Bankruptcy?

Euphful

Hi everyone,

Recently, bailiffs started chasing me for council tax debts related to an old property. As a result of this I got some debt advice and am in breathing space, but the whole episode has kind of made me start to face up to my issues with debts. 

National Debtline suggest that Bankruptcy seems like the best option for me. As well as the council tax debt, I have three CCJs related to other debts, and some debts that do not have a CCJ. I am keeping up with some payments that I haven't yet fallen behind with (car, phone) but otherwise am not paying anything off. 

My understanding is that a DRO would not be appropriate. I was told that it was unlikely that I'd be allowed to keep payments towards the car and so that would then become unsecured debt. If I was not paying the car, I would have more than £75 left over, and so they suggested bankruptcy. Initially that was quite frightening but the more I've thought about it, the more appealing a completely fresh start is for me. I have a couple of questions moving forward:

1) My car- I am a Social Worker and so will need a car, should I stop paying for the HP now to save up for a cheap car? I plan to complete my application or bankruptcy before breathing space is over. Will the OR let me keep a cheap car, and if so is there a limit as to how much I could buy one for?

2) My SOA- is it otherwise realistic in terms of things like groceries (320), broadband (30), mobile (25), health insurance (60)?

3) My income is based on bank work. If I chose to work fewer hours voluntarily, would the OR accept that? That isn't to escape an IPA, it's more because of my mental health. 

I want to take responsibility for the mess I'm in and it has been years in the making. I don't own a house or anything like that but I would like to in the future. In lots of ways it feels like an 'easy way out' but I'm hoping the experience will allow me to improve my relationship with money.

Any advice about what happens next would be really appreciated... Thanks

My SOA is below:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2300

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 2300[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 404

Rent.................................... 525

Management charge (leasehold property).. 0

Council tax............................. 100

Electricity............................. 65

Gas..................................... 50

Oil..................................... 0

Water rates............................. 40

Telephone (land line)................... 0

Mobile phone............................ 25

TV Licence.............................. 13

Satellite/Cable TV...................... 50

Internet Services....................... 30

Groceries etc. ......................... 320

Clothing................................ 20

Petrol/diesel........................... 260

Road tax................................ 13

Car Insurance........................... 160

Car maintenance (including MOT)......... 15

Car parking............................. 15

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 15

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 10

Life assurance ......................... 0

Other insurance......................... 61

Presents (birthday, christmas etc)...... 0

Haircuts................................ 15

Entertainment........................... 60

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2266[/b]

[b]

Assets[/b]

Cash.................................... 900

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 900[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 0........(0)........0

Hire Purchase (HP) debt ...... 22624....(404)......24.9[b]

Total secured & HP debts...... 22624.....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Credit card....................476.......0.........0

Credit card....................500.......0.........0

Credit card....................500.......0.........0

Mobile phone/iPad..............520.......0.........0

Dart charge....................116.......0.........0

Electricity....................560.......0.........0

Council tax....................669.......0.........0

Council tax....................2000......0.........0

Loan CCJ.......................7383......0.........0

Legal fees CCJ.................1748......0.........0

Family.........................2000......0.........0

Old mobile.....................344.......0.........0

Old mobile.....................362.......0.........0[b]

Total unsecured debts..........17178.....0.........-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,300

Expenses (including HP & secured debts). 2,266

Available for debt repayments........... 34

Monthly UNsecured debt repayments....... 0[b]

Amount left after debt repayments....... 34[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 900

Total HP & Secured debt................. -22,624

Total Unsecured debt.................... -17,178[b]

Net Assets.............................. -38,902[/b]

[i]Created using the SOA calculator at www.stoozing.com. 

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Sonic101

Hi there 
Don’t feel guilty about taking ‘The easy way out’, we all make mistakes or most of us wouldn’t be there. I’m not an expert, just another person currently trying to resolve debt issues (there are a few around who I’m sure will give you some feedback), but here are some initial thoughts: 

1
car - you are allowed a car if it’s essential for you job; I don’t know what the value of yours is - presumably not quite £20k with depreciation, but if you’re paying £400 I’d imagine it’s still worth quite a bit so you may not be allowed to keep. However, you would be allowed a cheaper replacement for around £1000  - there’s some info here https://www.stepchange.org/debt-info/bankruptcy-and-my-car.aspx 

2

-your car instance at £160 per month seems very high, is that correct? 
- groceries seem a little bit high, I think the norm is about 250 for a single person, but someone more knowledgable will be able to advise on this
- you have nothing for holidays, birthdays or sundress/emergencies - a small amount such as £20 a month should be accepted.

3. WRT your working hours, the OR has no power to tell you how many hours you should be working, so if you reduce them for mental health reasons that’s perfectly acceptable. 

Good luck! x

luvchocolate

I believe the value of a car has been increased to £2,000

fatbelly

Yes, the stepchange info is out of date.

You may be allowed to keep paying for  the car but the Official Receiver could 'take an interest' in it and require it to be sold when the HP completes.

It would be simpler to own a sub-£2000 car but then your surplus income would result in a 3-year IPA. If you are thinking of reducing your hours then now is the time to do that.

I also thought the groceries figure seemed high but suggest you stick with it as it is probably under the SFS figures and should mean that your budget is not too tight.

Minkym00

To correct some of the above posts…

DRO - you can keep a vehicle up to £2,000 
Bankruptcy - you can keep a vehicle up to £1,250 providing you need it (not normally a problem). 

The value of a car was recently upped to £2,000 for DROs. It was NOT increased for bankruptcies. 

Send the car back (any unsecured amount then owing will be covered under bankruptcy anyway) and get a car around the £1,250 value. 

fatbelly

It's £2000 now, Minky

It was updated last year

Debt Camel sets out the rules nicely

https://debtcamel.co.uk/lawnmower-bankruptcy/

stanger66

Not sure if this this helps but I was told I could keep paying my hp car approx value £8500 as they had no interest in it 

Euphful

Thanks everyone for your replies. I am leaning towards handing the car back; it feels like a bit of an albatross around my neck. 

For me, I’d have to give up the car if I was working fewer hours; I really am ready for a bit of a break.

I really appreciate the feedback, thank you  

Euphful

Also, my insurance really is £160! That is another reason getting rid of the car is probably the best solution for me, although until I get a new one I can’t update the budget. 

I did have one final question- will the health insurance be questioned?

Minkym00

fatbelly said:

It's £2000 now, Minky

It was updated last year

Debt Camel sets out the rules nicely

https://debtcamel.co.uk/lawnmower-bankruptcy/

Fatbelly, it’s slightly more nuanced than Debt Camel is making out.

The allowed value of a vehicle in bankruptcy has been increased to £1,250. However, the guidance states that ORs should not realise an exempt vehicle unless they are reasonably certain that there will be a net benefit to the estate of £500. So, when agent’s fees are taken into account, it won’t be worth selling a bankrupt’s vehicle if it’s worth less than £2,000.

This is important because the OR may still seek a 3rd party to buy out a bankrupt’s interest in a vehicle (instead of selling it) and, in those circumstances, they would use the £1,250 value to work how much they are looking for.

Does that make sense?