Will the OR have a problem with this?

radarjay

Earlier this year - in May when I was still earning good money from my freelance work and paying all my creditors, I paid off two debts of my own and my partners Argos card. I paid £165.80 to close my Capital One card, £170.00 to enable my partner to close her Argos card and something like £360 to pay off a catalogue debt from 1999/2000 that my ex partner had run up in my name. I also paid £300 extra off another credit card to clear some arrears due to going over limit.

They were the 3 smallest debts we had which is why I chose to pay them all off as I had earned a good amount of money that month.

Basically what I need to know is will the OR have a problem with what you spend during the period of time you aren't financially struggling even if its less than a year before going BR? My downfall has sort of been very quick, from having pretty much guaranteed income in August to not having it at all in September.

im1dful

Questions might be asked and if you paid debts of your partner they might ask for details so the money can be claimed from them (I say might but really they should if they are doing their job properly). The reason being that you didn't have to pay those debts off and your wife now owes you the money because you did.

In terms of BRO/BRU:
The amount is not material, we are talking less than £1,000 and so it isn't in the public interest to doe a BRO/BRU.
Any BRO report has to show that the bankrupt was insolvent at the time. They have to show that the bankrupt had liabilities greater than their assets (or did as a result of the transaction) and that, after paying all their living expenses and debt repayments, there was a shortfall in their income.

wherediditallgo

One of the criteria they use for BRO/BRUs is that the debtor knew or should have known that they couldn't pay off the debts when they accrued them. Another is the paying of one of more creditors without offering the same deal to the others, in other words giving preferential treatment to that creditor. You did pay off someone else's debt (though that person is your partner), & the timespan between being able to pay them & wanting to declare BR is very short, so they may think you should have been aware that your financial circumstances were going to change a few weeks later.

I think they could consider this a question of "preferential creditors", & if that's the case they do have the right to request the £170 back from your partner. They can't force her to pay it back, but it could reflect on you if she doesn't do so when asked. Even if your partner paid back the £170, there's still the £825 odd that you paid off your own debts, so the issue of "preferential creditors" still remains. I would hope however that they'd not bother going down the BRO route given that the amounts are relatively small, & I'm not sure they'd be worth the admin. If you look at the BRO register, the amounts there are in the tens of thousands.

radarjay

So am I right in thinking that you have to declare all your already settled debts on the BR forms? Or will the OR just ask about sums of money seen on bank statements?

It seems a bit unfair to punish someone for paying off a debt at a time when they had no money problems. I thought I was doing a good thing by paying off debts when I had the spare money.

wherediditallgo

You have to declare any existing secured or unsecured creditors, so they may not know about debts you've settled from that. However, they have the right to look at your bank statements going back as far as they want to, & they'll therefore see the lump sums you paid out. In addition to that, question 3.6 specifically asks:

[FONT=&quot]In the last 2 years have you made any payment to a creditor, other than in the ordinary course of business, with a view to improving the position of that creditor in case you became subject to insolvency/bankruptcy proceedings?

[/FONT]If you took out cash amounts it may not be so clear what happened, but they'll probably query why you needed those cash lump sums when you didn't need them in previous months. It's the closeness of the payments to you now wanting to go BR that may make them think you settled those debts to reduce the number of creditors on your SOA, & I think you'd be better off just saying what you did rather than let them go through your statements & think you were trying to hide the payments you made. As a freelance worker, your earnings would be more subject to change than someone on PAYE, so hopefully knowing that will make them more understanding of your situation.

I understand what you're saying about being penalised for paying off your debts. But from their point of view, you paid off someone else's debt when you still had a considerable amount of your own that you didn't pay. They may also take the view that, as a freelance worker, you should have known your earnings wouldn't be the same every month & should have therefore kept the extra you got for the times when you earned less. I'm just playing devil's advocate here - if you get an awkward OR, I think that's the way they'll look at it. Thankfully, most of them we've discussed on here seem fairly reasonable.

im1dful

wherediditallgo wrote: »

They can't force her to pay it back, but it could reflect on you if she doesn't do so when asked.

That is at least the second time that I have seen someone say that the beneficiary of a preference can't be forced to repay the money. Of course they can, that is why the section exists in the Insolvency Act 1986. The OR is very unlikely to force it (as it would involve an application to court and could lead to adverse costs) however if an Insolvency Practitioner is appointed they can and will force the repayment. I've seen a bankrupty order made because someone didn't repay a preference. In this case the amount is small and not worth it but the Trustee can force preferences to be repaid.

However, the money paid on behalf of the OP's wife was not a preference. The money was not owed by the OP and so, in bankruptcy, it would be classed a Transaction At an Under Value and recovered like a book debt.

Both Preferences and TAUVs are only such if the person was insolvent at the time (although if it is to a family member it is assumed that they were insolvent unless it can be proven otherwise)

Lizzibuff

Hi Radarjay - In my case i had sold a marital home when getting divorced and had received just short of 20 grand - all this was during my time of financially struggling. The OR asked me what had i done with the money and i rattled off x amount to that card and x amount to diff card and i'd paid off my odraft and a store card etc etc. He took the details and never even questioned it.

Granted it had been 3 years ago but i'd also transferred money between credit cards within the last few months of becoming bankrupt.

Again he asked for the details - i happily gave them and he never questioned it.

If these transactions were made prior to your financial difficulties you can quite honestly say that you didnt expect to run into problems and you were managing your money as you saw fit.

If you were successfully managing your money and expecting to do so for the coming future i cant see the OR having a prob with it. Just be honest.

Can i ask why you paid your partners card? Had you made purchaes on her card or her purchase things on your behalf or were you just helping her out?

PixiePie

im1dful wrote: »

That is at least the second time that I have seen someone say that the beneficiary of a preference can't be forced to repay the money. Of course they can, that is why the section exists in the Insolvency Act 1986. The OR is very unlikely to force it (as it would involve an application to court and could lead to adverse costs) however if an Insolvency Practitioner is appointed they can and will force the repayment. I've seen a bankrupty order made because someone didn't repay a preference. In this case the amount is small and not worth it but the Trustee can force preferences to be repaid.

However, the money paid on behalf of the OP's wife was not a preference. The money was not owed by the OP and so, in bankruptcy, it would be classed a Transaction At an Under Value and recovered like a book debt.

Both Preferences and TAUVs are only such if the person was insolvent at the time (although if it is to a family member it is assumed that they were insolvent unless it can be proven otherwise)

Sorry to hijack the thread, but was wondering if I could delve into this a little more im1dful? What's the consequences of doing a 'Transaction At an Under Value' and therefore being recovered as a book debt rather than preferential treatment to a creditor? My OR's assistant is trying to say that I treated my OH preferentially by transferring some money into his account, but it wasn't to pay anything off or repay a loan or anything, just the 'normal' pooling of finances, with me wanting to contribute to household expenses (we live together as married) - it seems a bit confuzzled in my head as the assistant is saying I preferentially paid a debt to OH on one hand, but then having a go at me because my OH doesn't earn as much as me and therefore I have to contribute more than 50:50 to the household expenses. Does the Book Debt mean they can court order force my OH to pay this money back to them (he doesn't have it and it would mean he went BR). It's £2k that I 'gave' him.

Many thanks

im1dful

The consequences are the same as a preference; the money can be recovered and it could lead to a BRO/BRU.

A preference (as most people know) is where you repay a creditor in preference to others.

A TAUV is where (as it sounds) you carry out a transaction where you don't get full value. This can be many things, examples would be:
* Giving money to someone (as in your case)
* Selling something to someone and not getting full value (selling your car for £1k when it is worth £2k)
* Giving something away (this could be a present if it is of significant value).

TAUV can also go back 5 years where Preferences can only go back 2 years.

In the OP's case it is a TAUV as he gave money to his wife (although it was actually paid to her creditor) without gaining anything himself).
In you case it also sounds like a TAUV unless you can show that you did obtain value for the tranaction (ie. the money was used for living expenses for the whole family). You are in an interesting situation and I don't want to comment on it because I don't know the full circumstances. From what you have said a lot more information is needed by the examiner as £2k is a lot of money and I am guessing this was quite close to the BO.

wherediditallgo

im1dful wrote: »

That is at least the second time that I have seen someone say that the beneficiary of a preference can't be forced to repay the money. Of course they can, that is why the section exists in the Insolvency Act 1986. The OR is very unlikely to force it (as it would involve an application to court and could lead to adverse costs) however if an Insolvency Practitioner is appointed they can and will force the repayment. I've seen a bankrupty order made because someone didn't repay a preference. In this case the amount is small and not worth it but the Trustee can force preferences to be repaid.

However, the money paid on behalf of the OP's wife was not a preference. The money was not owed by the OP and so, in bankruptcy, it would be classed a Transaction At an Under Value and recovered like a book debt.

Both Preferences and TAUVs are only such if the person was insolvent at the time (although if it is to a family member it is assumed that they were insolvent unless it can be proven otherwise)

Can you direct me to where it says that, please, bearing in mind that I said "they can't force her" rather than they can't ask for preferential payments to be repaid as a general rule? I'm genuinely interested, because as I understand it, no-one can be made BR if they owe less than £750, so they wouldn't be able to do that with the OP's partner. They can penalise the OP for the payments they made, but they can't make someone repay money they say they no longer have - their finances aren't part of the BR petition, only the debtors. The penalty for non-return of the money is therefore imposed on the debtor, & the debtor alone. If someone who the OR decides is a preferential creditor can be forced to repay the money (rather than just required & asked to do so), it would be useful for us all to be aware of that in greater detail. Thanks.

radarjay

Lizzibuff wrote: »

Can i ask why you paid your partners card? Had you made purchaes on her card or her purchase things on your behalf or were you just helping her out?

Thanks for that post, it was really helpful. This whole thing is such a mindful.

We were living together as though married and the purchases on her card were for things for the household.

We're actually no longer together and she has no job now as she was previously working freelance for my online business. She is also signed off sick at the moment due to a shoulder op and won't be able to work until well into next year so I would hope the OR wouldn't chase her for the £170 because she won't have it!