freelancer going bankrupt

lian332

Hi,

I've been working as a freelance software developer for a while now, but I also have accrued some debt (too much for a DRO) and due to a change in personal circumstance, I'd really like to use this time to start my application for BR.

The problem I'm faced with, as a freelancer, my income is usually based on contract payments, so is not 'regular' income.

Knowing that my income is very important for the OR, I'm not sure if I can actually go bankrupt as things stand?

Right now, I'm in a lull period, so there hasn't been much income and as such, I'm currently claiming UC.

Without a 'proper' look, it might seem that I'm on a vast sum of money, but averaged out, is much less than it seems. Surely this will make the IPA more complicated?

Does anyone know how things work under these circumstances and how I should proceed?

Cheers

L

Minkym00

Having irregular income won’t stop you going bankrupt. But it will make an IPA assessment slightly trickier. They’ll take an average income from the previous 6 months usually, however if you’d rather it was a year, you can ask them to take that into consideration.

Will you struggle to pay a monthly amount during the lull periods?

fatbelly

While you're on UC it will be very easy for them to track your income, and you won't get an IPA while on benefits.

If bankruptcy is the best strategy for you (and at over 20k debt with no assets to protect it probably is), then now is the time.

Pennywise

Being a bankrupt may jeopardise future contracting jobs, especially for larger employers, banks etc who tend to do more background checking on their contractors. Are you sure that you can't just work through your debts with voluntary arrangements etc?

terrence45

The OR will ask for your last few years' accounts at the time of bankruptcy to get an idea of what you earn and when. As you'll inform them you plan to continue trading (as and when you can) they'll take an average of your earnings to see if an IPA can be applied. It sounds like it won't be - especially not since you are currently on UC.

It's very unusual for a sole trader to go bankrupt and get an IPA (for obvious reasons - they either stop trading, which is what I did, or go cash-in-hand for a year).

If, say, halfway through your bankruptcy you got paid for a job, you'd need to declare this to the OR. Or maybe at the beginning the OR will give you a schedule to report your earnings. Ideally, you'd 'prove' to the OR that this money would all be consumed on allowable living expenses until the next payday and that you'd not run a surplus. They will probably ask for bank statements to verify this, or check themselves, but in my case I found the OR very busy and not really bothered about small-fry cases like mine. I had to chase THEM for things!

With a fluctuating income your situation is tricky but not impossible. You need to be canny. The last thing you want is a big payday triggering an IPA just before discharge. So play it carefully. Remember you have, I think, 21 days to declare a change of circumstances (quite a useful amount of time if you're approaching discharge - I got a well-paid job 2 weeks before discharge and didn't quite get round to declaring it in time...).

Contact Business Debtline if you need more personal advice.

TripleH

Are you able to support yourself at the present time (excluding servicing of debts)? If you do go bankrupt you will not have access to credit facilities to keep you going until your next contract, do you know when you are likely to get one?

It might help to do a Statement of Account showing your current living costs and also to assess what they might be like once you have a contract. It could be that you have a cross over period where you are working but haven't been paid yet but have no means of getting to work if Bankrupt.

terrence45

Further to what TripleH said, do you have any special business expenses like web-hosting or software subscriptions (things more than just an internet connection, which of course the OR will permit you to have at home)?

If the OR isn't convinced your business is viable, they may not allow expenses such as these. Although, if you aren't in an IPA because you're on UC and not earning, it won't make a difference.

lian332

Hi guys,

Thanks for the advice. I'm going to try going bankrupt based on my own UC payments alone, as my freelancing business is really slow at the moment.

Does anyone know, 'if' I'm eligible for a 'budgeting allowance' payment from UC (which ends up being a debt), does that get covered in my debts under BR application (i.e. do they get cleared).

Thanks

L

fatbelly

lian332 wrote: »

Hi guys,

Thanks for the advice. I'm going to try going bankrupt based on my own UC payments alone, as my freelancing business is really slow at the moment.

Does anyone know, 'if' I'm eligible for a 'budgeting allowance' payment from UC (which ends up being a debt), does that get covered in my debts under BR application (i.e. do they get cleared).

Thanks

L

I'm more familiar with DROs and yes they are a qualifying debt so I imagine that would apply for bankruptcy.

DWP are currently migrating many benefits to the Universal Credit (UC) scheme. Within the UC system eligible benefit claimants can ask for an advance called a payment on account (PoA).

A PoA is not a loan, but on or before making a PoA the claimant is given notice of their liability to repay the advance by deduction from subsequent payments of benefits or to repay any balance to the extent it is not deducted.

A PoA which has not been fully recovered at the date of the application is a qualifying debt. And the DWP cannot recover the balance from any ongoing entitlement to benefit.