Bankruptcy advice please!!!

BJ65

Hi, I've accrued debts of £12.5K to HMRC and £12K to credit cards. I've been prioritising paying my minimum monthly credit card payments as they have been my fall back safety net as I am self employed, and as such I haven't defaulted on these payments. But I have been getting deeper and deeper in debt on my cards as I use them occasionally when I have to but have only paid minimum payments.
And as these monthly payments clean me out each month I haven't paid anything to HMRC for a number of years. I am now being chased by CCS Collect for £2.4K of my HMRC debt, so it's in the process of hitting the fan now. I've known for a number of years that my debts were spiralling and impossible for me to get on top of, and that inevitably I would probably have to go bankrupt at some point, and I'm thinking that point is now.
To clarify, I'm single, self employed, a private renter, I've got a car that's worth about £500, and I have no savings or assets. I live totally hand to mouth. Most of my credit card debt is due to living off them after I'd had a number of major operations which required being off work for 3-4 months each time, and all my sickness benefit and housing benefit came nowhere near covering my rent, let alone my household bills. My gross earnings last year was £26K.
I've spoken to Business Debtline who weren't great tbh. They seemed intent on encouraging me to pay off these debts at maybe £200/month. This would take me the best part of 10 years I reckon. My work is extremely unpredictable and I can be incredibly busy one month and be scratching around the next. I asked BD if bankruptcy or an IVA may be better options and they gave me zero advice on which way to go. And CCS have given me 30 days to make a decision as to what to do and that is running out next week. Also, just to add some icing to the cake, I have been bankrupt before in 2002 for credit card debts, so I'm expecting to be hung drawn and quartered if I do it again!
I am massively stressed about the whole situation and it is affecting my physical and mental health, insomnia, depression, etc, and I am not at all proud of myself for getting into this situation, again! Any advice would be very much appreciated!

MalMonroe

Hi, I would advise speaking to someone at one of the free debt help agencies such as Stepchange. 

https://www.stepchange.org/

Or someone at Citizens Advice. Just because you're self-employed doesn't mean that you're not eligible for help and advice.

https://www.citizensadvice.org.uk/

You can actually file for bankruptcy more than once. And enough time has passed since your last one, too.
Nobody is going to hang, draw and quarter you.

But a DRO may be more suitable for you since the upper limit has now increased to £30k.

It does sound as if you need some advice about benefits too though and one of the free agencies can help you with that.

You could also do with some sound advice on money management from what I can gather. I had a DRO 8 years ago and have learned an awful lot about money management since then. Your income last year was twice mine and I can manage to live a decent life and run a car worth £6k. I'm also managing to save a small amount each month and I'm not on benefits.

Eight years ago I could never have envisaged that as my total debt was £15k. I never thought I would be free of the debt. It sounds like a long time but looking back it seems to have flown and I have to say that I've really learned a lot. You can too. Just phone one or more of those free agencies.

BJ65

Hi, thanks for your reply. My first port of call was StepChange who stopped me within the first 30 seconds after finding out I was a self employed sole trader. Apparently that's a no go for them. They referred me to Business Debtline who as I've said seemed intent on encouraging me to pay off the debts at minimal repayments and were totally non committal when I asked for actual advice as to my best option. They give information as opposed to advice it seems.

They also told me that I'm not eligible for a DRO although I'm not sure exactly why. And also that CAB don't help self employed sole traders as per StepChange.

I'm not being at all critical when I say this, but you can live on £13K a year? My rent and council tax and utility bills come to over £12K so I can only think that the cost of living where you are must be considerably less than where I am. And I've always assumed that I wouldn't be eligible for any benefits on £26K earnings. Maybe I'm wrong and should look into it as you advise?

My thoughts are that trying to clear my debts is not viable on my income and how much I owe, and that my best option is bankruptcy having read a number of threads on this forum. And as I said in my original post, I need to reduce my stress levels as I feel that I'm going to blow a gasket if I continue like this.

If anyone's got a better idea then I'm all ears :-)

flipflopflo

Please can I ask who CCS is?

antonic

flipflopflo said:

Please can I ask who CCS is?

https://www.ccscollect.co.uk/

Commercial Collections Services Ltd
Company HMRC have passed their debt to , to be collected 

BJ65

Hi, I could really do with some advice please as to whether I'm doing the right thing to be thinking of going bankrupt? The way I see it an IVA would only prolong the agony and I've been told that a DRO isn't an option for me.

Also, am I likely to get a pummelling because half my debt is to HMRC? And on that note, do you think I could persuade HMRC to declare me bankrupt as opposed to declaring myself bankrupt so that I can avoid trying to find £680 which right now is impossible.

I would love some advice please as Business Debtline weren't much help and apparently StepChange and CAB don't help self employed sole traders. Thanks

Minkym00

My personal opinion is that IVAs just prolong the agony and, as the supervisor takes their costs first, it can be a long time before any of the debt is actually paid off.

HMRC could make you bankrupt but they are very “hands off” at the moment so this could take quite some time. Forget this option.

You have no assets to protect and are not a high earner so bankruptcy is a viable option. Your debt is not new and you’ve been making the minimum repayments on your cards so you should have no worries about misconduct.

My advice would be to default on the cards to save up the fee and go for it.

fatbelly

I'm with Minky on this if your only asset is the car, which hopefully you'll be able to make out a case for as essential for your business.

sourcrates

I also agree with the above, IVA`s have their place, if you have a house to protect for example, but with no assets to protect, why drag things out, I'd opt for bankruptcy every time.

BJ65

Excellent, thanks for all your advice, that was exactly what I needed to hear. I've been spiralling deeper into debt for years and I knew this day was inevitable. I'm dreading doing it but I've just got to suck it up and do it, once I've found the £680 that is. Cheers

Keruge

BJ65 said:

Hi, thanks for your reply. My first port of call was StepChange who stopped me within the first 30 seconds after finding out I was a self employed sole trader. Apparently that's a no go for them. They referred me to Business Debtline who as I've said seemed intent on encouraging me to pay off the debts at minimal repayments and were totally non committal when I asked for actual advice as to my best option. They give information as opposed to advice it seems.

They also told me that I'm not eligible for a DRO although I'm not sure exactly why. And also that CAB don't help self employed sole traders as per StepChange.

I'm not being at all critical when I say this, but you can live on £13K a year? My rent and council tax and utility bills come to over £12K so I can only think that the cost of living where you are must be considerably less than where I am. And I've always assumed that I wouldn't be eligible for any benefits on £26K earnings. Maybe I'm wrong and should look into it as you advise?

My thoughts are that trying to clear my debts is not viable on my income and how much I owe, and that my best option is bankruptcy having read a number of threads on this forum. And as I said in my original post, I need to reduce my stress levels as I feel that I'm going to blow a gasket if I continue like this.

If anyone's got a better idea then I'm all ears :-)

It seems to me you have other choices

Open a basic account with a different bank, no overdraft, no credit, just a debut card or if you have no overdraft stay with your current bank. Maybe even consider one of the offers from MSE such as the £150 HSBC switch.

Grab every bit of credit you can from all your cards and overdraft if you have one.

Stop paying the credit cards a penny, they want to keep the debt alive and so ask you to contribute a pound a month.  Don't do it and the debt will start the 6 year journey to going off statute, but you will probably not need the 6 years, consider it an insurance policy.

If you say you can't afford a penny and will not be paying they will eventually issue a default notice, freeze the interest and sell the debt. getting the default notice is important (see link at bottom). Now do not lose any sleep for the credit card companies, they are lending irresponsibly in my opinion, the debt cost them just 3% to create on their computers, they have made a fortune in interest over the years, that stops now.

Next you need to change the entity for work, so you stop being self employed and form a company for your business activities, anything off the shelf, some even are free or pay you if you open a biz account.  Some people form companies in Ireland where tax rate is under 15% I believe, but consider HMRC rules.  You might want to get the company formed by a relative.

Get your income going to the company, become a PAYE employee of the company but also do work for other companies so you avoid IR35 risk to employers. If you can't get any other work do not worry for the moment.  The company has the income, you can be paid under £12,000, the rest stays in the company for now, you can use it for marketing to get more business or to subcontract, depends on what you do for work.  I suggest this because you are trapped, not only by the debt but by the employment, using a company allows you to limit your liabilities, but it is also a launchpad for you reinventing yourself and working for numerous employers.who bill the company instead of paying you as self employed.

You will need to cut your living costs and focus on paying off HMRC debt only, you say you can't live on £25k, I do not pay rent, but I live on under £7k net.  This means buying out of date food and freezing it, only buying such food if you would usually buy usually, maybe get a referral to a food bank. No drinking, no £3 coffee, no take away food or eating out or even lunches out, take pasta in that you made the night before.

You may need to move to a bedsit, to cut your costs, use the debt free wannabe thread to see ways of cutting your costs.  That starts with a full account of where you spending now. If your net income is low you can get 50% off your water bill. Wherever you are spending money you can cut it back, for example  I pay £4.50 a month for a sim with unlimited calls and texts plus 2gb a month for data, I was offered a free second sim to day with unlimited calls and text plus 100mb for data. I use hotspots for internet, I do not watch live TV, you might be able to get a reduction on Council tax once you have reorganised yourself or a one off discretionary payment for hardship.

You then have two choices, if you can live in this pauper mode for six years the debt will go off statute as long as you do not acknowledge it, so do not engage with debt collection agencies for consumer debt, just HMRC. Throw all you can at HMRC, now if you can get the total debt under £20,000 you can do a DRO (not sure if this wipes HMRC debt, assume not), but if you keep your income low the DRO will discharge you in a year if your income is still poor.  I do no know your circumstances, you might need to do a course to change the type of work you do, for example learn to drive HGV, or whatever.

You can turn your life around and reinvent yourself, I know a guy who had a mental breakdown due to debt in 2019, he lost job, home and everything. He retrained and did DRO to get a clean slate, he told me he never wants credit again.  Now he does not need it, he drives a milk truck, earns a fortune and loves it.

DRO only costs £90 while bankruptcy was around £750.

It seems to me that with your debt that close to 20k you would be better off getting your debt under that level.

Others will disagree with me on some of the above I know, but I truly believe the only way to remove the shackles of debt and low income is to restructure and reinvent yourself. Living frugally is an art form. You can go to Turn2Us for grants, too.

https://forums.moneysavingexpert.com/discussion/6027755/statute-barred-debts-and-the-limitation-act#latest