Ask a StepChange debt advisor a bankruptcy question

StepChange_Aidan

trialanderror2020 said:

StepChange_Aidan said:

Hi,

Thanks for posting.

Based on the details you’ve provided it looks like you would qualify for a Debt Relief Order (DRO). You should be eligible to apply as long as:

• You live in England, Wales or Northern Ireland

• Your total debts are less than £30,000 (£20,000 in NI)

• You have less than £75 left over each month after paying your priority bills and living costs (£50 in NI)

• Your vehicle is worth less than £2,000 (£1,000 in NI)

• Your other assets are less than £2,000 (£1,000 in NI)

DRO is usually a preferable option to bankruptcy, as it’s cheaper and can give you a fresh start after 12 months. However, you’d need to get full debt advice before you decide. If you’d like to get help from StepChange you can use our online tool or give us a call to speak with an advisor.

Please be aware that any costs orders relating to family proceedings are not written off in DRO or Bankruptcy and would still have to be paid. Costs relating to other cases can be written off.

The N39 (Order to attend court for questioning) is to help the creditor to gather more information about your situation and decide on the best way to enforce a debt.

There are some more details on the Order to Obtain Information process here.

Creditors are unlikely to apply to make you bankrupt as they would have to pay for the administration and legal costs. They usually only consider this if they believe that you have enough income or assets for them to get their money back.

I hope this helps,

Aidan

Thanks, it sounds like a DRO is my best option then.

The local authority's solicitors have just told me that they would recommend to their client that they stay the enforcement proceedings if I agree to pay them £75/month from my means-tested income, otherwise they are instructed "to pursue all enforcement measures, which might include enforcement against the capital value of any pension, attachment of monthly pension payments or ultimately a bankruptcy petition."

Can they make the civil service pension provider cash-in my pension and pay them whatever it's worth (not much I imagine, as it's only £600/year and I've already been receiving it for 30 years since I was medically retired)? If they can attach my £50 monthly pension payments, the DWP will still deduct that amount from my means-tested disability benefits even though I'm not receiving it, so my income will be £50/month less than what the Government says I need to live with my disabilities.

The local authority gave me a £300 grant to buy a new fridge last week because my current fridge is 20 years old and knackered and I'm on a low income and have no savings, and now they're asking me to pay them £900/year!

Hi,

My understanding is that a creditor cannot force you to cash in or take deductions directly from your pension except in very rare circumstances. If the local authority tries to use these methods, I’d recommend seeking specialist legal advice.

Based on your posts, I suspect a DRO will be your best option, but you need to contact a debt advisor to discuss your situation in more detail before you go ahead.

Kind regards,

Aidan

Shadow2512

Hello I'm hoping to be applying for my bankruptcy in April or may once i have saved the full fee.

I have been in touch with stepchange regarding this.

I have read up alot on the process but there is 1 thing I am not understanding.  I don't believe I will be on an IPA as my expenses are on over my income so I will still need to reduce this and I understand the OR may change my expenses etc.

 I understand that I will be put on a nil tax code, my tax is approximately £350 a month, my question is if i am not on an IPA and I am on a nil tax code what happens to the tax I am not paying for the year? Is it paid to me then I pay to the OR and if I am not paying tax how will the element which would normally be tax show on my payslip and be worked out ? I'm also assuming my student loan payments will increase due to a false increased salary due to no tax bring paid?

Thank you

StepChange_Aidan

Shadow2512 said:

Hello I'm hoping to be applying for my bankruptcy in April or may once i have saved the full fee.

I have been in touch with stepchange regarding this.

I have read up alot on the process but there is 1 thing I am not understanding.  I don't believe I will be on an IPA as my expenses are on over my income so I will still need to reduce this and I understand the OR may change my expenses etc.

 I understand that I will be put on a nil tax code, my tax is approximately £350 a month, my question is if i am not on an IPA and I am on a nil tax code what happens to the tax I am not paying for the year? Is it paid to me then I pay to the OR and if I am not paying tax how will the element which would normally be tax show on my payslip and be worked out ? I'm also assuming my student loan payments will increase due to a false increased salary due to no tax bring paid?

Thank you

Hi,

Thanks for your post.

If you’re in PAYE work, your tax will usually be stopped for the remainder of the tax year or until you change employers (whichever is sooner). If this happens your take home pay will increase, and the OR can ask you to pay the additional income into an IPA (Income Payment Agreement).

When the bankruptcy is approved, the Insolvency Service will inform HMRC, who in turn will contact your employer’s payroll department to amend your tax code to NT. This means that tax will be stopped (although National Insurance will continue). The OR will inform you if this affects the amount you’d need to pay into an IPA.

Please be aware that even if your normal budget shows that your living costs are higher than your income, an IPA could be set up if money is available in the short-term while the tax is suspended.

Student loans repayments shouldn’t be affected as the amount is based on your salary before tax and other deductions.

There’s some more information on IPAs here.

I hope this helps,

Aidan

Mitzi1

I became unable to repay credit card and loan repayments (amount owed is £35,000) in 2017 due to change in personal circumstances. Between then and now I have not worked and have not claimed benefits. I have no assets, car is in husband name and always has been. So I have absolutely no personal income. I have had some money in my bank over these years which is from my husband to me to pay for shopping, diesel etc. About 1 year ago I had £15,000 paid in to my bank from a company that my husband did a big job for. The money has dwindled down to very little now as that has been used for day to day expenses( all showing on my statements). I want to apply for bankruptcy now to clear my debt but my questions are:
1. Do I qualify?
2. How would the large sum of money paid in effect the bankruptcy application?
3. Would they need to ask for information from my husband/companies he has received money from into my account? Ideally I would like to keep him out of it altogether.

I posted this as a new discussion today but i don’t think it comes up on ask a stepchange debt adviser, which is what I wanted. So I’ve posted again here in the hope of that advice. Sorry it’s been posted twice. Im not familiar which posting on here I’m afraid.

Mitzi1

Mitzi1 said:

I became unable to repay credit card and loan repayments (amount owed is £35,000) in 2017 due to change in personal circumstances. Between then and now I have not worked and have not claimed benefits. I have no assets, car is in husband name and always has been. So I have absolutely no personal income. I have had some money in my bank over these years which is from my husband to me to pay for shopping, diesel etc. About 1 year ago I had £15,000 paid in to my bank from a company that my husband did a big job for. The money has dwindled down to very little now as that has been used for day to day expenses( all showing on my statements). I want to apply for bankruptcy now to clear my debt but my questions are:
1. Do I qualify?
2. How would the large sum of money paid in effect the bankruptcy application?
3. Would they need to ask for information from my husband/companies he has received money from into my account? Ideally I would like to keep him out of it altogether.

I posted this as a new discussion today but i don’t think it comes up on ask a stepchange debt adviser, which is what I wanted. So I’ve posted again here in the hope of that advice. Sorry it’s been posted twice. Im not familiar which posting on here I’m afraid.

In addition to the above, I should add that 2 of the debts are now CCJ’s, one for £2,000 and the other for £9,000. The remainder of my debts become statute barred in a few months. I have not made any payments towards any of the debts. CCJ’s have 4 years on one and 2 years remaining on the other. I believe aCCzJ’ expires after 6 years but am I right in saying that they can reapply a CCJ at any point in the future, every 6 years if they wanted to?

trialanderror2020

StepChange_Aidan said:

Hi,

My understanding is that a creditor cannot force you to cash in or take deductions directly from your pension except in very rare circumstances. If the local authority tries to use these methods, I’d recommend seeking specialist legal advice.

Based on your posts, I suspect a DRO will be your best option, but you need to contact a debt advisor to discuss your situation in more detail before you go ahead.

Kind regards,

Aidan

Thanks. I have a couple of questions about DROs.

If I get a DRO now, and I subsequently succeed with my appeals and persuade the court that the costs orders should never have been made and it quashes them, it will effectively mean that I never owed the council any money, but there will still be a marker on my credit record saying that I did and that I failed to pay it. Is there any process for clearing that marker from my credit record in those circumstances, or would I be stuck with it for six years?

On the other hand, if I fail with my appeals the court may order me to pay the council's costs for opposing those appeals, which may push the amount that I owe over £30,000 such that I won't qualify for a DRO any more. Presumably I could still apply for bankruptcy, but is there much difference other than the fact that the fee for applying is higher? I know it says that DROs are cleared after 12 months, but it also says it stays on your credit record for six years, which is the same as bankruptcy I think, so either way won't I have exactly the same problems with having a bad credit score and being unable to get any loans or credit cards for six years?

StepChange_Patience

trialanderror2020 said:

StepChange_Aidan said:

Hi,

My understanding is that a creditor cannot force you to cash in or take deductions directly from your pension except in very rare circumstances. If the local authority tries to use these methods, I’d recommend seeking specialist legal advice.

Based on your posts, I suspect a DRO will be your best option, but you need to contact a debt advisor to discuss your situation in more detail before you go ahead.

Kind regards,

Aidan

Thanks. I have a couple of questions about DROs.

If I get a DRO now, and I subsequently succeed with my appeals and persuade the court that the costs orders should never have been made and it quashes them, it will effectively mean that I never owed the council any money, but there will still be a marker on my credit record saying that I did and that I failed to pay it. Is there any process for clearing that marker from my credit record in those circumstances, or would I be stuck with it for six years?

On the other hand, if I fail with my appeals the court may order me to pay the council's costs for opposing those appeals, which may push the amount that I owe over £30,000 such that I won't qualify for a DRO any more. Presumably I could still apply for bankruptcy, but is there much difference other than the fact that the fee for applying is higher? I know it says that DROs are cleared after 12 months, but it also says it stays on your credit record for six years, which is the same as bankruptcy I think, so either way won't I have exactly the same problems with having a bad credit score and being unable to get any loans or credit cards for six years?

Hi there

Thanks for getting in touch, it sounds like it's a very difficult time for you.

Council debts aren't typically reported on a credit file, it's usually consumer regulated debts such as credit cards or some utilities such as water and electricity and gas. 

If you were to go ahead with a DRO and the application be successful, it would be this which would show on your credit file for six years and impact your ability to obtain credit.

If the appeal wasn't successful and if this was to increase the amount of debt you have, there is a risk your DRO may be revoked (cancelled) and any interest or charges would reapplied on the debt. 

The main differences between the two debt solutions would be the cost of applying for it and how it's applied for, but as my colleague Aiden advised, it sounds like you need to speak to a debt advisor to discuss your options and next steps.

I hope this helps.

Patience

StepChange_Aidan

Mitzi1 said:

Mitzi1 said:

I became unable to repay credit card and loan repayments (amount owed is £35,000) in 2017 due to change in personal circumstances. Between then and now I have not worked and have not claimed benefits. I have no assets, car is in husband name and always has been. So I have absolutely no personal income. I have had some money in my bank over these years which is from my husband to me to pay for shopping, diesel etc. About 1 year ago I had £15,000 paid in to my bank from a company that my husband did a big job for. The money has dwindled down to very little now as that has been used for day to day expenses( all showing on my statements). I want to apply for bankruptcy now to clear my debt but my questions are:
1. Do I qualify?
2. How would the large sum of money paid in effect the bankruptcy application?
3. Would they need to ask for information from my husband/companies he has received money from into my account? Ideally I would like to keep him out of it altogether.

I posted this as a new discussion today but i don’t think it comes up on ask a stepchange debt adviser, which is what I wanted. So I’ve posted again here in the hope of that advice. Sorry it’s been posted twice. Im not familiar which posting on here I’m afraid.

In addition to the above, I should add that 2 of the debts are now CCJ’s, one for £2,000 and the other for £9,000. The remainder of my debts become statute barred in a few months. I have not made any payments towards any of the debts. CCJ’s have 4 years on one and 2 years remaining on the other. I believe aCCzJ’ expires after 6 years but am I right in saying that they can reapply a CCJ at any point in the future, every 6 years if they wanted to?

Hi,

Thanks for your post.

There are no qualifying criteria as such to apply for bankruptcy, if you’re unable to repay the debts an application will almost always be approved. Rejections are very rare and usually only when the wrong jurisdiction is used (for example, applying for bankruptcy in England if you don’t live here).

Once a bankruptcy has been approved the case is normally passed to the Official Receiver. They can review your financial history and may ask for some more information about where this money came from and how it was spent.

As Fatbelly has highlighted in your other thread, if some of the debts are due to become statute barred in the next few months it could be worth waiting until then, as you may be able to apply for a DRO when the total amount of debt drops below £30,000.

The CCJs will come off your credit file after six years (although the debt still exists). Creditors cannot reapply for a CCJ. In any case, these debts would also be included in a bankruptcy or DRO.

I hope this helps,

Aidan

JCS1

StepChange_Aidan said:

Shadow2512 said:

Hello I'm hoping to be applying for my bankruptcy in April or may once i have saved the full fee.

I have been in touch with stepchange regarding this.

I have read up alot on the process but there is 1 thing I am not understanding.  I don't believe I will be on an IPA as my expenses are on over my income so I will still need to reduce this and I understand the OR may change my expenses etc.

 I understand that I will be put on a nil tax code, my tax is approximately £350 a month, my question is if i am not on an IPA and I am on a nil tax code what happens to the tax I am not paying for the year? Is it paid to me then I pay to the OR and if I am not paying tax how will the element which would normally be tax show on my payslip and be worked out ? I'm also assuming my student loan payments will increase due to a false increased salary due to no tax bring paid?

Thank you

Hi,

Thanks for your post.

If you’re in PAYE work, your tax will usually be stopped for the remainder of the tax year or until you change employers (whichever is sooner). If this happens your take home pay will increase, and the OR can ask you to pay the additional income into an IPA (Income Payment Agreement).

When the bankruptcy is approved, the Insolvency Service will inform HMRC, who in turn will contact your employer’s payroll department to amend your tax code to NT. This means that tax will be stopped (although National Insurance will continue). The OR will inform you if this affects the amount you’d need to pay into an IPA.

Please be aware that even if your normal budget shows that your living costs are higher than your income, an IPA could be set up if money is available in the short-term while the tax is suspended.

Student loans repayments shouldn’t be affected as the amount is based on your salary before tax and other deductions.

There’s some more information on IPAs here.

I hope this helps,

Aidan

Student loans are based on NIC'able pay, not gross pay.

StepChange_Aidan

JCS1 said:

StepChange_Aidan said:

Shadow2512 said:

Hello I'm hoping to be applying for my bankruptcy in April or may once i have saved the full fee.

I have been in touch with stepchange regarding this.

I have read up alot on the process but there is 1 thing I am not understanding.  I don't believe I will be on an IPA as my expenses are on over my income so I will still need to reduce this and I understand the OR may change my expenses etc.

 I understand that I will be put on a nil tax code, my tax is approximately £350 a month, my question is if i am not on an IPA and I am on a nil tax code what happens to the tax I am not paying for the year? Is it paid to me then I pay to the OR and if I am not paying tax how will the element which would normally be tax show on my payslip and be worked out ? I'm also assuming my student loan payments will increase due to a false increased salary due to no tax bring paid?

Thank you

Hi,

Thanks for your post.

If you’re in PAYE work, your tax will usually be stopped for the remainder of the tax year or until you change employers (whichever is sooner). If this happens your take home pay will increase, and the OR can ask you to pay the additional income into an IPA (Income Payment Agreement).

When the bankruptcy is approved, the Insolvency Service will inform HMRC, who in turn will contact your employer’s payroll department to amend your tax code to NT. This means that tax will be stopped (although National Insurance will continue). The OR will inform you if this affects the amount you’d need to pay into an IPA.

Please be aware that even if your normal budget shows that your living costs are higher than your income, an IPA could be set up if money is available in the short-term while the tax is suspended.

Student loans repayments shouldn’t be affected as the amount is based on your salary before tax and other deductions.

There’s some more information on IPAs here.

I hope this helps,

Aidan

Student loans are based on NIC'able pay, not gross pay.

Hi,

Thanks for the clarification.

I believe that the student loan repayments would still be unaffected by a nil tax code, but please let me know if you have further details on this process.

Regards,

Aidan