Bankruptcy due to impact of Coronavirus

[Deleted User]

If you have petitioned for bankruptcy as a direct result of Coronavirus is it fair to say that you are in this position through no fault of your own? (Debts would have continued to be paid off using income had it not been for Coronavirus halting income)
Therefore, who would should be contacted regarding reviewing credit scores for "Covid bankrupts"? 

Payment holidays due to Covid are not affecting credit scores so can a similar measure be considered for this specific cause of bankruptcy? 6 years of bad credit score due to a pandemic seems unreasonable for someone who would not have petitioned were it not for Coronavirus.
Thoughts? And who would legislate this? FCA?
Thanks

mwarby

Coronavirus maybe the straw which breaks the camels back, but in many cases Coronavirus is not the root cause.

Im almost certain there will be no credit score get out for bankruptcy during this time. Many of us here have been through insolvency, the 6 years will pass and I personally came out of it much more financially savvy and focus on saving rather than credit

sammy32683

Yea regardless of how/why you became bankrupt they won't create a new special category of bankruptcy. As most places issue payment holidays and it will have only been a couple of months of no wages if you were unlucky enough to lose your job it wouldn't be the main cause that pushed you into bankruptcy if you were doing fine beforehand. 

It's a hard thing to do but you will feel much better having done it. 

[Deleted User]

mwarby said:

Coronavirus maybe the straw which breaks the camels back, but in many cases Coronavirus is not the root cause.

Im almost certain there will be no credit score get out for bankruptcy during this time. Many of us here have been through insolvency, the 6 years will pass and I personally came out of it much more financially savvy and focus on saving rather than credit

Thanks for replying. The OR seemed to think it would be a fair question to pose to the decision maker (When I figure who that is). Although I was vulnerable with a large payments schedule, I would never and have never defaulted in 20yrs. My industry (TV) stopped all shoots overnight rendering me with nothing to make my regular payment commitments. Coronavirus IS the root cause. My version of a savvy outcome will end up being a whole new, more secure career as the creative industry is far too insecure - living cheque to cheque -  however I earn a lot when the going is good. Feast or famine!

mwarby

So it would appear that the cuase is that you have been living payday to payday. While the coronavirus has forced the issue, it's quite possible that a number of other things could also have some so. Most creditors have been offering 3 month payment holidays, could these not have given you the breathing space needed ? IMVHO a feast or famine industry is fine and is no doubt exciting, I'm sure its all possible to earn a very good wage on the good times, however if you recognize the industry as  being so unstable it's prudent to limit the amount of credit commitements you take on

Re the OR's comment I suspect the OR was simply trying to deflect a difficult question, there was no get out of jail free card during the 2008 crisis, nor for any previous recessions. Unless you can afford to repay the debts on full and then some, to annull the bankruptcy, the bankruptcy will stand. It's not for the OR or insolvency service to say what effect the bankruptcy should have on your ability to obtain credit in the future, that is down to the lending policies of the banks. It's quite possible that they will loosen slightly to attract new custom, as many will be impacted, it's also possible that things will go the other way as banks will seek to lessen exposure to risk.

Your credit score as obtained from numerous websites is somewhat fictional in nature, it is the credit reference agencies trying to give a picture as to how your credit history would be viewed by a typical bank. It ignores the fact that different products are interested in different aspects of your credit history(a secured loan such as a mortgage is very different to a loan for a car, which is again different to a credit card) and often ignores your income and outgoings.

What is important is your credit history, which should be an accurate record of how you've managed your credit for the last 6 years. The measures you outlined are I believe around not defaulting or recording missing payment flags for those in difficulty due to coronavirus, however the fact that nothing was paid will often still be visible (eg that your mortgage balance is going up, due to interest, and not going down). As it currently stands the idea that a bankruptcy and the fact that all credit accounts have been defaulted and outstanding balances written off,would not be reported is a no go. To do so would render the credit histories useless for any lender seeking to use them

Minkym00

I’m curious, did you get any debt advice before pushing the button? We’ve been in lockdown for 6 weeks. Why did you go bankrupt so quickly?

MEM62

AA72 said:

mwarby said:

Coronavirus maybe the straw which breaks the camels back, but in many cases Coronavirus is not the root cause.

Im almost certain there will be no credit score get out for bankruptcy during this time. Many of us here have been through insolvency, the 6 years will pass and I personally came out of it much more financially savvy and focus on saving rather than credit

Coronavirus IS the root cause. 

No.  COVID-19 may have been a contributory factor.  The root cause, as previously mentioned is that you live from payday to payday.  You work in an insecure industry yet, from the immediacy with which you went from solvent to looking at bankruptcy,  appear to have had nothing put aside to tide you over a lean spell.  In the TV / film industry periods of unemployment are expected/  You could even say that they are normal so a contingency fund is important with this kind of employment.  An acquaintance of mine (a stunt performer) puts away a large percentage of his earnings to cover this.     

I make the distinction not to be argumentative but to invite you to consider the real causes for your situation.  Although blaming coronavirus makes the thing more palatable a proper understanding will put you in a better position in avoiding finding yourself in a similar position in the future.  If your finances were robust before COVID-19, you may be facing challenges now but it is highly unlikely that you would be facing anything as extreme as bankruptcy.  

cymruchris

I remember the London riots of 2011 - that dropped my business so far into the red I ended up going through bankruptcy - but I don’t blame the riots - it was simply the straw that broke the camels back. There had been numerous other challenges in the year leading up to the event, but it would be easy for me to say that I’d lost my business due to the riots. Would it have survived if the riots hadn’t happened? Realistically I’ll never know -  but it could have been anything else that might also have been the straw that broke the camels back. On the bright side - for those that have to go through a bankruptcy - it’s tough - but there’s light at the end of the tunnel on the other side. Have you actually pressed the button and actioned it? 

sourcrates

AA72 said:

  My industry (TV) stopped all shoots overnight rendering me with nothing to make my regular payment commitments. Coronavirus IS the root cause. My version of a savvy outcome will end up being a whole new, more secure career as the creative industry is far too insecure - living cheque to cheque -  however I earn a lot when the going is good. Feast or famine!

I would say overspending, and not having an emergency fund, and/or some savings, from when the going is good, is probebly the root cause.

Recent events only brought the situation to a head.

Brock_and_Roll

Who knows what life can throw at you.....there are always "unknown unknowns" out there can break the camel's back if you are sailing close to the sun!
I suffered a financial crisis many years ago out of the blue, and since then I just dont want to carry any debt and I have a years's income tucked away where it is quite hard for me to touch. Give me some peace of mind.

MinuteNoodles

AA72 said:

If you have petitioned for bankruptcy as a direct result of Coronavirus is it fair to say that you are in this position through no fault of your own? (Debts would have continued to be paid off using income had it not been for Coronavirus halting income)

No. It is 99 times out of a 100 always your fault. You should have at least 3-6 months of living expenses in an emergency fund and given we've not been on lockdown for even 2 months yet then if you'd have been financially responsible and had that fund then you'd have continued to pay them.

Secondly there's the payment holidays finance companies and mortgage companies have been giving so yet again the drop in income because of the crisis was not the cause of your bankruptcy

Ultimately bankruptcy is because you've over-leveraged yourself running so hand to mouth that the slightest thing that came along tips you over the edge and that could be your wages not getting paid one month, your car breaking down, the washing machine packing up, you ending up off sick because of illness or injury or a crisis like this.

Bankruptcy in almost all cases is down to poor financial decisions by the bankruptee. I was bankrupt 20 years ago when it used to be for a minimum of 3 years, not the 6-12 months it is now, when my income dropped 50%. It wasn't the drop in income that bankrupted me because without the loan and credit card payments my income was still plenty to live on. It was all the stuff I'd bought I couldn't afford with other peoples money. This is a situation I've never repeated since and the emergency fund was one of the very first things I built back up. 20 years on of living within my means and I'm in the position that I could lose my income for 2 years and still pay the bills.