Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

StepChange_Kirsty

Hello,

Thank you for your post and welcome to the forum.

The three year rule which you refer to is the time limit in which the Official Receiver (OR) needs to decide how they will deal with the property but it can be sold sooner than this. Under section 337 of the Insolvency Act 1986 you could argue that you have a right to occupation under the grounds that you have children under the age of 18 in the property but after one year it would generally be considered that the interests of the creditors would outweigh all other considerations.

It would be difficult for us to say exactly what the OR will decide in terms of the property but if a third party is willing to buy out the equity then they would normally give due consideration to this. I would recommend contacting the Insolvency Service helpline for further guidance.

You mentioned that your ex-partner has agreed to give you a lump sum as most of the debt is for his company. Is it possible your ex-partner could give you the lump sum now to compensate for the debts in your name for his company? Depending on your circumstances this could prevent the need for you to declare bankruptcy at all. If this is a possibility you can contact us at StepChange and we can look at the best options for you to deal with the outstanding debt.

I hope this helps.

Kirsty

lmurray1980 wrote: »

Hi I am in the process of going bankrupt and am terrified I will lose my house. I am a single mum now on benefits but I am a sole home owner. I understand that the OR will want to evaluate the equity in the property after the 3 year term. Could you offer any advice how likely it is they will push to sell as opposed to being offered a buy out from me? The property could be perceived to be valued more than the real value as alterations were made when we bought the property, fenced in the property creating a large garden - although the council have said we need to apply to change the curtilage of land if we ever sold. We also made a parking space that needs to be brought inline with council recommendations. Would this all be taken into account? I really do not want to lose my family home but ex partner has agreed to give me a lump sum at the time to offer the buy out as most of the current debt is for his company (all in my name!!). Any advice greatly appreciated, many thanks :-)

StepChange_Kirsty

Hi there,

As Flyright has mentioned, your friend would not be eligible for a debt relief order (DRO) on the basis that he owns a property even if the property is interest only.

In terms of assets the property is considered to be an asset so if there is equity in the property, the Official Receiver (OR) may expect the property be sold. The equity available would then be paid towards any costs or fees incurred by the Insolvency Service during the bankruptcy process and any remaining funds would be shared out fairly between your friends creditors.

I hope this helps.

Kirsty

londoner1000 wrote: »

Thanks for your reply.

I have read your site and it sounds like a Debt Relief Order might be a better deal. It seems cheaper and serves almost the same purpose as bankruptcy. As for him having under £20000 of debts, i'm not entirely sure. It's somewhere around that number.

What is meant by this: "make sure your assets are shared out fairly among your creditors" (with regards to bankruptcy)?

My friend doesn't really have any assets worth much. Just furniture and other household items. His car is being repossessed and was on hire purchase and his mortgage is interest only.

londoner1000 wrote: »

Would an interest only mortgage be considered owning it, i.e. he's not actually paying off anything other than interest.

Unremarkable

I am considering going bankrupt, and possibly my husband too, as our debt has spiralled out of control and is way beyond affordable. We don’t own a house, we rent privately.

First some background… I was previously discharged from bankruptcy in 2009, as was my husband. We are renting privately, he has his own business as a sole trader but not doing brilliantly (last time we were both out of work, so slightly different this time). Much of the debt is in my name, some jointly, some in his, but none of it affordable anymore. He was pushed into becoming self-employed by the jobcentre after a redundancy about 5.5 years ago, but it’s never quite got off the ground. I was a full-time student in receipt of a bursary until this month but have had to leave due to a combination of my health and one of my 3 children’s health. We also have a disabled son in receipt of DLA and get Carer's Allowance.

I understand most of the process etc. but have some Q’s I wonder if anyone would be kind enough to clarify.

Re. his business…

Can he continue to work self-employed? The nature of his business is that he can continue to run it with minimal outlay if necessary but has bookings with deposits paid so has to honour those bookings or refund them/let them down.

He has a van on a PCP plan, less than a year since he got it, 3 and a bit left. He uses it for the business as well as personal. I assume he’ll have to surrender it back under the bankruptcy – or does it work like that with PCP? Would he then have to get a cheaper version? My car is recently acquired on hire purchase so that will have to go?

An element of his business involves equipment that we purchased via my credit card and he has been paying it back… how does that work re bankruptcy? Can he keep it or will it have to be sold on? If so, that puts a big spanner in the works for the business.

Re. miscellaneous…

We have a holiday booked in October that has recently been paid off – will that have an impact in any way?

We are in the process of trying to move, locally – if we can sort this prior to bankruptcy (would be with a guarantor anyway, due to our financial situation) would this be impacted at all after bankruptcy?

What about the deposit returned from current rental property? Are we best to get that sorted first? Chances are we’ll be borrowing for a new deposit from a relative so any returned deposit would go straight to them anyway.

My 15-year-old daughter has a bank account which is kind of in my name too as parent, as it was set up when she was 11. It doesn’t have a fortune in but will it be affected by my bankruptcy? Similar question re my 3 kids’ trust fund ISA accounts, which are in their name but under mine as parent. My daughter’s account is with TSB, and if it helps, I was able to change her address when we moved recently. However, the 3 trust funds are with Nationwide and they wouldn’t accept just my authority to change their address, they claim they need to speak to each child (one is 5 years old!!)

Mobile phones… me, my husband and my daughter have mobiles on contract. Would they be affected? Mine and my husbands’ are just £10 plans, my daughter’s is £29 though and her handset cost is part of that (Tesco mobile). All have substantial time left on the contracts.

Many many thanks in advance.

StepChange_Rachael

Hi

Welcome to the forum and thanks for posting.

In general assets received after discharge wouldn’t form part of the bankruptcy, however, it depends on when you made the complaint and when the asset was issued. Ultimately the decision would be the Official Receivers (OR).

The best thing to do to check, is to let the OR know, if it’s not an acquired asset you can keep it and if it is then you don’t have to worry about it being found out and risking possible consequences of not informing them.

Thanks
Rachael

Davanda wrote: »

First post, bear with me!

I was discharged from bankruptcy last year and whilst I know that any repayments due from PPI claims have to be declared to the bankruptcy court, I was wondering if the same also applies to refunds of interest following a complaint to payday loan companies when the loans were taken out prior to being declared bankrupt? I suspect that the same rule applies but wanted to check.

Thank you.

StepChange_Kirsty

Hello,

Thanks for your post and welcome to the forum.

To start with, as your husband is self-employed I would recommend you both seek advice from Business Debtline. Like StepChange they’re a charity who offers free and impartial advice but they specialise in giving advice to people who’re self-employed even if there is no business debt involved. They'll be able to do a joint budget for both of you to make sure bankruptcy is your best solution. I won’ be able to answer your business related questions today but you’ll be able to ask these when you speak to Business Debtline.

You mentioned you have both been made Bankrupt previously. This is something which could have an impact in any subsequent Bankruptcies as the Official Receiver (OR) will want to understand what has happened since your previous Bankruptcy to cause the debt to accrue again. The OR could decide to set a Bankruptcy Restriction Undertaking (BRU) or Bankruptcy Restriction Order (BRO) which would mean the usual restrictions that apply in Bankruptcy would apply for longer than the usual 12 months.

In terms of your miscellaneous questions:

1. If the holiday is already booked and paid for it’s unlikely this will be affected by the Bankruptcy but if you have saved any money for spending, the OR may view this as an asset which is expected to be paid into the Bankruptcy. If you’ve not already saved, it’s unlikely the OR would allow you to set aside any money for the holiday. Also the OR may wish to investigate how you have been able to pay for a holiday if you’re struggling with debt.

2. Some contracts for privately rented accommodation do include clauses which state they can terminate a contract in the event of the tenant’s bankruptcy. If this clause exists in your contract it does not necessarily mean your landlord would invoke it but it’s important you check with the landlord/ lettings agent first.

3. I would recommend speaking to the Insolvency Service helpline regarding the return of the deposit. If this is not being used to directly pay the deposit on the new house then it could also been seen as an asset which may need to be paid into the Bankruptcy for the benefit of the creditors. If you have borrowed money from family then the family member would also be included as a creditor in your Bankruptcy. You would not be able to pay your family member straight back from the deposit without permission of the OR as it could be viewed as a preferential payment and the OR may expect your family pays the money back into the Bankruptcy.

4. With the children’s savings, the OR would normally allow the savings to remain in the accounts but they will look at the amount being paid in to ensure that it appears the account is genuinely used for the child’s savings. If there is any evidence to suggest that excessive payments have been made to the savings to the detriment of your creditors, the OR can apply to reverse the transactions. You won’t be able to continue adding money from your own income to the savings accounts during the Bankruptcy as this is not considered to be an allowable expense. It may be worth taking your children to Nationwide to update your address.

5. You’d normally be able to continue paying mobile phone contracts in Bankruptcy as long as they’re not considered excessive. You may find it a little more difficult to get a new contract with a different provider in the future with Bankruptcy on your credit file but you would normally be ok if you renew with your existing provider.

I hope this information helps.

Kirsty

Unremarkable wrote: »

I am considering going bankrupt, and possibly my husband too, as our debt has spiralled out of control and is way beyond affordable. We don’t own a house, we rent privately.

First some background… I was previously discharged from bankruptcy in 2009, as was my husband. We are renting privately, he has his own business as a sole trader but not doing brilliantly (last time we were both out of work, so slightly different this time). Much of the debt is in my name, some jointly, some in his, but none of it affordable anymore. He was pushed into becoming self-employed by the jobcentre after a redundancy about 5.5 years ago, but it’s never quite got off the ground. I was a full-time student in receipt of a bursary until this month but have had to leave due to a combination of my health and one of my 3 children’s health. We also have a disabled son in receipt of DLA and get Carer's Allowance.

I understand most of the process etc. but have some Q’s I wonder if anyone would be kind enough to clarify.

Re. his business…

Can he continue to work self-employed? The nature of his business is that he can continue to run it with minimal outlay if necessary but has bookings with deposits paid so has to honour those bookings or refund them/let them down.

He has a van on a PCP plan, less than a year since he got it, 3 and a bit left. He uses it for the business as well as personal. I assume he’ll have to surrender it back under the bankruptcy – or does it work like that with PCP? Would he then have to get a cheaper version? My car is recently acquired on hire purchase so that will have to go?

An element of his business involves equipment that we purchased via my credit card and he has been paying it back… how does that work re bankruptcy? Can he keep it or will it have to be sold on? If so, that puts a big spanner in the works for the business.

Re. miscellaneous…

We have a holiday booked in October that has recently been paid off – will that have an impact in any way?

We are in the process of trying to move, locally – if we can sort this prior to bankruptcy (would be with a guarantor anyway, due to our financial situation) would this be impacted at all after bankruptcy?

What about the deposit returned from current rental property? Are we best to get that sorted first? Chances are we’ll be borrowing for a new deposit from a relative so any returned deposit would go straight to them anyway.

My 15-year-old daughter has a bank account which is kind of in my name too as parent, as it was set up when she was 11. It doesn’t have a fortune in but will it be affected by my bankruptcy? Similar question re my 3 kids’ trust fund ISA accounts, which are in their name but under mine as parent. My daughter’s account is with TSB, and if it helps, I was able to change her address when we moved recently. However, the 3 trust funds are with Nationwide and they wouldn’t accept just my authority to change their address, they claim they need to speak to each child (one is 5 years old!!)

Mobile phones… me, my husband and my daughter have mobiles on contract. Would they be affected? Mine and my husbands’ are just £10 plans, my daughter’s is £29 though and her handset cost is part of that (Tesco mobile). All have substantial time left on the contracts.

Many many thanks in advance.

Aussie1978

Good afternoon and thanks for being available to answer questions and queries, it is greatly appreciated!
I am considering Bankruptcy as I have close to £45k in unsecured debt.
Credit cards & personal loans!
No student loans, no ccjs and no assets of value.
I’m not a home owner and my vehicle is only worth £800ish.
If possible could you assist with the following please:

Barclaycard £15k
NatWest personal loan £14k
NatWest Credit card £4.5k
Lendable personal loan £15k

I took a large (Lendable £15k) consolidation loan only a few months ago, but as is often the case, I gambled the money.

I have not gambled now for over 3 months and feel it will be a life long struggle, but I’m attacking it face to face daily.

I have barred myself from all online accounts and for the sake of myself and my children’s future, will never enter a casino again.

I understand I will receive a BRU, possibly a heft one, but will I face criminal prosecution?

I was in a position to service the debts and the only mistruth was the fact I didn’t actually clear any debt, just added to it.

I have researched recently and after completing my SOA have approximately £30/£40 per month to include towards the impending IPA.

In working that out I have included small amounts for my children in the time they spend with me (100 nights per year)
I am a single, full time employed private renter.
But my kids are also with me approximately 14 weeks of the year.
ie 38 weeks of the year I spend £50 pw on food
14 weeks of the year I spend £70pw on food etc
Add the totals and divide by 12, so the figure is close to £240 per month.
Is this allowed?
I will account for an emergency fund of £20 pm
Contents insurance of £10 pm

Is it reasonable to set aside £25 pm towards a yearly holiday?

Is it reasonable to continue to give them £5 a week picker money, which will hopefully teach them to much more money conscious than their dad 🤞

Apologies for the rambling

Thanks in advance for your assistance

StepChange_Allen

Aussie1978 wrote: »

Good afternoon and thanks for being available to answer questions and queries, it is greatly appreciated!
I am considering Bankruptcy as I have close to £45k in unsecured debt.
Credit cards & personal loans!
No student loans, no ccjs and no assets of value.
I’m not a home owner and my vehicle is only worth £800ish.
If possible could you assist with the following please:

Barclaycard £15k
NatWest personal loan £14k
NatWest Credit card £4.5k
Lendable personal loan £15k

I took a large (Lendable £15k) consolidation loan only a few months ago, but as is often the case, I gambled the money.

I have not gambled now for over 3 months and feel it will be a life long struggle, but I’m attacking it face to face daily.

I have barred myself from all online accounts and for the sake of myself and my children’s future, will never enter a casino again.

I understand I will receive a BRU, possibly a heft one, but will I face criminal prosecution?

I was in a position to service the debts and the only mistruth was the fact I didn’t actually clear any debt, just added to it.

I have researched recently and after completing my SOA have approximately £30/£40 per month to include towards the impending IPA.

In working that out I have included small amounts for my children in the time they spend with me (100 nights per year)
I am a single, full time employed private renter.
But my kids are also with me approximately 14 weeks of the year.
ie 38 weeks of the year I spend £50 pw on food
14 weeks of the year I spend £70pw on food etc
Add the totals and divide by 12, so the figure is close to £240 per month.
Is this allowed?
I will account for an emergency fund of £20 pm
Contents insurance of £10 pm

Is it reasonable to set aside £25 pm towards a yearly holiday?

Is it reasonable to continue to give them £5 a week picker money, which will hopefully teach them to much more money conscious than their dad 🤞

Apologies for the rambling

Thanks in advance for your assistance

Hi there

Welcome to the forum and thanks for posting.

I'm pleased to hear that you've taken steps to try and stop the gambling. If you'd like more help and support with dealing with the gambling I'd recommend contacting either Gamblers Anonymous or GamCare.

It's important to seek debt advice before going ahead with any debt solutions, if you haven't already. I appreciate you're asking questions specifically about bankruptcy, but without going through a full budget with you I don't know whether bankruptcy is the right solution for you.

We'd like to establish that first if that's okay, and then we can look deeper into any potential issues that could arise from the way the debt has been accumulated. We can also discuss specific budget areas including food, pocket money and holidays.

You can register with us via the phone or our Debt Remedy tool, all details can be found on our contact page: www.stepchange.org/Contactus

I hope this is okay.

Allen

Pinky85

Hi, my OH left his now ex wife in 2017, they had a joint IVA with payplan, when they split we let them know and they turned the IVA into two so they were paying one each. The debt is £36,000.
For a while whilst he was working he was paying the £200 a month towards it that they had worked out he payed based on his income. But he then suffered a mental breakdown and eventually his other health conditions he suffers from got worse and he had to leave his job.
We are both now on a joint ESA claim and on £143.90 a week. Naturally he couldn’t afford the monthly payments and they were very kind and put the account on hold for a while biy eventually it failed.
I spoke to National debt line and they advised that we wrote letters to all of his creditors explaining his situation (at the time he was homeless) and asked if they would be willing to write off his debt as a gesture of good will. 1 company did do that, a few of the companies didn’t reply and still haven’t. But two other companies (Cabot financial and Link financial) have said it isn’t in there policy to do that. We have been on constant contact with these two companies and they have been good , putting his accounts on hold and just asking us to update them every so often.
As far as I am aware the ex wife still has her IVA, whether she pays it or not I don’t know as she is isn’t very good with money either.
Both the companies we are in touch with have said they will accept token payments of £1 a month been as he’s on such a low income. They’ve also asked for medical information so they can assess the situation. We have sent various boys and pieces, aswell as the expenditure forms they keep sending etc.

What I want to ask is- because of his situation (we now live in a council flat and both on benefits) should he declare himself bankrupt? I’ve asked this question before to various debt agencies and they have all said there is no point as he has nothing to give, and his priority debts and day to day living expenses are more important.

There are 8 creditors in total. 1 wrote the debt off, 3 are in contact with us and the other 4 didn’t contact us back and haven’t in the last 3 years.

Regards
Pinky 85

Linda212

Hi there,


I am looking for some advice. I am currently my dad's Power of Attorney and over the past 3 months or so he has received debt letters from a company called Robinson Way. They are claiming he owes around £4000 but in their letters, they are not confirming with him what the debt is actually for.
My dad has had no credit arrangements since his separation in 2000 - 19 years ago. As far as I'm aware, he has no CCJ's outstanding.
Is someone able to let me know if this debt is enforceable in Scotland?
He is almost at retirement age and does not have the funds to repay this as he had to take early retirement due to ill health.


Any help is appreciated.


Thanks

angie85

Hello,

I moved overseas with my husband and our young children a few months ago. He secured a job following being made redundant in the UK. Our family home is solely is his name and is being rented out. The rental income doesn't cover the mortgage at present but we cover this deficit as part of our monthly outgoings. We have no joint accounts and no credit cards, I have one small personal loan in my name which again we cover each month.

I have three properties, two in my sole name and one I co-own with an ex partner.

Property One - Owned with ex partner under an interest only mortgage. Currently in negative equity but the rental income covers the mortgage.

Property Two - Owned by me under a capital payment right to let mortgage. The rental income almost covers the mortgage payments each month and no equity.

Property Three (The Problem) - Owned by me under a capital repayment mortgage. The property has been vacant for some time as my lender would not grant a right to let mortgage. It has been on the market for three years but has not sold despite reducing the price many times.

We have been using all our savings to pay the mortgage on Property Three in the hope it would sell. As a result we have no savings left and can no longer afford the Mortgage payment. Even if our lender were to grant a right to let, we would never recover on a monthly basis the mortgage amount.

If i move back to the UK and work full time this would barely cover nursery costs and food, let alone enough to pay the large mortgage.

I am running out of options and hope. Bankruptcy seems so extreme but I can't see any way out of this mess.

I'd be so grateful for any advice.

TIA