Post bankruptcy savings and selling household items

londonsteve

Dear Forumers,

I've recently been declared bankrupt after a long period struggling to service my debts. Redundancy and Covid conspired to force me to give up the unequal struggle and start afresh. I am presently registered self employed. I receive the basic Universal Credit payment because of my very low monthly income, this as you probably know is reduced by 63 pence for each £1 I declare in income in a given month.

I am presently living with my parents and post bankruptcy (now that my income doesn't all go on interest payments), I have started paying them £200 a month in rent. My income does not meet my expenses, implicitly my uncovered costs are being subsidised by my parents (e.g. groceries I would otherwise need to buy). The living expense budget I submitted with my bankruptcy application was approximately £850 a month while my average income since I became self employed is £500 a month, which includes the UC payment.

I have not had official confirmation from the OR that I won't have an IPA. Obviously I don't expect to when I have such a low income, but without official confirmation I am unsure if the decision has been pushed into the future, pending how my income may develop over 2021? Perhaps I may never hear anything about an IPA, unless I report a new, higher level of income to them?

With the arrival of spring and lockdown restrictions easing, I am anticipating my income from self employment to rapidly rise from derisory sums to quite a few hundred per month. As I earn more, I receive less UC, until I reach the point where I am not entitled to UC at all. To the extent that the Minimum Income Floor comes back, I would immediately get nothing. On the assumption that my income from combined self employment and UC doesn't reach my monthly expense budget, I believe I don't have to inform the OR, but what happens when my overall income strays £100 or more over my monthly budget? Do I need to let them know? What is the threshold? What if I moved away from my parents into shared accommodation and therefore my monthly expenses went significantly higher than the budget provided in the bankruptcy application? I presume I'm not now obliged to live with my parents just because I'm an undischarged bankrupt? I have a short term target of generating enough income from self employment to allow me to join the government's Help to Save scheme which is for people in receipt of government benefits but with a monthly income of at least £550 of thereabouts. I would like to break a corrosive habit of being in permanent debt and start a culture of saving and to that extent, I would like to put the maximum £50 a month into this scheme. Am I allowed to do this while an undischarged bankrupt?

I have household items I would like to sell to raise money. None are worth anything close to £500, hence they were not declared in the application. Am I at liberty to sell these to raise money even if I am an undischarged bankrupt? In aggregate I might be able to raise £1500 on ebay from these items from many individual sales. I was selling off items before bankruptcy to help me to service debts but I realised I'm liquidating my belongings in order to only meet interest payments and I was treading water, giving away what little I had but not reducing my overall debts, so I stopped this at the time.

Your advice is much appreciated!

Sonic101

- If your income is lower than what you stated when you declared bankruptcy, you should let the OR know. With regards to income increasing again (and changes to your living situation), you only need to let the OR if and when this actually happens. With regards to where you live, the OR cannot stop you moving and an increase it rent would be seen as reasonable, providing you weren't planning to rent a great big house all by yourself. But neither you nor the OR can base your budget on speculative events - so I wouldn't worry about this yet. 
- While bankrupt you might be allowed a savings fund for "emergencies" (e.g., if your car breaks down, washing machine breaks, or any other such unforeseen event) ,but would not be allowed a savings scheme as such. When bankrupt, any spare money over and above your essentials and "reasonable domestic needs" should be going towards your creditors; the way the OR would see it is that if you can afford to "save" (other than money put aside for emergencies or necessities), then you can afford an IPA. 
Two questions: 
- If your parents are having to subsidize your income, it doesn't seem to make much sense that you are paying them £200 in rent? 
- If you have already gone bankrupt, what is your statement of affairs like (sorry if I've misunderstood and you haven't yet had a discussion with the OR).

Savetowin

It may be worth trying to sell your things through forum like local facebook groups you won't have to pay to list them and you will be able to to ask the buyer to pick them up saving time and money posted. Just something to think about 

londonsteve

Sonic101, I am a little confused where I'm sitting in the process. Nearly a month has passed since I was declared bankrupt. Shortly thereafter I started getting e-mails from the OR, including one from an Investigator, with some questions pertaining to the circumstances that lead up to my bankruptcy as well as some assets. I responded promptly to all these questions, via e-mail. I didn't hear from the Investigator again. Within a short space of time thereafter, literally, some hours, I had a PDF letter confirming that they do not wish to interview me in person. Another e-mail sent contained a letter that they are not interested in my low values tools of trade and a third e-mail contained some template documents that I had to sign and send back, e.g. to confirm that I understand the restrictions that now apply to me, etc. I signed and scanned them in, both e-mailed them and posted hard copies. This was over two weeks ago and I since haven't heard anything. In light of my income at the time of my bankruptcy being below my monthly expenses, am I unlikely to hear anything more from the OR unless I contact them? I.e. the process is over from their side?

To address your other points: My income is not lower than what I stated in my application, it remains at that level, below my monthly expenses. I am paying rent because I feel an obligation to. It is more an aspiration at present, because my income is so low but over the next couple of months I trust my income will rise to a level where I can pay rent AND I'm entirely self sufficient, albeit still living at home. At the moment I pay rent but don't have enough money to fund everything else, so as an example my parents buy the groceries. If I am allowed to save a modest amount of money as an emergency savings fund, why could I not utilise a government savings account to do this? I don't have to put £50 a month aside, I can presumably save as little as £1 a month, or nothing at all in a given month. I see no difference between saving money in a Barclays account, a piggy bank or a government scheme. We're talking very small sums of money overall, even the maximum permissable amount per annum you can put in is £600.

Unless I am mistaken, I'm not ostensibly incentivised to increase my income above my monthly expenses while I am undischarged and if it were to rise above that level, I would be advised to spend the surplus on moving into a bedsit paying a normal market rent?

Sonic101

londonsteve said:

Sonic101, I am a little confused where I'm sitting in the process. Nearly a month has passed since I was declared bankrupt. Shortly thereafter I started getting e-mails from the OR, including one from an Investigator, with some questions pertaining to the circumstances that lead up to my bankruptcy as well as some assets. I responded promptly to all these questions, via e-mail. I didn't hear from the Investigator again. Within a short space of time thereafter, literally, some hours, I had a PDF letter confirming that they do not wish to interview me in person. Another e-mail sent contained a letter that they are not interested in my low values tools of trade and a third e-mail contained some template documents that I had to sign and send back, e.g. to confirm that I understand the restrictions that now apply to me, etc. I signed and scanned them in, both e-mailed them and posted hard copies. This was over two weeks ago and I since haven't heard anything. In light of my income at the time of my bankruptcy being below my monthly expenses, am I unlikely to hear anything more from the OR unless I contact them? I.e. the process is over from their side?

I don't know - I would suggest contact the OR's office to ask. 

To address your other points: My income is not lower than what I stated in my application, it remains at that level, below my monthly expenses. I am paying rent because I feel an obligation to. It is more an aspiration at present, because my income is so low but over the next couple of months I trust my income will rise to a level where I can pay rent AND I'm entirely self sufficient, albeit still living at home.

It doesn't seem to make sense if you are paying rent but your parents are subsidizing your other outgoings, but if it somehow works for them and you then it's probably fine. 
But again, you say " trust my income will rise to a level where I can pay rent". You need to base your budget on what you are actually living on rather than what you might be living on.

 If I am allowed to save a modest amount of money as an emergency savings fund, why could I not utilise a government savings account to do this? I don't have to put £50 a month aside, I can presumably save as little as £1 a month, or nothing at all in a given month. I see no difference between saving money in a Barclays account, a piggy bank or a government scheme. We're talking very small sums of money overall, even the maximum permissable amount per annum you can put in is £600.

If you haven't been told you're not allowed to do this then it's probably fine to go ahead, assuming you will be able to open such an account as a bankrupt.
The point I was making was that savings to cover and emergency should be fine, but saving per se as a bankrupt are a no-no because any surplus income should in theory be going toward your debts.
Assuming if and when your income improves you can put some money aside, if you later get questioned and it's just sitting in the bank at most the OR might ask for it - but if it's just sitting there I can't see why there'd be a problem, it's not like going and spending hundreds on a holiday or suchlike. 

Unless I am mistaken, I'm not ostensibly incentivised to increase my income above my monthly expenses while I am undischarged and if it were to rise above that level, I would be advised to spend the surplus on moving into a bedsit paying a normal market rent?

Realistically, yes. 
If you are deemed to have a surplus income over £20 you are likely to have to pay an IPA which lasts for three years (unless your income drops again - they can be changed up and down or stopped). If no IPA is set up before you are discharged from bankruptcy, then it can't be set up at a later date. 

There are more experienced people here that can help you further. I would direct any other questions to the ORs office.  But it sounds like you don't have anything to worry about. Just be honest. 

TheGardener

londonsteve said:

Unless I am mistaken, I'm not ostensibly incentivised to increase my income above my monthly expenses while I am undischarged and if it were to rise above that level, I would be advised to spend the surplus on moving into a bedsit paying a normal market rent?

Pretty much - yes. There was a time not that long ago when BR's were excluded from all savings products anyway (by the Banks rather than the OR)  I don't know if things have changed? The OR used to allow a £10 pm emergency savings allowance on SoA's but as sonic101 says, more than £20 pm suggests you have disposable income. If your income does rise sufficiently for you to be able to move into your own place again - the SoA would be reassessed. 

londonsteve

I would be surprised if BRs were excluded from Help to Save but I might be. It's a government scheme expressly for people in receipt of benefits. Part of the aim has to be to encourage low income people to create an umbrella for a rainy day. I would rather put my 'spare' £10 or £20 a month into that than a zero interest bank account and mix it up with my current account; I'll only end up spending it, unless I withdraw it and keep it in cash! The reality is that if I earn £550 a month, thus allowing me to open such an account, I'm still £300 below my monthly expenses. If I put £10 into the savings scheme, that's £10 my parents will spend to buy groceries for me, but they would rather I save some money and get a bonus akin to interest after 2 years, than have no savings at all. They want to help me turn my life around.

Sonic101

londonsteve said:

I would be surprised if BRs were excluded from Help to Save but I might be. It's a government scheme expressly for people in receipt of benefits. Part of the aim has to be to encourage low income people to create an umbrella for a rainy day. I would rather put my 'spare' £10 or £20 a month into that than a zero interest bank account and mix it up with my current account; I'll only end up spending it, unless I withdraw it and keep it in cash! The reality is that if I earn £550 a month, thus allowing me to open such an account, I'm still £300 below my monthly expenses. If I put £10 into the savings scheme, that's £10 my parents will spend to buy groceries for me, but they would rather I save some money and get a bonus akin to interest after 2 years, than have no savings at all. They want to help me turn my life around.

You seem to be missing the point. 
You are currently bankrupt, so at the moment it's not about what your parents want for you, it's about what the Insolvency Service expects from you.

If you are able to open the savings account you mention to set aside some money then indeed why not, you have nothing to lose by doing so - and yes, it's probably a good idea to keep some money in a separate account to avoid spending it in error.

However, as stated, a small amount set aside to cover emergencies should not be frowned upon by the OR, but while bankrupt you don't get the luxury of "saving for a rainy day", because in theory if you can afford to save, you can afford to pay that money towards your debts. That's the reality/downside of having your debts wiped out.

In practical terms, if you are setting a small amount of money aside in a savings account and you are suddenly asked to provide bank statements before you're discharged (whether that's likely to happen I cannot speculate), then if there's money sitting there and you say that you were setting something aside in case of emergency, then I doubt there would be a problem with that. Once you are discharged from your bankruptcy, you're home and dry and you can do whatever you like with your money and start rebuilding your "savings for a rainy day".

Again, I don't know how you can afford to save money if your outgoings are more than your income and you're paying your parents rent that you can't afford, but that's another issue and probably not productive to go round in circles. 

JCS1

Please remember you have a duty to cooperate with the OR.  if they find out you have savings, they are likely to go through your file very carefully.

Modest emergency fund savings would be fine, more than that may be questioned and looked into.  Your surplus income should be going into an IPA.

flipflopflo

If you can’t get a Help to Save account then may I suggest looking to see if you have a Credit Union in your area, just Google Credit Union and your county. In fact I would probably open one anyway if you can. Some have more services than others depending on how big they are. Here’s a couple of examples. 

https://bristolcreditunion.org/

https://www.norwichcreditunion.org.uk/home.html

londonsteve

Thank you for your responses. In the interests of transparency I think it best therefore if I keep things simple for the next 11 months, don't save and work towards increasing my income so that parental support reduces to zero. I have never been anything less than willing and open to cooperate with the OR.

Can I expect a pre-discharge interview early next year, to see how my income has developed?

If I sell household items, e.g. an old hifi for £200, is that money of no interest to the OR, since it heralds from an asset worth less than £500 that I owned at the time of my bankruptcy order? What if my income and expenses were both £1000 and I received £200 from such a sale, thus constituting surplus money?