Bankruptcy to clear VAT debt

DorisTrousers

In theory that may be possible, in practice it is unlikely. My own opinion is that the situation described above is more applicable to divorce law rather than insolvency law. As long as he doesn't own the property, and no undervalue transactions have occurred in the last two years then I don't believe there is an issue at all. There is no Trustee in a DRO don't forget, and I find it difficult to believe that HMRC would object to the granting of the DRO. No approved intermediary would put forward a DRO if they felt there were any area of concern, so the best bet would seem to be to speak to one, maybe a visit to the local CAB is in order?

alastairq

The reason I raised the issue of BI is because HMRC are involved, and could well resort to a Bankruptcy Order...in which case, BI is an issue.

More reason, then , for the OP's parents to follow your own advice, and seek words with an Approved Intermediary, such as CAB?

If the circumstances are suitable, then getting in first with a DRO seems best?

Gwenig3

Hi Thank you.
Spoke with my parents and they have contacted a debt advise company and been offered option of combining all debt together and paying a monthly fee of £90. Apparently they have combined debt of £18000.00.
The property they live in is rented from the council. My parents tend to make quick decisions to resolve a issue and which I think will cause more issues.

alastairq

Please impress upon your parents that they will be paying this company to deal with their debt, when they do not have to .[If it is a commercial debt company].

Since they have no assets of value [household goods are not included] their best bet is to cease payment on all debts to HMRC, and any other creditors [aside from priority debts, such as Council tax, power, etc]....and save what money they have as 'income' to support a 'reasonable standard of living'.

HMRC have a history of going to Bankruptcy over tax debts, which is what is needed here.

Since your parents' income stems solely from State pensions, a creditor's Bankruptcy will deal with the debt situation without it costing them a bean.


Whatever they do, they have no need to be paying any company anything.

They can go to CAB, or Stepchange, or NDL for free advice and assistance.

Since they appear to have combined debts of 18000, a DRO would not be allowed.

However, you need to question how this figure is arrived at?

[IE, what exactly are these additional debts?]

On the face of it, it seems to me your parents are being taken advantage if, in this instance.

DorisTrousers

Have to disagree again slightly, sorry.

We know that he has £7,600 in his own name, there is no mention of any joint debts at all, so it follows that she has circa £11k, therefore they can look at a DRO each if they wish.

HMRC MIGHT bankrupt him, but as he has no assets then that isn't a done deal, so may just be quicker and easier to pay the £90 each for the DRO's. Visit the Insolvency Service website for a full list of approved intermediaries/competent authorities.

alastairq

My mistake...I misread the 'combined'debt' bit.....focusing too much on Dad?

Yes, a DRO each, done quickly, as Doris says, will be a one-off £90 each, then nothing more to pay.

antonic

alastairq wrote: »

My mistake...I misread the 'combined'debt' bit.....focusing too much on Dad?

Yes, a DRO each, done quickly, as Doris says, will be a one-off £90 each, then nothing more to pay.

But can HMRC object to a DRO if they are his biggest creditor ? (I know they can object to an IVA).

alastairq

Your creditors may object to the DRO being made. They can also object to being included in the DRO or to the details of their debt as listed in the DRO. They can only make such objections on certain grounds, for example that you are not eligible for a DRO. It is not a valid ground for a creditor to object just because they don’t want to be included in the order.

The above, from NDL

https://www.nationaldebtline.org/EW/factsheets/Pages/37%20EW%20Debt%20relief%20orders%20(DROs)/Page-06.aspx

I note, the fees for a DRO can be paid in installments.

[However, if NDL is the chosen intermediary, the fees must be paid up within 2 months of the information pack being received by NDL.]

I suspect I would strongly recommend the OP to impress upon Mum & Dad to contact national debt line with a view to applying for a couple of DRO's.

longtermplanner

The property they live in is rented from the council.

In that case it is not at risk in bankruptcy even if it were in joint names.

Spoke with my parents and they have contacted a debt advise company and been offered option of combining all debt together and paying a monthly fee of £90.

That sounds like a commercial debt management company, who take their fees from that amount first. This is a seriously bad idea. Tell your parents they need to speak to someone from a charity that is not looking to exploit them Suggest eiether their local Citizens Advice if they would like face to face advice or National Debtline or Stepchange if they prefer telephone advice.

Apparently they have combined debt of £18000.00.

As the others have said, in that case they should be looking at both having a Debt Relief Order as their likely best option.

My parents tend to make quick decisions to resolve a issue and which I think will cause more issues.

Indeed. Signing up to this £90 a month would be a huge mistake. point out to them that HMRC may not accept the arrnagement as well.