Aiming for/Planning Bankruptcy

Serotine

Hallo

Think I'd best start with a bit of background (sorry, it's going to be long, feel free to skip to the questions at the end!! ).... Husband and I bought a house where we lived 'away' in 2007, daughter was born n 2008, 2009 we relocated back home to West Wales as we (particularly myself) were struggling with isolation and lack of family support (I had postnatal depression) and at that point we put the house on the market (not the best timing seeing that was not long after everything crashed). We ended up renting and paying a mortgage at the same time and due to a combination of poor money management (we were crap, and I'm sure weren't the first!) and bad luck we accumulated a *lot* of debt trying to do both. (We did, at the time, look at various options regarding the house we 'owned' but kept hitting brick walls metaphorically speaking).

Cut a long story short - lots of problems happened, I ended up self employed for a while, husband worked 60-70hours a week, debts went unpaid, we stopped paying the mortgage and handed the keys of the house back to the mortgage company, mental health suffered further, marriage nearly crumbled etc etc. Eventually we went to CAB and with their help and letter templates set up minimum payments on those debts that were outstanding. This was about 18months-2 years ago (2011) and since then we've been paying off about £25,000 of debt at £40 a month split between various creditors while occasionally updating them on our changing circumstances.

We always thought that bankruptcy would be the eventual end of things especially as our circumstances changed further last year - income level dropped further and we found out we were expecting child number 2 (two months from now - not the greatest timing I have to admit! :eek: ). We've just about managed, although we've have nothing spare to put aside for things like refilling the oil tank or fixing the car when something goes wrong (based on past experiences with cars, this is a frequent and costly thing!) - however, things will ease slightly in the next few weeks now the new tax year has rolled around as I'm entitled to maternity allowance and we should be able to claim some child tax credits.

Finally, We had a letter through the other day from solicitors acting on behalf of the mortgage company informing us that the house has finally sold (3 years after handing back the keys!) and we're now liable for the amount outstanding on the mortgage which comes to £36,000.

Total debts are now in the region of £60,000
Current income before deductions is about £20,500pa (not including any MA or tax credits that will come in in the future) - monthly income after deductions varies due to husbands variable shift patterns but averages about £1300 a month over the year (on one occasion it was only £700 which wasn't enough to pay rent and bills, let alone food etc, so had to borrow from family but that was a very rare month and unlikely to happen again).

Paying back the debts we owe isn't going to happen and we've accepted bankruptcy is the way forward and having used the debt remedy tool on the StepChange website that's what's been recommended too (all the stress, anxiety and near-marriage breakdown over our financial situation happened 2years back so now we're both pretty calm about it all). We'll both be going bankrupt as about £50,000 of the debt is joint (including the outstanding mortgage).

In preparation for this, in the last 6 months we've moved to a property with lower rent and council tax and have slowly been reducing the amount we spend on bills etc. We're still learning but are getting there. Because we live in a rural area (several miles from the nearest bus stop), up until fairly recently we've been running two vehicles so what we've done to further save money is husband has signed up for his company's Bike-To-Work scheme so now cycles the 12miles to and from work.

Question 1: We're selling the two vehicles to pay for the bankruptcy which should bring us in the £1400 we need for the fees plus maybe £600 to buy an old banger for me to get daughter to school, do the shopping etc. Has anyone else done similar and do you think that doing that will look a bit dodgy to the Official Receiver? (Selling off 'assets' in advance and spending money on a replacement vehicle instead of using it on debt repayment?)

Question 2: I'm working on reducing the number of direct debits we have as we manage our budget better using cash - we're considering getting a prepayment electricity meter (with a key) and was wondering if this was a good idea in terms of money management (we've already had a water meter fitted). Also, part of the reducing DDs thing is because of the bank account being frozen on being declared bankrupt - I don't want the bills to bounce!

Question 3: I've used the MSE budget planner - taking into account an 'average' monthly salary from my husband of £1300 plus my maternity allowance and the child benefit I get for my daughter as additional income, when everything is accounted for we'll have £250 spare a month which I'm assuming the Official Receiver will want to take for the creditors etc? The amount spare will increase with baby number 2's child benefit and (potentially) any tax credits but at the end of 9months it will drop to around £50 spare once my MA ends. Does the OR take *all*spare income or is a buffer allowed because if some months my husband only brings in £1000 then we'd have to use the 'spare' to top up the monthly income. Then conversely, if he has a month when he brings in £1500 we'd have extra 'spare' but I'd hope to put some aside to balance out the weaker months (especially after my MA ends). Does that make any sense?!

I'm sorry for such a long post, I'm just trying to clarify things and although I will be speaking to someone at StepChange before we start the process (and we still have to raise the bankruptcy fees anyway!) it'd be good to hear from others in a similar situation.

Thanks.

MikeJO

This will be of little help Serotine but I didn't want to read and run! There's absolutely no doubt at all that you'll get lots of good and positive advice on here....but it just may not be tonight.

If not then make sure you come back tomorrow, you won't regret it, there are many brilliant people on here!

alastairq

Question 1: We're selling the two vehicles to pay for the bankruptcy which should bring us in the £1400 we need for the fees plus maybe £600 to buy an old banger for me to get daughter to school, do the shopping etc. Has anyone else done similar and do you think that doing that will look a bit dodgy to the Official Receiver? (Selling off 'assets' in advance and spending money on a replacement vehicle instead of using it on debt repayment?)

That would be fine...and probably expected.

This is domestic expenditure, not a luxury....the debts are non-essential.

Question 2: I'm working on reducing the number of direct debits we have as we manage our budget better using cash - we're considering getting a prepayment electricity meter (with a key) and was wondering if this was a good idea in terms of money management (we've already had a water meter fitted). Also, part of the reducing DDs thing is because of the bank account being frozen on being declared bankrupt - I don't want the bills to bounce!

I strongly recommend you [immediately, if not sooner] open a Co-op CAshminder basic account each. [do it well before your planned BR].

Do not mention BR when opening accounts. [you have no obligation to do so, as BR is irrelevant until the petition is stamped].

I suggest paying DDs from one account only..which is then left alone so essential bills are budgeted for and protected.

Co-op will not freeze the accounts unless the OR expresses an interest in them [unlikely, they are for domestic expenses]

You also can have internet access throughout the BR [undischarged] period, which is useful for money management.

Question 3: I've used the MSE budget planner - taking into account an 'average' monthly salary from my husband of £1300 plus my maternity allowance and the child benefit I get for my daughter as additional income, when everything is accounted for we'll have £250 spare a month which I'm assuming the Official Receiver will want to take for the creditors etc? The amount spare will increase with baby number 2's child benefit and (potentially) any tax credits but at the end of 9months it will drop to around £50 spare once my MA ends. Does the OR take *all*spare income or is a buffer allowed because if some months my husband only brings in £1000 then we'd have to use the 'spare' to top up the monthly income. Then conversely, if he has a month when he brings in £1500 we'd have extra 'spare' but I'd hope to put some aside to balance out the weaker months (especially after my MA ends). Does that make any sense?!

The MSE budget planner, whilst a very useful tool, doesn't operate like an SOA for BR.

SO, complete your SOAs and post them on here for folk to peruse and make suggestions which are relevant for BR.

You may find you have a lot less surplus than you thought [with regards to BR]?

Regarding surplus income?

If it is variable, the OR will calculate an average over several months, or a year.

Point to note.....what you are referring to is an IPA.....and I emphasise, this is an agreement between yourselves and the OR.

It is not an imposition on their part.

So, if you disagree with the OR's conclusions regarding your SOA, you can argue your corner...but ensure you have evidence, bills, etc, to support your argument.

The important thing is not to blindly accept what the OR demands.

Serotine

alastairq wrote: »

That would be fine...and probably expected.

This is domestic expenditure, not a luxury....the debts are non-essential.

That's good to know

I strongly recommend you [immediately, if not sooner] open a Co-op CAshminder basic account each. [do it well before your planned BR].

Do not mention BR when opening accounts. [you have no obligation to do so, as BR is irrelevant until the petition is stamped].

I suggest paying DDs from one account only..which is then left alone so essential bills are budgeted for and protected.

Co-op will not freeze the accounts unless the OR expresses an interest in them [unlikely, they are for domestic expenses]

You also can have internet access throughout the BR [undischarged] period, which is useful for money management.

As it happens, we already have a Co-op Cashminder account - well my husband does (it's his personal spending account - he gets £50 'pocket money' a month out of his wages lol ). When we started the ball rolling a couple of years back we had debts with the bank we used (HSBC) as loans and overdrafts and so we opened a joint basic account with Halifax (no overdraft, no cheque book etc etc) which we assumed would still be usable once we went bankrupt, while husband opened an account for himself with the Co-op for his personal use (the only reason the joint account went to Halifax was because there's a local branch so if we needed to speak to someone in person we could, whereas with the Co-op the nearest branch is about 60miles away). I'm not sure now that we could still use the Halifax account as I know they won't let you open one once bankrupt (having recently checked) so we may just turn husbands Co-op account into a joint one.

The only concern I have with that, is that I read somewhere on here (I think) that if you have a Direct Debit or payment bounce more than 3 times with the Co-op Cashminder Account then they close the account (another reason why I want to avoid DDs as much as possible, for our protection). While trying to get ourselves together over the last year or so, we've had many occasions with our Halifax account where we've had DD's bounce because of lack of funds (although we've always been able to pay them within a couple of days of that happening) but there's never been a risk of the account closing.

Although I'd like to think it won't happen once we're bankrupt it still worries me slightly the the information about Co-op closing the account after 'three strikes' is correct.

The MSE budget planner, whilst a very useful tool, doesn't operate like an SOA for BR.

SO, complete your SOAs and post them on here for folk to peruse and make suggestions which are relevant for BR.

You may find you have a lot less surplus than you thought [with regards to BR]?

We made an SOA 18months ago but obviously things have changed since so it would no longer be accurate. I thought I'd used the MSE tool as a quick tool to give me an idea/new starting point although we will be completing a new SOA in the next few days and as soon as it's done I'll post it here.

Regarding surplus income?

If it is variable, the OR will calculate an average over several months, or a year.

Point to note.....what you are referring to is an IPA.....and I emphasise, this is an agreement between yourselves and the OR.

It is not an imposition on their part.

So, if you disagree with the OR's conclusions regarding your SOA, you can argue your corner...but ensure you have evidence, bills, etc, to support your argument.

The important thing is not to blindly accept what the OR demands.

OK, that's good to know as well. I got the impression that any spare money was taken regardless, over 3 years (although that being said, one of my husband's colleagues went bankrupt a few years back and she was able to save £250 a month during the year before the bankruptcy was discharged - I just wasn't sure if things had changed since then)

Thank you for your response!

luvchocolate

I think a couple of years ago you could keep up to £100 surplus but now its £19......big difference!!
That's why its important to put everything down on you S.O.A

tigerfeet2006

Make sure you also ring StepChange and talk to them about BR as well as doing their calculator thingy.

Will you be going back to work soon? You will need to raise a very good case to keep a carare not working. Make sure you have all the evidence and your ducks in a row for this before BR. if you

Serotine

tigerfeet2006 wrote: »

Make sure you also ring StepChange and talk to them about BR as well as doing their calculator thingy.

Will you be going back to work soon? You will need to raise a very good case to keep a carare not working. Make sure you have all the evidence and your ducks in a row for this before BR. if you

I was planning on ringing StepChange next week - we wouldn't go through Bankruptcy without proper advice.

As to the car - it's pretty essential considering where we live, even without me working. We live in a small rural village. Daughter's school is two miles away and there's no funding for her to go on the bus until she's 5 - she's not long turned 4. The nearest bus stop is 2 miles in the other direction, with buses running every 1-2hours. I'm perfectly capable of walking 2 miles by myself but it would be a serious struggle with a baby and a 4year old in tow. Nearest town with supermarket/shops is about 8miles, nearest post office 2 miles, doctor's surgery is 12 miles, nearest train station is 8miles but there's only 4 trains a day to coincide with the Ferry (another station about 12 miles away has maybe 6-8 trains). Our dentist is in Cardiff (!) because there's no NHS dentists locally and I've been going to that dentist since living in Cardiff 10 years ago (so now we all go there as a family rather than be on a 10year waiting list for an NHS dentist locally) - I'm also having dental treatment at Cardiff dental hospital where I have an appointment every 6-8weeks and train times/public transport doesn't coincide with appointment times.

So yep, can't really do without a car. Plus it's handy backup for my husband because although he now cycles the 12miles to and from work there are occasions when it's not hugely practical (e.g. If he's working a shift ending at 9pm and has that followed by a shift starting at 6am - driving rather than cycling at those times allows him a bit more sleep which makes things safer for him in work as it can be quite a manual job).

alastairq

Re- the Co-op CAshminder accounts?

I suggest you open one, and your OH opens another one [you can have as many as you like in BR]...., then if a glitch occurs, you have others to fall back on?

Re-the 3-strikes?

If the account holder simply ignores things, then the 3 strikes rule will be applied.... however, if the account holder phones the Co-op to explain, often the Assistant can cancel the strike.

They did suggest to me once, that if I knew sufficient funds may not be available to meet a DD [need to be in the account the previous working day].....to telephone the bank, get them to cancel the DD, and set up a new one.

The important thing is to communicate with the Co-op....


But then, what are the chances of a DD failing three times in one year????

Serotine

OK, I used the SOA calculator on the stoozing website and came up with this. Children in the household currently stands at 1 but will be 2 come the end of June. My income is based on my maternity allowance but this will only be until the end of this year (9months total) and partners income is the average (can vary between 1100 and 1500). I've put the number of cars as 1 as that's where it will be by the end of May (which is our target for bankruptcy - want to get it sorted before baby arrives). Benefits will increase when baby arrives - I've only included child benefits as I'm not sure what sort of child tax credit we'll be entitled to, if we are entitled then that will increase our total income. I have over estimated on certain things such as monthly grocery shopping and petrol for the car (latter to take into account possible trips to visit my dad and his wife who live the other side of the country).

Other than the debt associated with our old mortgage (I have the solicitor's letter in front of me) the other debts are historical and estimates - husband and I will have to speak to the various creditors to get accurate figures but the estimates are pretty close. Based on current figures it does leave £95 to go into an IPA with the OR.

Any thoughts would be appreciated

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 585
Partners monthly income after tax....... 1300
Benefits................................ 87.97
Other income............................ 0
Total monthly income.................... 1972.97

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 470
Management charge (leasehold property).. 0
Council tax............................. 80
Electricity............................. 82
Gas..................................... 0
Oil..................................... 125
Water rates............................. 55
Telephone (land line)................... 35
Mobile phone............................ 20
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 6.49
Groceries etc. ......................... 350
Clothing................................ 75
Petrol/diesel........................... 200
Road tax................................ 20.63
Car Insurance........................... 35
Car maintenance (including MOT)......... 65
Car parking............................. 2
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 50
Medical (prescriptions, dentist etc).... 25
Pet insurance/vet bills................. 15.86
Buildings insurance..................... 0
Contents insurance...................... 13.55
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 40
Haircuts................................ 10
Entertainment........................... 0
Holiday................................. 25
Emergency fund.......................... 50
Pet food etc (dog & guinea pigs)........ 15
Total monthly expenses.................. 1877.65


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 750
Other assets............................ 0
Total Assets............................ 750

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Outstanding mortgage...........35798.....0.........0
Old utilities..................94........0.........0
HMRC...........................2200......0.........0
Credit Cards...................6500......0.........0
HSBC...........................21000.....0.........0
Total unsecured debts..........65592.....0.........-


Monthly Budget Summary
Total monthly income.................... 1,972.97
Expenses (including HP & secured debts). 1,877.65
Available for debt repayments........... 95.32
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 95.32

Personal Balance Sheet Summary
Total assets (things you own)........... 750
Total HP & Secured debt................. -0
Total Unsecured debt.................... -65,592
Net Assets.............................. -64,842

Created using the SOA calculator at stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.

tigerfeet2006

Serotine wrote: »

OK, I used the SOA calculator on the stoozing website and came up with this. Children in the household currently stands at 1 but will be 2 come the end of June. My income is based on my maternity allowance but this will only be until the end of this year (9months total) and partners income is the average (can vary between 1100 and 1500). I've put the number of cars as 1 as that's where it will be by the end of May (which is our target for bankruptcy - want to get it sorted before baby arrives). Benefits will increase when baby arrives - I've only included child benefits as I'm not sure what sort of child tax credit we'll be entitled to, if we are entitled then that will increase our total income. I have over estimated on certain things such as monthly grocery shopping and petrol for the car (latter to take into account possible trips to visit my dad and his wife who live the other side of the country).

Other than the debt associated with our old mortgage (I have the solicitor's letter in front of me) the other debts are historical and estimates - husband and I will have to speak to the various creditors to get accurate figures but the estimates are pretty close. Based on current figures it does leave £95 to go into an IPA with the OR.

Any thoughts would be appreciated

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 585
Partners monthly income after tax....... 1300
Benefits................................ 87.97
Other income............................ 0
Total monthly income.................... 1972.97

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 470
Management charge (leasehold property).. 0
Council tax............................. 80
Electricity............................. 82
Gas..................................... 0
Oil..................................... 125
Water rates............................. 55
Telephone (land line)................... 35
Mobile phone............................ 20
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 6.49
Groceries etc. ......................... 350 (£425)
Clothing................................ 75 (£90)
Petrol/diesel........................... 200 (visiting parents is not seen as essential expenditure.)
Road tax................................ 20.63
Car Insurance........................... 35
Car maintenance (including MOT)......... 65 (this may be cut )
Car parking............................. 2
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 50 ( what's this for)
Medical (prescriptions, dentist etc).... 25 (£30)
Pet insurance/vet bills................. 15.86
Buildings insurance..................... 0
Contents insurance...................... 13.55
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 40 ( most ORs won't allow this. But you could leave and see)
Haircuts................................ 10 (£25)
Entertainment........................... 0
Holiday................................. 25 (£50/70)
Emergency fund.......................... 50 (£10 per person £40)
Pet food etc (dog & guinea pigs)........ 15 (to come out of groceries)
Total monthly expenses.................. 1877.65


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 750
Other assets............................ 0
Total Assets............................ 750

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Outstanding mortgage...........35798.....0.........0
Old utilities..................94........0.........0
HMRC...........................2200......0.........0
Credit Cards...................6500......0.........0
HSBC...........................21000.....0.........0
Total unsecured debts..........65592.....0.........-


Monthly Budget Summary
Total monthly income.................... 1,972.97
Expenses (including HP & secured debts). 1,877.65
Available for debt repayments........... 95.32
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 95.32

Personal Balance Sheet Summary
Total assets (things you own)........... 750
Total HP & Secured debt................. -0
Total Unsecured debt.................... -65,592
Net Assets.............................. -64,842

Created using the SOA calculator at stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.

Some things to think about and questions to answer for you.

tigerfeet2006

Actually thinking about it you will have nappies and milk to buy so up to £500 for groceries for when baby arrives.