Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

John_paul_chris

Hi, 
I am writing on behalf of my partner, she has credit card/overdraft debt of around 18000,and we live in Scotland. She has no way to repay this as her wage is too little. She has contacted national debtline over a year ago but because we are in Scotland, there was a few phone calls to and fro but nothing happened. Having received at letter telling her one of her creditors had a date for proceedings in the sherriff court, she contacted Citizens Advice Burae this october ( the court date was 21st Nov). they didn`t get back to her and no record of her on file. So the receptionist arrannged a face to face interview, the person went through the details of her situation and said we will put you in touch with our money adviser, this never happened and today received a letter saying she has been given Sherrff Court Decree. She sees no option and has accepted she will go bankrupt but apparently she needs approval from a money adviser to give along with her application to the Accountant in Bankruptcy, obviously she is frustrated by her attempts to do this and unfortunately the virus has made it more difficult to pursue. With having the decree could she apply directly to the AoB , without having a cerificate/ or proof she has taken debt advice/ thanks in advance

StepChange_Aidan

John_paul_chris said:

Hi, 
I am writing on behalf of my partner, she has credit card/overdraft debt of around 18000,and we live in Scotland. She has no way to repay this as her wage is too little. She has contacted national debtline over a year ago but because we are in Scotland, there was a few phone calls to and fro but nothing happened. Having received at letter telling her one of her creditors had a date for proceedings in the sherriff court, she contacted Citizens Advice Burae this october ( the court date was 21st Nov). they didn`t get back to her and no record of her on file. So the receptionist arrannged a face to face interview, the person went through the details of her situation and said we will put you in touch with our money adviser, this never happened and today received a letter saying she has been given Sherrff Court Decree. She sees no option and has accepted she will go bankrupt but apparently she needs approval from a money adviser to give along with her application to the Accountant in Bankruptcy, obviously she is frustrated by her attempts to do this and unfortunately the virus has made it more difficult to pursue. With having the decree could she apply directly to the AoB , without having a cerificate/ or proof she has taken debt advice/ thanks in advance

Hi,

Thanks for your post.

Your partner won't be able to apply for bankruptcy in Scotland without going through an approved money advisor.

If she applies to the Accountant in Bankruptcy directly, your partner will need to provide a Certificate of Sequestration which confirms that she’s insolvent and has received debt advice. An approved organisation (such as CAB, StepChange or National Debtline) will be able to provide this.

You’ve said that your partner sees no other option, but would she qualify for Minimal Assets Process (MAP)? This is another form of insolvency available in Scotland for those on a low income, and it could be cheaper and easier than going bankrupt.

In your other thread you’ve mentioned that your partner is self-employed. I’d suggest that she contacts Business Debtline, who will be able to give her specialist debt advice and support her with a bankruptcy application.

I hope this helps.

Aidan

bvizion

Hi

I just recently declared BR. Still no IPA set, but it has been only a week. My question is, will this affect my work pension? I am nearly 52 YO. My work pension current value is around £5000 with Nest, and I would be eligible to for withdrawal when I an 55 (3 years from next April)

Thank You

StepChange_Aidan

bvizion said:

Hi

I just recently declared BR. Still no IPA set, but it has been only a week. My question is, will this affect my work pension? I am nearly 52 YO. My work pension current value is around £5000 with Nest, and I would be eligible to for withdrawal when I an 55 (3 years from next April)

Thank You

Hi,

Thanks for posting.

Savings in an approved pension fund are not counted as an asset and are normally unaffected by bankruptcy. 

The Official Receiver (OR) can reverse payments into a pension if they were deemed to be excessive (more than 15% of your gross wage).

The OR has 12 months from the date of the bankruptcy order to set up an IPA, which would last for three years. In most cases you would be discharged from the bankruptcy after a year, but the OR can extend this in some circumstances.

If at age 55, you're still in an IPA or have not been discharged from bankruptcy, money withdrawn from the pension (either as a lump sum or annuity) could be claimed by the OR. However, they can't force you to make a withdrawal.

There’s some more information on how bankruptcy could affect pensions here.

I hope this helps.

Aidan

joe1796

Hi, my second post on here, thanks for your advice and support.

I applied for bankruptcy and was approved December 2019. I am now discharged from bankruptcy but had a complaint that I escalated to chief executive. They didn’t go in my favour, cutting a long story short, the insolvency service lost my details 3 times, did it answer my calls or emails and I disputed that I should pay an IPA as it’s took them a year to sort it out. I still haven’t heard anything about setting up an IPA and I’m over a year in now.

My situation is, because I’ve managed to progress in my career since becoming BR. I earn a lot more money, meaning on an IPA I’d probably have around 700-800 took off me monthly. My way of thinking here is, I’d rather put that money into a nicer rented property, that is more luxurious and larger in space, this would obviously bring my IPA cost down when they eventually decide to get in touch to sort one out, 

could I be penalised for this? Could the examiner say to me “why is your house so expensive” and force me to get a cheaper rented accommodation? Or if I had a reasonable explanation, for e.g I need to live here because of work and closer to family to support them would they not be able to say anything?

any advice would be great, thank you.

StepChange_Aidan

joe1796 said:

Hi, my second post on here, thanks for your advice and support.

I applied for bankruptcy and was approved December 2019. I am now discharged from bankruptcy but had a complaint that I escalated to chief executive. They didn’t go in my favour, cutting a long story short, the insolvency service lost my details 3 times, did it answer my calls or emails and I disputed that I should pay an IPA as it’s took them a year to sort it out. I still haven’t heard anything about setting up an IPA and I’m over a year in now.

My situation is, because I’ve managed to progress in my career since becoming BR. I earn a lot more money, meaning on an IPA I’d probably have around 700-800 took off me monthly. My way of thinking here is, I’d rather put that money into a nicer rented property, that is more luxurious and larger in space, this would obviously bring my IPA cost down when they eventually decide to get in touch to sort one out, 

could I be penalised for this? Could the examiner say to me “why is your house so expensive” and force me to get a cheaper rented accommodation? Or if I had a reasonable explanation, for e.g I need to live here because of work and closer to family to support them would they not be able to say anything?

any advice would be great, thank you.

Hi Joe,

If an IPA is set up, the Official Receiver (OR) will normally consider rent to be an essential living expense and just accept the cost in their calculations. If you’ve sent them a budget previously, they may query your reason for moving.

If the OR feels that the rent is too high, they don’t have any power to force you to move but they could set the IPA at a rate which makes living there unaffordable. I believe that this happens very rarely and only if the OR considers the rent payments to be unreasonably high. 

The OR normally has to have set up an IPA before you’ve been discharged from bankruptcy. However, I can see from your previous post that you’ve had a number of problems with the Insolvency Service losing your details and not receiving paperwork, so I would recommend getting in touch with your OR again to find out where you stand. Their offices are currently closed due to Coronavirus, so it would be best to chase this up by email.

I hope this helps.

Aidan

Toooldforthis1

My IVA ended last year.  It's only now that I'm starting to wonder if the mortgage part of the advice provided was actually correct.  I had an interest-only mortgage with no savings plan in place to repay this.  I was advised to change to a part & part mortgage.  The interest-only part still without a payment plan.  I'm now speaking with various mortgage providers and all are questioning why I was advised to only go part & part and not a full repayment mortgage or, at least, begin a suitable savings plan.  The mortgage is due to end in less than 5 years and I am not be able to repay the interest-only part.  My only prospect seems to be to sell the house and down-size.  Is it ever correct to enter into an IVA with such mortgage advice?   I'd very much appreciate your thoughts please.

Lisabug

My husband and I were discharged from bankruptcy in July 2020. Today we got a letter we saying we're due £8500 for missold PPI, but it's getting paid to the insolvency people! 😭
I'm wondering, if we've been discharged from the bankruptcy and the trustee has been discharged then should the money not come to us? 

StepChange_Allen

Toooldforthis1 said:

My IVA ended last year.  It's only now that I'm starting to wonder if the mortgage part of the advice provided was actually correct.  I had an interest-only mortgage with no savings plan in place to repay this.  I was advised to change to a part & part mortgage.  The interest-only part still without a payment plan.  I'm now speaking with various mortgage providers and all are questioning why I was advised to only go part & part and not a full repayment mortgage or, at least, begin a suitable savings plan.  The mortgage is due to end in less than 5 years and I am not be able to repay the interest-only part.  My only prospect seems to be to sell the house and down-size.  Is it ever correct to enter into an IVA with such mortgage advice?   I'd very much appreciate your thoughts please.

Hi there

Thanks for posting.

This is a tricky one, as I don't know your full circumstances or why that advice was given to you, but if other mortgage advisors are questioning it now, then it may well not have been right. 

Two things I would say are:

1. A mortgage is always a priority over unsecured debts, and having a part interest only mortgage and doing an IVA perhaps isn't fully prioritising it.

2. At least it isn't if no suitable repayment vehicle is in place to repay the interest only element. I'm reasonably sure that a mortgage advisor that recommends any part of a mortgage be on an interest-only basis should have discussed a suitable repayment vehicle with you.

So, if you feel as though the advice given wasn't accurate or fully explained verbally and in paperwork, you could make a complaint.

Please let us know if you have any further questions.

Best wishes
Allen

StepChange_Allen

Lisabug said:

My husband and I were discharged from bankruptcy in July 2020. Today we got a letter we saying we're due £8500 for missold PPI, but it's getting paid to the insolvency people! 😭
I'm wondering, if we've been discharged from the bankruptcy and the trustee has been discharged then should the money not come to us? 

Hi Lisa

Thanks for posting.

I'm afraid that the right to claim back a mis-sold PPI policy is a 'right of action' which vests with the official receiver (OR) as soon as a person is made bankrupt. This means that any money otherwise due to you from a PPI claim must be paid to the OR even if you're discharged from the bankruptcy. 

Sorry to be the bearer of bad news.

Allen