IVA and Bankruptcy expense question

p12345_2

Hi all,

I have couple of questions about both IVA and BR, I am currently on dmp and been so for the past six years, total debt is about 24k, no property or any thing worth of any value!

1. When declaring I&E what are the guidance for a reasonable expenses? Do you have to provide a proof for every single expense??
2. I have to help my family abroad with a monthly payment of(£350) due to the passing away of my father couple of years ago! will they accept this as a reasonable expense?
3. Do they contact your employer to confirm your salary? how do they confirm your income?
4. If and before you are discharged from bankrupcy you changed job or got a pay rise do you have to declare this? can they monitor this?

alastairq

Hi & welcome.

IVAs are dealt with differently to BR, so may be worth asking about them specifically on the IVA board?

As for the questions?

[1]...for BR, the SOA must be exactly what you do spend on the various categories.
If you post your SOA eventually on here, others will advise what will, or will not be allowed..but for Bankruptcy, SOA's, and what they contain, are open to negotiation and are subject to agreement.

[2] Again, this may be subject to negotiation, but there will be difficulties, as it may be seen as salting away assets?

[3] They have no need to contact your employer, and will not do so. The OR has good communication with HMRC, and can demand of the bankrupt sight of all current wage slips.

[4] Changing job, or losing job, do not have to be notified. Any changes in circumstance [financial] MUST be notified to the OR within 21 days. If the bankrupt does not do so, they are in breach of the regulations [Law] of the bankruptcy.
Such a breach might result in a suspension of Discharge...worst case scenario it is contempt of Court, [I believe]...

If the bankrupt has received a NT [Nil Tax] tax code..whereby no income tax is paid for the remaining period of the BR, a change of job will result in a new PAYE, and the reversion to original tax code. The NT IPA which would be paid to the OR as a result of the NT code, would cease at that point.

Remember, if information comes to light subsequent to automatic discharge, the OR can still go back to Court to rectify matters.

longtermplanner

p12345 wrote: »

Hi all,
[*]I have to help my family abroad with a monthly payment of(£350) due to the passing away of my father couple of years ago! will they accept this as a reasonable expense?
[/LIST]

Highly unlikely in either bankruptcy or an IVA (unless this includes any children of yours - child support is a reasonable deduction.)

You could perhaps scrape together a lesser amount. Say you have £170 for groceries in your budget and you are happy to live very frugally on £100 - you could then send £70 to family. But the chance of you being able to 'save' £350 a month is very very slim.

greek-dave

I was self-declared in August this year and TBH it was the best £700 I ever spent. My debts, through a failed business, came to just under £70k and I had tried everything possible to restructure them. I even had a DMP for 3 months and if I'm honest, that was the worst thing I done.

Once I got free advice from my accountant it was made clear that the problem with DMP's and IVA's is that you are tied to quite a high payment for 5 years and if at anytime you default, you still have the same debt that you started with. The only people that benefit from either of those two options are the companies that provide them.

As far as I know the only way your employer will know of your BR is when your tax status is changed to NT, NO Tax. This will be in place until the end of the tax year so if you are declared BR in May then you'll be NT until the following April.

If you go online and search bankruptcy you will find a link to the insolvency services and on that site you will find the two forms that you will require. Best thing is is that you can complete and save them online and then print them when you are ready.

Once you have attended the court and have been declared bankrupt you will then have about one years grace. In my case the Official receiver, who TBH, was V Helfpful, called me within a week of the court hearing and we spoke on the phone for several hours which helped to put my mind at rest.

Your daily expenses are basically everything that you either have to pay, like bills and utilities, plus any other payments that you make in the way of everyday life, food, HP, TV subscriptions, Clothes, Petrol (I even pay for horse livery) plus any other reasonable things that you have a track record of paying.

Basically, if your monthly income is £2k and your daily accepted overheads come to £1500k per month, then the first £100 is yours and the remaining £400 "may" be split 50/50 with the Insolvency Practitioner so as to pay your creditors. This "may" happen for 3 years.

As long as you cooperate fully with the OR and the IP then you will normally be discharged from the BR within a year, but any arranged payments to the IP may be in place for up to 3 years.

If you have a house a charge will be placed upon it so that any sales would have top be referred to the Insolvency Practitioner, but no one is going to come and kick you out. That is, as long as you are not in arrears. If you have a mortgage MAKE SURE THAT YOU KEEP UP THE PAYMENTS.

Again, you will have about a years grace before any decisions are made about your house. Best thing is, is that if you're in negative equity, any joint owner can normally buy your share of the "equity" for £1 which then means that the house remains yours. If there is a equity, say £10k, and the property is jointly owned, the other person will also have the opportunity to buy your £5k share. The IP dealing with my case said that that payment can be staged.

Since becoming BR the thing that I have learned is that the only people that want to you feel stigmatised about it are the creditors, all of my friends shook my hand and said well done for having the b-lls to do it.

As far as I know the only way your employer will know of your BR is when your tax status is changed to NT, NO Tax. This will be in place until the end of the tax year so if you are declared BR in May then you'll be NT until the following April.

Don't be scared of BR but make sure that you get professional advice from an accountant of solicitor as if you haven't had any the court will not accept your petition.

luvchocolate

any surplus of £20 or over could go into an I.P.A....I have no idea where the 50/50 you quote comes from.
I would advise you to go on the insolvency website and read as much as you can. you will find all the facts on there and follow the links from the br board,,,you need all the correct information so you can make your decision.
then come back on here for all bits we can help you with xx

greek-dave

Where did I get the 50/50 from? The IP and the OR...

But then what do I know, I was only declared BR in August..

alastairq

Not every personal bankruptcy goes via an Insolvency Practitioner.

Either way, an IPA may be agreed [before AD]...to take ALL surplus income, if there is a surplus over £20 per month identified. [not, any amount over £20]

How that IPA may be divided up really doesn't matter, as it doesn't alter the outcome to the Bankrupt.

What has also been ignored is that, if an IP is involved [apparently because there is an asset with equity of a value exceeding £10000?], then there will be IP fees to be sorted as well.

Regarding the NT code?

An NT code can be applied by HMRC for any number of reasons.

For an employer to 'pre-suppose' the application of an NT code is because of personal Bankruptcy is an assumption it is not wise for an employer to make....[especially if they've got it wrong?]

The NT code will also be changed if the BR person changes employer during the tax year. The tax code then revert to what it was, & the NT IPA is cancelled.

longtermplanner

greek-dave wrote: »

Where did I get the 50/50 from?

pre 2011, bankrupts were expected to pay a proportion but not all of their disposable income to an IPA. This was often described as "50/50".

However, the rules have now changes. And I have no idea how the poster managed to get livery expenses accepted as reasonable.

greek-dave

longtermplanner wrote: »

pre 2011, bankrupts were expected to pay a proportion but not all of their disposable income to an IPA. This was often described as "50/50".

However, the rules have now changes. And I have no idea how the poster managed to get livery expenses accepted as reasonable.

Would you expect someone to have a dog or cat destroyed so as to save a few pounds every month? I have already reduced the livery fee's from £300 per month to £130 per month and have made cuts everywhere else that it is possible to do so. No Sky TV, I don't drink alcohol, I don't smoke fags and I don't use drugs or have any addictions. There is literally nothing else that can be trimmed or cut so as to make any further savings and I am not having a healthy animal destroyed just so that some financier, banker or credit house can get an extra £10 a month from me.

BR isn't an easy decision to make, but what I was trying to suggest to the OP was that it is not as bad as people make out, normally because they know nothing about it and because it is portrayed on the TV in a manner that is simply not accurate.

andyuk01

greek-dave wrote: »

Would you expect someone to have a dog or cat destroyed so as to save a few pounds every month? I have already reduced the livery fee's from £300 per month to £130 per month and have made cuts everywhere else that it is possible to do so. No Sky TV, I don't drink alcohol, I don't smoke fags and I don't use drugs or have any addictions. There is literally nothing else that can be trimmed or cut so as to make any further savings and I am not having a healthy animal destroyed just so that some financier, banker or credit house can get an extra £10 a month from me.

BR isn't an easy decision to make, but what I was trying to suggest to the OP was that it is not as bad as people make out, normally because they know nothing about it and because it is portrayed on the TV in a manner that is simply not accurate.

Out of curiousity could you have serviced your debts if you didn't spend £300 per month on livery fees prior to BR?

wharty

greek-dave wrote: »

Would you expect someone to have a dog or cat destroyed so as to save a few pounds every month? I have already reduced the livery fee's from £300 per month to £130 per month and have made cuts everywhere else that it is possible to do so. No Sky TV, I don't drink alcohol, I don't smoke fags and I don't use drugs or have any addictions. There is literally nothing else that can be trimmed or cut so as to make any further savings and I am not having a healthy animal destroyed just so that some financier, banker or credit house can get an extra £10 a month from me.

BR isn't an easy decision to make, but what I was trying to suggest to the OP was that it is not as bad as people make out, normally because they know nothing about it and because it is portrayed on the TV in a manner that is simply not accurate.

Nobody would expect you to have the Horse destroyed but maybe you should have given the horse up and sold it. Having a horse sounds like a luxury to me. A cat or dog costs nowhere near what a horse would. Cats and dogs can be given to the local RSPCA cattery if needed.