Bankruptcy and training courses

Linzy234

Hi, as a sole trader and in bankruptcy, if you have a higher than expected income at any given month, are you allowed to use the 'surplus' income to pay for training courses related to your business?

mwarby

I'm no expert but I think it would basically come down to this

do you need to take the course ?
would you be taking the course if you werent bankrupt ?
is the course likely to increase the amount you earn ?

ie if your taking the course just to avoid paying the OR, expect some pushback, if you'd be doing it anyway then its a legit cost of being in business

TheGardener

I'd agree with mwarby I think. Does the course form part of a longer term business plan? Can you point to evidence it is a good investment and will improve the business? Is it essential business expenditure - for example: learning/complying with recent changes to the laws governing your business?
If you can make a strong case and prove a reasonable base for the investment then that's the way to go.

Linzy234

Hi, thanks for your replies, it is a new beauty business started before the bankruptcy, and the courses would be taken in order to add new treatments available to clients and grow the business, I guess if I formulate a business plan then they should be acceptable..

terrence45

Are you in an IPA? Did the OR say how they wanted to assess your income & expenditure over the period of bankruptcy? E.g. average of x many months?

Just interested to see how it works for self-employed people, as surely business and income expenditure is largely controllable by them?!

Linzy234

Hi,
I havent actually gone bankrupt yet, I am in the planning stages and trying to find everything out before I do, I am interested too to see how it all works before I go ahead ... such a minefield..

terrence45

Linzy234 wrote: »

Hi,
I havent actually gone bankrupt yet, I am in the planning stages and trying to find everything out before I do, I am interested too to see how it all works before I go ahead ... such a minefield..

Ok I see. Are you paying any debts at the moment or have you already stopped? Your money is yours to do what you like with (at present) and if you're going bankrupt anyway, some people would stop paying debts early and focus on living and business expenses, which could include this course. You wouldn't get into trouble if you paid for it now (NOT via credit!) and I very much doubt the OR would ask you to get it refunded after bankruptcy.

In general I've not seen any hard-and-fast rules for self employed people, which was why I was so interested. It seems to be the case that, in order to estimate current income and expenditure for the bankruptcy application, some people have to provide a few years' worth of accounts, some people the last 3 or 6 months etc, and work out an average. Not an exact science, and open to people doing what they like in terms of running the business in order to lower bottom line profits!

I've read about cases where, after bankruptcy, the official receiver wants profit & loss accounts every 3 months, others where the OR wants only to know if profit goes over a set amount (which would trigger an IPA) and others where the OR never asks for anything at all! I also read about a chap who agreed an IPA based on estimated earnings, which didn't materialise and he was left out of pocket when the tax bill came in.

Being self-employed while bankrupt does seem to be a great way to either get yourself into trouble, or completely get away without having to pay anything. Please keep us updated!

Linzy234

Being self-employed while bankrupt does seem to be a great way to either get yourself into trouble, or completely get away without having to pay anything. Please keep us updated!

Exactly! Thats why I am going to have to plan this very carefully... I am still paying at the moment... Considering stopping though... Just need to decide how to go about it all! :huh:I will keep you updated!

terrence45

Linzy234 wrote: »

Exactly! Thats why I am going to have to plan this very carefully... I am still paying at the moment... Considering stopping though... Just need to decide how to go about it all! :huh:I will keep you updated!

Cool. If going down bankruptcy or other serious debt solution then don't worry about stopping payments if it helps your situation in the short-term. They usually take weeks/months to notice and take action. This is payments to credit lenders, not bills and tax ideally!

As it happened I went bankrupt having never failed to pay a bill in my life (and still haven't, technically, since my debts became property of the OR as soon as I went bankrupt!). In hindsight I wish I'd stopped a little sooner to ease things.