Are payments under a CCJ/existing loan agreement classed as preferential payments?

lifeoflearning

Hi,

I thought I would create a separate thread for this question for the sake of Google searchability for other people doing research into this area. The basis of this query can be found here:

forums.moneysavingexpert.com/showthread.php?p=75971318&posted=1#post75971318

For those that do not want to read the background of my query in the above thread, I will summarise. I am essentially trying to understand what my position may be if any of my creditors were to petition to have me made bankrupt. I say creditors, but actually the debts have all been sold on to debt recovery agencies as they are from 10 years ago. With the help of the members on this site, I have FINALLY got an answer regarding how beneficial interest is viewed in bankruptcy (if you wish to know, check out the thread link above!). The other thing that is plaguing my mind is the concept of preferential payments. I have read the part of the Insolvency Service Technical Manual that relates to this but really can’t understand how it relates to my situation.

I have a CCJ hearing pending, which is 50/50 whether the judgement will go against me or not, so I am going to assume it WILL go against me. I have no income so I will be applying to the court to pay this in small monthly instalments. Furthermore, I have a personal loan that I have been paying for over the last year. I am no longer paying this due to having no income so my wife is filling the gap for me whilst we are in this period in our lives (yes, she is an amazing woman!!!); I have NO intention of defaulting on this. However, what I am concerned about is that if I were to be made bankrupt by any of the debt collection agencies that have bought my old debts, that the courts would view me as making preferential payments to the CCJ and to the newer loan that I am paying for monthly. Is this correct? If it is correct, what would this mean for me?

It does seem very silly that I would be expected to not maintain my CCJ payments and to default on an existing loan in order to not be seen as giving preference, so I feel that I must have misunderstood this concept somewhat!

Any ideas much appreciated!

debt_doctor

Hi,

A contractual payment can never be a preference - A preference is a payment 'other than in the ordinary course of business' (so higher than normal payments) AND with a view (a deliberate intention) to improve that creditors position if you became bankrupt.

Forget about preference.

Have you made payments or wrote letters along the 10 years of these debts owing? They might be statute barred meaning they can't be enforced by the court anyway.

DD

ToxtethO'Grady

As DD says you need to check if your debts are not statute barred; you have not paid or acknowledged the debts in 6 years or more. If they are they are unenforceable, your creditors cannot take legal action against you.


Same as with the preference part of it as DD says and just to add if your wife is making the payments DIRECT to the loan you have no control over it so it would not be classed as a preference if they did make you BR.

Your creditors would only think about making you BR if they feel they can get something from it or pressure you ( you have assets they are aware of or you are a company director/self-employed where you have stock). Do you have anything like that?



If not let them make you BR it'll save you £680 however the loan will be included in the BR. Is it a guarantor, logbook or secured loan? Is that why you don't want to stop paying it?

lifeoflearning

debt_doctor wrote: »

Hi,

Have you made payments or wrote letters along the 10 years of these debts owing? They might be statute barred meaning they can't be enforced by the court anyway.

DD

Unfortunately I only stopped paying them at the start of 2016 so not quite there yet! I know this all sounds like I am probably worrying about a problem that may never come about, however I just want to be prepared in advance and know where I stand with things.

ToxtethO'Grady

With the CCJ your creditor may use the fact you are maintaining another credit commitment to push for the court to increase the amount you are required to pay. The fact that there is a hearing inclines me to believe they have checked your credit file and will seek to show you are making a preference in that way.
If you can maintain that payment why can't you pay them more? Be prepared to have evidence that you have not been paying it in the same way as a preference in insolvency.
Good luck!

lifeoflearning

ToxtethO'Grady wrote: »

As DD says you need to check if your debts are not statute barred; you have not paid or acknowledged the debts in 6 years or more. If they are they are unenforceable, your creditors cannot take legal action against you.


Same as with the preference part of it as DD says and just to add if your wife is making the payments DIRECT to the loan you have no control over it so it would not be classed as a preference if they did make you BR.

Your creditors would only think about making you BR if they feel they can get something from it or pressure you ( you have assets they are aware of or you are a company director/self-employed where you have stock). Do you have anything like that?



If not let them make you BR it'll save you £680 however the loan will be included in the BR. Is it a guarantor, logbook or secured loan? Is that why you don't want to stop paying it?

Ok cool. As I just messaged above in response to DD, I may be worrying about nothing because as you say, in reality, it makes NO business sense for any agency to come after me for BR as I have nothing, so would be a complete waste of money. Also, the existing debts aren't statute barred yet.

Just to confirm then, if someone other than myself pays off a debt of mine, it cannot be seen as a preference at all?

No reason for wanting to pay the existing loan other than moral reasons; the mess I got into all those years ago was a VERY different, young, irresponsible etc version of me that I don't want to be again and I entered into the existing loan with all this in mind. Then again, if BR were forced on me then that is out of my control.

However, what I am thinking of now is possibly trying to deal with this sooner by going for a DRO in the next few months. I have mentioned this in another thread I have running but it it probably best if I post in a new thread about this so as not to digress on the topic in the title (better for people doing Google searches)!!

lifeoflearning

ToxtethO'Grady wrote: »

With the CCJ your creditor may use the fact you are maintaining another credit commitment to push for the court to increase the amount you are required to pay. The fact that there is a hearing inclines me to believe they have checked your credit file and will seek to show you are making a preference in that way.
If you can maintain that payment why can't you pay them more? Be prepared to have evidence that you have not been paying it in the same way as a preference in insolvency.
Good luck!

But surely if contractual payments cannot be viewed as a preference then this couldn't be upheld by the court? That money is committed to paying an existing credit agreement and if I only had enough money in my life every month to cover that then surely they couldn't expect me to default on it in order to pay one that is not under an current agreement? Or could they?! God, I really need to deal with all this ASAP.......making me even more inclined towards a DRO soon!

TheGardener

I have been following some of your threads - I take a pragmatic and simple view of this level of debt (some may say simplistic...) Insolvency as a state of being isn't really debatable - you are either insolvent and unable to meet your contractual financial obligations - or you are not. It appears that you may not be eligible for a DRO as things stand.

If BR is out of the question in that you have too much to lose - then find a way to pay the debts and negotiate with your creditors. If a clean break and fresh start is the best way forward - then go for BR.

It feels as though you are over thinking all aspects of this in a way that seems almost frenetic. Debt can have a profound effect on all aspects of our lives - relationships, mental health etc. Other peoples google searches are of no importance to your position. Take a long, hard, dispassionate look at your own position and seek the help of the debt charities. Once you have a clear picture - move forward based on that basis rather than tying yourself in knots trying to find workarounds.

lifeoflearning

TheGardener wrote: »

I have been following some of your threads - I take a pragmatic and simple view of this level of debt (some may say simplistic...) Insolvency as a state of being isn't really debatable - you are either insolvent and unable to meet your contractual financial obligations - or you are not. It appears that you may not be eligible for a DRO as things stand.

If BR is out of the question in that you have too much to lose - then find a way to pay the debts and negotiate with your creditors. If a clean break and fresh start is the best way forward - then go for BR.

It feels as though you are over thinking all aspects of this in a way that seems almost frenetic. Debt can have a profound effect on all aspects of our lives - relationships, mental health etc. Other peoples google searches are of no importance to your position. Take a long, hard, dispassionate look at your own position and seek the help of the debt charities. Once you have a clear picture - move forward based on that basis rather than tying yourself in knots trying to find workarounds.

Thanks for the comments. I don't want to go for BK if there is a way that I can go for a DRO for reasons such as forever having to tell mortgage brokers and insurance providers that I am a discharged BK. So, if I can get the same effect using a DRO using a work-around/technicalities, then that seems sensible to me.

I have been told I over-think things (mostly by the wife!!!), so don't disagree with you there! It has been to my detriment at times in the past, although more often it has served me well! Regarding the internet searches, all I want is my questions and experiences to be searchable to help others in a similar position to me and see no harm in attempting to make things easier for people to find. After all, that is one of the points of having advice forums.

Thanks

sourcrates

lifeoflearning wrote: »

Thanks for the comments. I don't want to go for BK if there is a way that I can go for a DRO for reasons such as forever having to tell mortgage brokers and insurance providers that I am a discharged BK. So, if I can get the same effect using a DRO using a work-around/technicalities, then that seems sensible to me.

I have been told I over-think things (mostly by the wife!!!), so don't disagree with you there! It has been to my detriment at times in the past, although more often it has served me well! Regarding the internet searches, all I want is my questions and experiences to be searchable to help others in a similar position to me and see no harm in attempting to make things easier for people to find. After all, that is one of the points of having advice forums.

Thanks

Hi,


Criteria for a DRO as follows :


Must not be a homeowner


Must have 20k of debt or less


No assets over £1000


A car worth up to £1000


Must have less than £50 left at month end (not including debt repayments).


Would you meet those criteria ?

lifeoflearning

sourcrates wrote: »

Hi,


Criteria for a DRO as follows :


Must not be a homeowner


Must have 20k of debt or less


No assets over £1000


A car worth up to £1000


Must have less than £50 left at month end (not including debt repayments).


Would you meet those criteria ?

Well based on the answers in posts #2 and #3, I would qualify, given that my existing loan could be paid off by the wife, not be seen as a preferential payment, and take me under the £20k mark (just!).