OR can pay them any of it, and can't chase you for it.

However, as said, in April or when you change employer (new job etc) you will revert to a normal tax code.

lucyh60

Ok so it will only happen in the tax year you are in and is not something that will happen for the next however many years?

Just an extra question I've thought of, I pay our gas and electric by prepayment meter - do I need to keep these receipts to show the OR (I don't at the moment and wonder if he'll need proof of spending - these are the only utilities I don't have bills for)

debtinfo

they probably wont ask for them but it is good practice to keep them anyway