Bankruptcy via Debt-Charity Route

toroymoi

Hi MSE forum,

Wanted to ask Step-Change (will probably end up calling), have no assets, £45k in credit card non-priority debt. Debt Repayment plans suggesting going to take nearly 5 years to pay-off. Aware my debts will default either way, so have decided on the Bankruptcy option, and going via a Debt-Charity. 

My question is, will the appointed ICO go through each transaction on my credit card statements? I went through a dark time last year, and am all better, have had therapy and counselling. But there are questions transactions that were used for substance purchases. Furthermore, due to my salary being decreased by 20% for over 13-months now because of Covid, I was supplementing my monthly support to my girlfriend who lives overseas via credit-card transfers. One charity advised that this would void a bankruptcy agreement immediately. 

Do I just need to bite the bullet and pay a debt repayment plan for the next 5 years? Or will going with a charity (vs trying to apply for bankruptcy direct with Gov) provide a bankruptcy application some form of anonymity of how the debt was accrued?

I do hope my financial situation (salary income) changes in the next 12 months, but it was damming news to hear that now a bankruptcy might not be valid due to how it accrued (money sent supporting a loved one/dependent). 

Any advice would be greatly appreciated. 

Thanks.
Paul.

fatbelly

You can get advice from a charity and they may help with the application but there is only one route in and that is the gov.uk website. The OR will look into how the debt accrued but your situation is by no means unique and you'd be unlucky to get a BRO.

You seem to think your application might be rejected and that wouldn't happen. The adviser that talked about an application being voided was talking nonsense and that does not surprise me. It was probably an IVA-pusher.

As you have surplus earned income however you would get a 3-year Income Payment Arrangement

sourcrates

As FB has said, you apply for bankruptcy online, at the .Gov website, yourself, you pays your fee, and usually that is that.

You don`t normally get turned down for bankruptcy, unless your case involves fraud of some kind, even then you would get a BRO, and not an outright decline.

No one goes bankrupt with an exemplary financial record, the OR knows this, they won`t be looking to trip you up. 

The advisor you spoke with probably wasn`t from a charity, and was talking rubbish anyway, as FB has intimated, they most likely were an IVA lead company, wanting to sell you an IVA.

[Deleted User]

It's important that people understand that DROs, Insolvency and Bankruptcy are last resort options, no one should ever take one as a quick way out of debt. 

If you have a good credit rating and are just feeling abit overwhelmed by interest charges ect and haven't missed any payments of defaulted, then less damaging and effective options such as debt consolidation and balance transfer credit cards are a far better alternative.

sourcrates

Deleted_User said:

It's important that people understand that DROs, Insolvency and Bankruptcy are last resort options, no one should ever take one as a quick way out of debt. 

If you have a good credit rating and are just feeling abit overwhelmed by interest charges ect and haven't missed any payments of defaulted, then less damaging and effective options such as debt consolidation and balance transfer credit cards are a far better alternative.

I disagree, yes it does depend on your circumstances, and yes you should get all the best advice possible, but last resort options ? not always, transfers are a stop gap measure at best, and consolidation, well, that`s typically just another step in the bankruptcy dance, unless you alter the way you treat money, you will be back in a similar position within 18 months, but with twice the debt you had before.

Consolidation takes commitment and self control if your going to make it work, these kind of loans are almost impossible to get nowadays anyway, lenders have raised the drawbridge on such products due to covid.

DRO`s are no more invasive than debt management, once the 6 years are up, bankruptcy, granted, is more involved, but nowadays its not a last resort option, for the average joe, its no worse than any other debt solution, yes its a major step for most people, but it should not be viewed as a last resort, I don`t like that terminology, it should be seen as a new beginning, debt free, that is how most of those who have been through it describe it.

You are only bankrupt for a year, in most cases, after 6 years all trace is gone, except in the London Gazette, if you can live with that, as most do, then it can be the right choice for you, its all down to personal choice and if your circumstance warrant it.

toroymoi

sourcrates said:

As FB has said, you apply for bankruptcy online, at the .Gov website, yourself, you pays your fee, and usually that is that.

You don`t normally get turned down for bankruptcy, unless your case involves fraud of some kind, even then you would get a BRO, and not an outright decline.

No one goes bankrupt with an exemplary financial record, the OR knows this, they won`t be looking to trip you up. 

The advisor you spoke with probably wasn`t from a charity, and was talking rubbish anyway, as FB has intimated, they most likely were an IVA lead company, wanting to sell you an IVA.

Hi SC, 
Thank you for this. The advisor was from the head office from a large well known 3 letter abbreviated religious based debt-Charity. I am well aware of the IVA salesmen, who've been ringing me a few times. I have decided against an IVA. 

The issue which I have been discussing also tonight with the national debt line is that only around 15K of the debt has been attributed to monthly support to my girlfriend who lives overseas via credit-card cash transfers. They advised that this might come under investigation only as a matter of fraud so that it is clear that I am not securing assets overseas, which I fully understand, but there is no fraud here and the money has been legitimately spent on living costs, with receipts on the receivers end.  

It's been very valuable to get a second opinion from you guys here and the national debt line. I am yet to get their final advice tomorrow as I've run out time tonight. 

fatbelly said:

You can get advice from a charity and they may help with the application but there is only one route in and that is the gov.uk website. The OR will look into how the debt accrued but your situation is by no means unique and you'd be unlucky to get a BRO.

You seem to think your application might be rejected and that wouldn't happen. The adviser that talked about an application being voided was talking nonsense and that does not surprise me. It was probably an IVA-pusher.

As you have surplus earned income however you would get a 3-year Income Payment Arrangement

I have done income and expenditure and am left with around £250 a month to pay my creditors (on my current salary still reduced). I am expecting yes I might have to pay an IPA, but would be better still I think than opting for the 5+ year debt management plan. This Bankruptcy route also gives me an opportunity to start saving for a future, during the 6 years of a tarnished credit rating. I am very aware of the risks, but I do not have any assets to lose other than a car I use for work valued around 2.5k (2003 reg).

Would a OR thoroughly check my income and expenditure? Thing is I lodge with my parents, and I give them "rent" which is a fixed monthly amount that spreads across the house utility bills. I don't directly pay the utilities companies i full, as its handled by my parents, I just pay a share of it. I can prove the money going out to my "landlord parents". 

Thank you all so much,
Paul.

fatbelly

With income and expenditure they will accept 'reasonable' figures. You don't have to prove every last penny so if what you pay for your keep is reasonable, it'll be accepted.

On the car valuation they accept a Parker's Guide bottom figure. Are you sure your 18-y-o car is worth £2500? AFAIK the value of the car should be less than £1000 and could be sold if more, with £1000 given back to get a replacement. However, in practice if it's not going to release anything for the creditors it won't happen AND the max value in a DRO has just gone up to £2000 so there may be a bit more flexibility.

toroymoi

fatbelly said:

With income and expenditure they will accept 'reasonable' figures. You don't have to prove every last penny so if what you pay for your keep is reasonable, it'll be accepted.

On the car valuation they accept a Parker's Guide bottom figure. Are you sure your 18-y-o car is worth £2500? AFAIK the value of the car should be less than £1000 and could be sold if more, with £1000 given back to get a replacement. However, in practice if it's not going to release anything for the creditors it won't happen AND the max value in a DRO has just gone up to £2000 so there may be a bit more flexibility.

Thank you! Yes reasonable figures considered. 

I did read on the Citizens Advice that if you can justify that the car is being used for work, then they will rethink seizing it. It's a BMW, and yes old, but well looked after. I've had a local mechanic value it at that, and he sells BMW's as a side business, and I trust him, but I know you must be thinking! ;-) 

Minkym00

To be honest, from what you have said it is very likely that you would be subject to further investigation. It sounds as if your debt is quite recent, some classed as extravagance and some disposed of to a non-dependent. How much have you spent on your cards in the last 2 years? 

The OR will also want attempt to recover the money you gave your girlfriend.