HMRC making me bankrupt...what next?

toomuch2

After a conversation with HMRC today they have stated they will petition for my bankruptcy. I tried to negotiate an offer, but as I had broken the previous plan (I could only pay 70% of of my agreed amount) and my offer would only pay about 70% of the debt for over three years they want to move forward to bankruptcy. I had already set a meeting with my bank at the end of the month, so they have agreed to wait until then before starting the process.

I have to be honest it seems mad to me - I have no assets - it just feels punitive. I will also lose my job as my current contract would cease the second I am made bankrupt.

Not sure how I feel at the moment, but I have a many questions building up. Just a few.

The first is how long does the process take. I know there the 21 day 'warning' letter, but how long between that and the court case.

I also read on these boards that it is better to bankrupt yourself than let the HMRC do it. Does anyone know if this is true?

Should I complete my tax return for last year before the bankruptcy hearing?

Is there such a thing a preferential payments before someone makes you bankrupt?

I ask because I have a joint loan that will fall to my wife, and it would be useful to reduce that as much as possible. I know if you make yourself bankrupt the OR will not look kindly on it.

Probably more to come!

Thanks

antonic

Please see my comments in red

toomuch2 wrote: »

After a conversation with HMRC today they have stated they will petition for my bankruptcy. I tried to negotiate an offer, but as I had broken the previous plan (I could only pay 70% of of my agreed amount) and my offer would only pay about 70% of the debt for over three years they want to move forward to bankruptcy. I had already set a meeting with my bank at the end of the month, so they have agreed to wait until then before starting the process.

HMRC will not accept a Composite Offer (which is what you have offfered) if you are still trading, also they wont consider a further Time To Pay as you failed the previous one.


I have to be honest it seems mad to me - I have no assets - it just feels punitive. I will also lose my job as my current contract would cease the second I am made bankrupt.

They have a job to protect the Public Purse and if you are continuing to accrue further debt, thats the reason for Bankruptcy, its nothing personal against you.

Not sure how I feel at the moment, but I have a many questions building up. Just a few.

The first is how long does the process take. I know there the 21 day 'warning' letter, but how long between that and the court case.
The process is you first have to be served a Statutory Demand under Sec268(a) of either the 1986 or 1989 Insolvency Act - this then gives you 21 days to pay what is due or HMRC will issue a Bankruptcy Petition - the Petition is not normally issued after 21 days, it can take longer.
HMRC will attempt to serve the Statutory Demand and Bankruptcy Petition on you in person - if they cant they can be served in other ways.
Personal service is made by a Field Force Agent who if they cant see you will leave a letter with their contact details.
Service is ALWAYS attempted at the address HMRC have on file, but they will meet you at another address, if it may cause you a problem (but you need to have ID).

I also read on these boards that it is better to bankrupt yourself than let the HMRC do it. Does anyone know if this is true?

If you let HMRC make you bankrupt then you save yourself the Court fees of approx £750, HMRC will add the fees to your existing debt.

Should I complete my tax return for last year before the bankruptcy hearing?
Your still obliged to complete your SA return for last year anyway, but once made bankrupt your old UTR will be closed and you will be issued with a new one.

Is there such a thing a preferential payments before someone makes you bankrupt?

I cant answer as I dont know

I ask because I have a joint loan that will fall to my wife, and it would be useful to reduce that as much as possible. I know if you make yourself bankrupt the OR will not look kindly on it.

Probably more to come!

Thanks

dojoman

toomuch2 wrote: »

Is there such a thing a preferential payments before someone makes you bankrupt?

Yes there is, as you know you are going to be made BR you are not allowed to make extra payments to other creditors, you will unfortunately have to let this debt fall to your wife.

woodformoretrees

dojoman wrote: »

Yes there is, as you know you are going to be made BR you are not allowed to make extra payments to other creditors, you will unfortunately have to let this debt fall to your wife.

I see the logic in your answer - but there is only a telephone conversation at the moment. Surely 'knowing' you are going to be made bankrupt is when you receive some form of paperwork?
(devil's advocate question).

fermi

Debatable whether this preference would fall under one to a connected person or not, but even if deemed unconnected then the OR could take action against it if within 6 months of the presentation of the bankruptcy petition.

Must also be a desire to prefer at the time.

Also quoting from OR's guidance.

"It is necessary to show that the debtor was insolvent at the time of the transaction or became insolvent as a consequence of the transaction".


So here, the OP:

- is insolvent as they are not able to pay their debts as they fall due.
- would be desiring prefer, to make the payments to put the bank or other party in a better postion regards the bankruocty than they otherwise have been. or could be argued to being doing so.
- would be doing so within 6 months, most likely, of the petition. That is the fact of the petition, not certain foreknowledge of it.

toomuch2

Thanks for your thoughts.

The root of my question is if I did make a greater payment to the bank loan would the OR then simply reverse it. I am sure they would if I was making myself bankrupt, but as someone else is petitioning I wasn't sure. I have also read that even after the petition it may take several months before court proceedings.

The extent of my issues really hit me today, so feeling very down - apart from anything else I still have to tell my wife. She knows it is a possibility but not yet had it confirmed. The fact that I will lose my job (and at my age 50+) does not bode well for the future.

I understand Antonic's point that it is not personal - but I do think it is punitive.

Again thank you for you thoughts, no doubt I will be back with more questions if that s okay.

coolcait

Why do HMRC make people bankrupt?

It's probably not personal, it's probably not intended to punitive.

But I don't buy the argument that it protects the Public Purse. Most bankruptcies don't pay that much to creditors (if they pay anything at all).

It's even less likely that HMRC will get money back if the person becomes unemployed as a result of bankruptcy.

So, given a choice between making an affordable agreement to pay the debt over three or four years, or petitioning for bankruptcy, how is the Public Purse protected by bankruptcy?

Wouldn't most taxpayers prefer it if HMRC waited a couple more years to get the money rather than writing it off? And pushing more people out of employment and onto benefits?

TheGardener

I don't have the experience with HMRC to offer advice with the tax stuff but - if you are about to be made BR and if you haven't already done so , you should start getting your proverbial ducks in in a row now. Follow the links on the Weclome post on this board and get the basics sorted like a BR tolerant bank account(s) car worth less than £1000 etc etc..

toomuch2

Thanks for the link.

I am trying to get through the "this is an outage" and feeling sorry for myself and get onto the practicalities as soon as possible.

Paul_Downward

Unfortunately, most people will wait for money if you discuss problems with them, but HMRC are the most vicious and will not stop until you are BR, not sure why, as it is definitely against the best interests of the public purse.

toomuch2

Paul Downward I agree. Many creditors will deal with something, and I was offering more than just something!

It is really upsetting. My business is beginning to improve - but from their perspective I suppose it is all "ifs and buts' and I am sure they have heard it all before.

They have given me a week to find a "substantial" part of the money, but wouldn't say what that would be. I have a meeting with my bank about a loan I have, the bank has said I am eligible for a rate reduction (the loan was on a high rate) and that might provide more cash flow, but not a lump sum. The revenue didn't seem interested in that only a lump sum. So in a week so they will deliver the statutory demand and the procedure begins.

I am also not sure how upfront I should be with the bank. I am not suggesting I would lie if they ask about circumstances, but the loan will go to just my wife, so a reduction would help. Still thinking on that