Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

Mk8000

Hi I am going to be going bankrupt when I have got the money together but what I really wanted to know was will there be any problem with the bankruptcy if the official receiver sees that I am paying off mine and my other half’s wedding as it will be seen on bank statements ? Me and my other half have a joint account and we are only on receiving benefits we are both on pip and universal credit and I get careers allwence for caring for her just worried they might say something if we have money to spend on wedding and not pay depts thanks.

Former_StepChange_Linsi

Hi

Thanks for your post and welcome to the forum.

Usually when you apply to go bankrupt the official receiver (OR) will work out what disposable income you have using their own budget guidelines and it’s unlikely that wedding costs would be an allowable expense.

Having said this, if your income is made up solely of state benefits, an income payment arrangement (IPA) will not be made and the OR doesn’t need to make any checks into your expenses. If the OR doesn’t check your expenses you’d be able to budget for any costs you have.

If you’ve borrowed any money or taken out any loans/credit agreements to pay for your wedding then these would be included as debts in your bankruptcy and you wouldn’t be able to continue paying them back.

Should you need any more guidance about this you can contact the Insolvency Service Helpline on 0300 678 0015. You can also use our Debt Remedy tool to create a budget and make sure bankruptcy is the right solution for you. Here’s the link.

All the best,

Linsi

Mk8000 wrote: »

Hi I am going to be going bankrupt when I have got the money together but what I really wanted to know was will there be any problem with the bankruptcy if the official receiver sees that I am paying off mine and my other half’s wedding as it will be seen on bank statements ? Me and my other half have a joint account and we are only on receiving benefits we are both on pip and universal credit and I get careers allwence for caring for her just worried they might say something if we have money to spend on wedding and not pay depts thanks.

Trigger99

I am preparing to declare bankruptcy because I am unable to pay a large HMRC demand.
My question is about the implications fo my wife and our joint assets. My wife has no debt whatsover and no issues with HMRC. We jointly own (mortgaged) BTL properties which generate a monthly surplus but which are in negative equity. My question is whether HMRC can seize the properties? We have no other joint accounts or assets.

Many thanks

T

Flyright

Your interest in the BTL properties will become an asset in the bankruptcy and your share of the rental income derived from the properties will also form an asset in the bankruptcy.

StepChange_Allen

Trigger99 wrote: »

I am preparing to declare bankruptcy because I am unable to pay a large HMRC demand.
My question is about the implications fo my wife and our joint assets. My wife has no debt whatsover and no issues with HMRC. We jointly own (mortgaged) BTL properties which generate a monthly surplus but which are in negative equity. My question is whether HMRC can seize the properties? We have no other joint accounts or assets.

Many thanks

T

Hi T

Thanks for posting.

There's quite a lot to this, and I'd definitely recommend contacting Business Debtline before going ahead with bankruptcy as they're experts in advising self-employed people (including buy-to-let owners) on effects of bankruptcy. Their website is: www.businessdebtline.org

I'm happy to give you as much advice as I can though, which I'll break down into a few bullet points:

• You would remain as landlords and only your beneficial interest vests with the Official Receiver (OR) - in this case if it's in negative equity at the moment that's nothing right now
• You can continue to collect the rent from the tenants, however your share (normally 50%) must be passed onto the OR. You'd be allowed to pay essentials like insurance but not the mortgage with that rental income
• You wouldn't be allowed to pay your share of the mortgage as it wouldn't be an allowable expense in the bankruptcy. Your wife would be allowed to make the full payment, but if she couldn't afford to then the mortgage will fall into arrears
• If it falls into arrears, the mortgage company can either take possession action in the county court or Appoint Law of Property Act (LPA) receivers to collect the rent from the tenants direct. If this happens, the OR will stop taking the rent and the tenants will have to pay the LPA receivers

This is it in a nutshell from my understanding. I hope it's helpful, but as mentioned, please contact Business Debtline for further advice and to discuss the specifics for you.

Best wishes

Allen

Trigger99

Thanks for all your advice - very helpful

Shellbob83

Can anyone please help. My parents have given their house back to mortgage company with the plan to go bankrupt. They signed voluntary repossession papers that talks about still being responsible for any outstanding debts once the property is sold. Does this mean if they go bankrupt they will still be liable for any negative equity?

menageamoi

No - the negative equity is included within the money they owe as part of the Bankruptcy. When you fill in the form you'll see that it effectively identifies any negative equity as "assets"

Shellbob83

Thanks for the reassurance. It feels like such a scary process, I was just really worried we’d screwed up!

fatbelly

Shellbob83 wrote: »

Can anyone please help. My parents have given their house back to mortgage company with the plan to go bankrupt. They signed voluntary repossession papers that talks about still being responsible for any outstanding debts once the property is sold. Does this mean if they go bankrupt they will still be liable for any negative equity?

The thing to avoid signing is a 'deed of acknowledgement'

What is a Deed of Acknowledgement of a debt?
If the property is sold, any shortfall on the mortgage loan (or any other loan that is secured on your home) is still a bankruptcy debt and you will be released from this debt on your discharge. This applies even if you have been discharged from your bankruptcy by the time your property is sold.

Sometimes, after the date of the bankruptcy order a lender might ask you sign a document in which you agree to be responsible for the debt and any shortfall arising on the sale of the property. This is known as a deed of acknowledgement of a debt. If you sign it, the lender will be able to ask you to pay the debt after you have been discharged from your bankruptcy. If you are asked to sign a deed of acknowledgement you may wish to take legal advice before doing so. The lender can ask any joint borrowers who are not bankrupt to pay the shortfall in full, whether or not they have signed a deed of acknowledgement.

I haven't heard of these being used since the sub-prime lenders went out of business nearly a decade ago. You should be OK.