Bankrupcy HMRC

noodles2309

My husband was served papers on Friday to say that HMRC are going to pursue him through the courts for bankruptcy for an outstanding tax bill.


To be honest it is the best option for him / us as he owes almost £50K and will never be in a position to pay this back. He was recently signed off work by his GP and is currently in the process of the paperwork for DLA. He has since de-registered as self employed.


Due to the reduction in income into the house we are struggling to keep up with outgoings (we have reduced everything possible) and have defaulted once already on our mortgage....we have met with the bank and are currently awaiting a decision on whether we can go interest free for 6 months until we get back on our feet.


The bank will be carrying out a credit check to which I imagine this will pop up, so they will most likely say no to interest only. If this is the case we will have to give the bank the keys and look at renting somewhere. The thing this if the bank sell the house for less than what we owe then we are still liable for the balance. Can this be included in the bankruptcy? I don't imagine it can as the bankruptcy solely in his name whereas the mortgage is in both of our names.


Any advice welcome?

National_Debtline

Hello there,

I hope that the lender allows you to go on to an interest-only arrangement. The bankruptcy will show on your husband's credit file shortly after the order has been made. I'm not certain anything will show up at the moment.

If you do have to give up the house, any shortfall would be written-off by the bankruptcy - regardless of if you give up the property before or after the bankruptcy date. As the house is in joint names you could still be chased for the full amount of the shortfall. Do you have an idea as to how much the shortfall might be?

A finally word, please ensure that your husband doesn't sign anything given to him by the mortgage lender after his bankruptcy date which states that he is liable for the shortfall. This is commonly called a deed of acknowledgement. It could potentially make him liable for the shortfall once more.

If you have any further queries, please feel free to ask. Here is a link to our bankruptcy fact sheet.

Very best wishes,

David @natdebtline

noodles2309

thanks for that David,


I am not sure re: the shortfall; we had the house valued a few weeks ago and they valued it at 80-85K, we currently owe 81K on it but the norm seems to be that if the bank takes it and sells it that it goes for so much less - people have said approx. 50-60K??


If the bank agree to the 6 months interest free we should be okay and if you think it will not show up yet then fingers crossed! It would give us a chance to get sorted and if all of his debt goes with the bankruptcy then we will have so much less to worry.


Another question, in an attempt to try and pay what we could to HMRC we have been paying £150 a month; if they are now taking this to court and we are really struggling to cope with no work can we stop this payment?


Thanks again

magpiecottage

National_Debtline wrote: »

If you do have to give up the house, any shortfall would be written-off by the bankruptcy - regardless of if you give up the property before or after the bankruptcy date. As the house is in joint names you could still be chased for the full amount of the shortfall. Do you have an idea as to how much the shortfall might be?

A finally word, please ensure that your husband doesn't sign anything given to him by the mortgage lender after his bankruptcy date which states that he is liable for the shortfall. This is commonly called a deed of acknowledgement. It could potentially make him liable for the shortfall once more.

This is a bit unclear. The bankrupt will clearly have no further liability for the mortgage unless the lender gets him to sign something saying he is again - which would almost certainly incur the displeasure of the Financial Conduct Authority and/or Financial Ombudsman Service.

However, there is a concept known as joint and several liability. That means that every borrower is liable for the entire debt - so the borrower will remain entitled to pursue the OP if she is on the mortgage deed. If the mortgage is in the sole name of the bankrupt then they cannot.

A lender in possession does have a duty to secure a realistic price for a property, In theory, if they do not the lender can end up owing the mortgagor money.

However, they are also entitled to take off costs they reasonably incur in the sale (and maintaining/insuring it until they do).

noodles2309

I think I understand, its all very confusing!


Does anyone know if in an attempt to try and pay what we could to HMRC we have been paying £150 a month; if they are now taking this to court and we are really struggling to cope with no work can we stop this payment?


Also do we need to contact a solicitor for the paperwork etc.? I have done up an income and expenditure spread sheet so that they can see that we are not in a position to pay back but not sure what else we should be doing at this point. what other evidence etc. do we need to provide?

National_Debtline

noodles2309 wrote: »

I think I understand, its all very confusing!


Does anyone know if in an attempt to try and pay what we could to HMRC we have been paying £150 a month; if they are now taking this to court and we are really struggling to cope with no work can we stop this payment?


Also do we need to contact a solicitor for the paperwork etc.? I have done up an income and expenditure spread sheet so that they can see that we are not in a position to pay back but not sure what else we should be doing at this point. what other evidence etc. do we need to provide?

Hi again noodles

I don't feel you need to involve a solicitor. You will be perfectly capable of demonstrating to HMRC what you can/cannot afford to pay - the spreadsheet sounds as if it will do just fine. In these sorts of negotiations, there is not set legal requirement for you to provide supporting evidence of income, expenditure etc. - HMRC would have to take court action to oblige you (well, your partner) to provide this.

If they appear set on making your husband bankrupt and he has no incentive/grounds for defending this, there is little purpose in making any further payments in the meantime, especially if you are putting yourselves under even greater financial pressure as a result.

Regards

Dennis
@natdebtline

noodles2309

thank you Dennis, all very helpful!


I am starting to panic less having had all this feedback.


If it all goes smoothly I am looking forward to no more sleepless nights, and less panicking worrying about how we were ever going to get it sorted!!

woodformoretrees

Definitely stop paying HMRC. NOW. I was paying them £2000 a month (you can only imagine how much extra Self employed working hours that took!!!!)
Please be prepared that the date they give you for bankruptcy may be cancelled by the court and you will then be given a second date. This happened to me (made bankrupt by HMRC) So get all your barclays account and everything else ready in advance, but call the court on the day and check and don't be surprised if it's delayed by a month xx

After 20 years of faultless mortgage payments our mortgage company haven't even given a seconds consideration to our 'interest only' payments (to enable us to save a rental deposit) due to the fact it wouldn't be ethical lending. Go figure!! Although lovely lady on the phone did say we probably had six months to not pay before they took action.


ETA --- he can also stop paying ALL his other sole creditors now and save up the pennies for the things you're going to need now (rental deposits/food/everyday living). All payment from now on are just wasted. It sounds harsh, but it's definitely true, and it is advice I wish that I had received prior to being made bankrupt.

noodles2309

whoop whoop!!! Bank just phoned and they have agreed to the 6 months interest only....thank god!!!


We have an appointment made for Friday with CAB to progress with the bankruptcy.


Please God this will all go smoothly and that in 6 months time we will have some sort of half decent life again with soooooooo much less stress....fingers crossed!!

egrescrimp

noodles2309 wrote: »

whoop whoop!!! Bank just phoned and they have agreed to the 6 months interest only....thank god!!!


We have an appointment made for Friday with CAB to progress with the bankruptcy.


Please God this will all go smoothly and that in 6 months time we will have some sort of half decent life again with soooooooo much less stress....fingers crossed!!

Good news! good luck for the future, it does get easier as time goes on

noodles2309

ah thanks! Been worrying over money for that long ...sooooo looking forward to it getting easier. ;-)