Idiots guide to bankruptcy

Wig

A friend has approx. £30,000 in debt.
He has a job about £16K salary,
Wondering is bankruptcy an option?
Is it easy to get bankruptcy?
I read on .gov that it costs about £680, and takes a year, and through that year you are expected to continue to make your payments.
Can I have an idiots guide to bankruptcy, pros and cons, procedure etc..?
Thanks

sourcrates

I will move your post to the bankruptcy board, were you will get more responses.

National_Debtline

Hi wig,


Bankruptcy is, obviously, a complicated options and the consequences can vary for people depending on their situation. The key issues would be, that you friends needs to do a SOA. If he has very little or no money left per month and his situation is unlikely to improve then bankruptcy may be better than paying £1 per month for years to come.


However, if your friend has any assets, especially a property, vehicle, savings, shares etc. then these can be at risk in bankruptcy and may rule it out as an option. When you go bankrupt you will be in that state for 12months but he will not have to make any payments to the debts during that time, the debts are written off. He may have to make payments to the Official Receiver (the person in charge of bankruptcy) if his SOA shows more than £20 per month disposable money. This is known as an Income Payment Arrangement and can go on for 3 years.


Bankruptcy does cost £680 and is all done online. Each application is assessed by an adjudicator and he will get an email with the outcome. There is no need to go to court for a hearing anymore. It is obviously very damaging to his credit file and will have a large impact on his ability to get credit for the next 6 years (perhaps longer). These are just a few key points and not full advice about all of the elements of bankruptcy. For that he should contact one of the free debt charities. He may also want to read our factsheet about this - https://www.nationaldebtline.org/EW/factsheets/Pages/bankruptcy/how-to-go-bankrupt.aspx


Laura
@natdebtline

Wig

Hi Laura,

Thank you v much, for the reply.

He has no assets. Has not done SOA yet,

If, for example he has a disposable income of £100 or £200 per month, (I have no idea as he has not done SOA).

Is bankruptcy still an option? i.e. is there a maximum/minimum disposable income that you have to be below to get bankruptcy awarded?

He has a wife who lives overseas with his children and he helped her to buy a house there which cost £10,000 -last month- the house is in her name. I don't know the details, but I guess he paid for it himself out of what he had managed to save up.

The idea is he might be going to live there (third world country) and wants to clear his debts before leaving UK.

National_Debtline

Hello again,


So, with regard to his SOA if he has anything over £20 per month the OR will take all of it. It wouldn't necessarily prevent him from going bankrupt but he would have to be careful of how much it would equate to. For example, if he has £200 per month spare he would lose that for 3 years (£200 x 36 = £7200) plus it costs him £680 to go bankrupt. So if his debt level is approx. £30,000 this would seem fine as it would be the shortest repayment option and he would still be getting (effectively) £22120 written off.


Unfortunately, the bigger issue is the property abroad. If he used his savings to pay for this then it is his asset, irrespective of whose name it is in and where it is. In bankruptcy, this could be at risk of being repossessed and sold to go towards the bankruptcy. So this may rule bankruptcy out as an option all together. The OR will consider things such as the practicality of seizing and selling a property abroad, as well as the potential returns, and whether this will benefit the creditors. I cannot say for certain if it would be safe, as it would be at the discretion of the OR. If a family member/ friend were to step in and 'buy back' the interest in the property from the OR this should prevent a sale. (Essentially this means someone pays the OR the value of the property to stop him selling it).


I hope this make sense. As I mentioned before, your friend will definitely need specific advice for him before trying to go bankrupt. It seems to be a complicated situation.


Laura
@natdebtline