CAB recommending bankruptcy (SOA page 3)

allthe7s

I have been paying off my minimum payments and paying extra when I can afford to on all of my credit cards. I have never missed a payment. My ex is now wanting half an old loan paying which I cant afford to contribute to (it is in joint names and I understand that I am liable for this) 

This means I earn approx 13k a year and have debts totalling £38000. 

After an in depth phone interview with CAB they said that in their opinion going bankrupt is the best option for me. A DMP is apparently no good as I dont have any money to pay them back (I have been increasing my debt each month to break even) 

My only asset is a car worth £4000. They have advised me to sell this to afford the bankruptcy fee and buy a car worth £1000. They advised because I am single with 2 children I may be allowed to keep £1000 in a savings account for emergency as I will have no access to credit. 

I am so worried, I never thought I would be going through anything like this. 

Any advice would be greatly recieved. 
Thank you 

mwarby

allthe7s said:

(I have been increasing my debt each month to break even) 

You need to work out how your going to solve this, this maybe a bigger issue than the car. You might find sharing your statement of affairs helps(you'll likely get a number of suggestions as to how you could cut back)

I would also make sure that your wages are being paid somewhere your creditors can't get them, you don't want them to use them to clear debts you have with them (called right to set off) before you actually go bankrupt. This is IMHO best done by opening a new account with a bank you have no debts with and switching just wages and essential bills

allthe7s

Thanks Mwarby, without meeting the minimum payments for my debt I break even, with about £30 a month left over. 

sourcrates

You need to prepare for this before you take any action, look after yourself, as no one else will.
As well as the clean bank account, keep some cash at home, when your bankrupt, cash is king, build up a nice emergency fund, as well as sorting out the car problem, if bankruptcy is going to be likely, start defaulting on your payments now, use the spare money from the car sale for (A) your emergency fund, and (B) your bankruptcy fee.
Debt collection takes forever, and if your going bankrupt, who cares.

allthe7s

Am I able to have an emergency fund in cash? If I withdrew cash now do they not look at my bank statement and ask where that cash went? 

Do they actually look at my bank statements themselves or do I just give them my SOA? 

mwarby

They will look at your bank statements and your soa.I'd avoid trying to pull wool over ORs eyes, this has potential to go very badly. They won't necessarily take all your emergency fund, but they do have a duty to maximize return to creditors, so it may as well be a modest one

Minkym00

Any emergency fund will be viewed on your personal circumstances. So if you’re a higher earner than average then it would be expected that your outgoings are higher than normal. On your lower than average income £1000 might be seen as a bit excessive. 

allthe7s

Ok thank you all for your help so far. I have a couple of other questions if anyone could answer. 

1. I am named on my 2 sons savings accounts, I've never paid into them but their grandparents do. Would they be seen as my accounts? Yes I have access to them but I never have and never would touch them. They have approx 4k and 2.5k in. 

2. Do I need to show the OR my bank statements or is an SOA ok? 

3. I have a partner who doesnt live with me at the moment but we would like to (him move in with me) . Is it better to move in before the bankruptcy and have the expenses halved (although they wont be able to give me exactly half as he earns  different amounts each month) or ride out the year officially single and move in after the year is over? 

4. CAB recommended I sell my car to raise funds to pay the bankruptcy fee  but my parents are buying it and lending it to me (my son is disabled and m workplace not accessible by public transport so CAB are confident I'll be allowed use of a car) should I keep it and let the OR decide best course of action for my car (it is worth approx 4k)

5. Should I move all of my direct debits and payments (wage and benefits) into my new basic bank account now as I have debts with my current current account bank and am going to stop making the minimum payments as of end feb, I dont want them to take it themselves. 

6. If the OR decides I dont need to pay towards my debts but I got a pay rise after discharge but within the 3 years can they introduce an IPA (I think thats what it is called) or does it have to be agreed to in the initial 12 months? 

Thank you and sorry for all the questions I have no one to discuss this with and want to be sure I am doing the right thing. 

mwarby

1 - you should be OK as they arent your accounts

2 - the OR will want to see bank statements, if you don't have them they will get them from bank

3 - If your expenses halve it could lead to you getting an IPA. I'd be very careful though not to mislead the OR, they will want to know about significant chnage of circumsgances

4 - it wouldn't be your car, but this also means you wouldnt get money to maintain it, and possibly no money to insure and fuel it. IMHO the advice cab gave is good and better than what you suggest

5- not all direct debits, just those for essentail bills (ie elec and council tax yes, barclaycard no)

6 - an IPA needs to be setup in first year before discharge, once setup though its not fixed and so a payrise would likely increase it

allthe7s

Thank you mwarby 
So with point 4 you think get my dad to buy the car no so that I can pay the fee and then explain to the OR that I will have use of a car my dad owns? 

And with point 6 they cant set up an IPA once I'm discharged? 

Thank you 

Minkym00

Re the car - I'm amazed CAB has suggested this as you could be committing a misconduct. If you sell the car to your parents you are disposing of an asset to a connected party and the OR will go after them to reclaim it. Especially as you will still retain the car, so you are no worse off, but your creditors lose an asset in your bankruptcy. You need to ensure that it is sold for full market value (get evidence from Auto Trader to show other similar car's value) and ensure you use the money to pay off creditors (on a pro-rata basis) as well as the adjudicator fee.