Thinking of bankruptcy ( will check with a trusted HR person if that would be an option )

fl123

This is my SOA from the post I made - https://forums.moneysavingexpert.com/discussion/6361354/debt-got-too-big-handle/p1

All debts have been defaulted for some time now, so no interest. What I am thinking, and would like to check with everyone here who has way more experience and knowledge of this topic than I do, is if I go bankrupt and be placed on an NT tax code, then I believe the whole debt can be paid in under a year. Is that an option ? How does it all work ? Thank you all !

I don't plan on taking any new loans for sometime ( don't want to have debt anymore and just buy what I can afford ), only concern is future renting.

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

Monthly Income Details[/b]
Monthly income after tax................ 4000
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 4000[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 500
Management charge (leasehold property).. 0
Council tax............................. 50
Electricity............................. 120
Gas..................................... 80
Oil..................................... 0
Water rates............................. 5
Telephone (land line)................... 0
Mobile phone............................ 15
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 8
Groceries etc. ......................... 200
Clothing................................ 10
Petrol/diesel........................... 50
Road tax................................ 0
Car Insurance........................... 30
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0[b]
Total monthly expenses.................. 1068[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0[b]
Total Assets............................ 0[/b]
[b]
No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
HSBC Overdraft.................2493......0.........0
HSBC Credit Card...............3060......0.........0
PayPal Credit..................195.......0.........0
Other .........................17000.....0.........0
Lending Stream.................600.......0.........0
AMEX...........................6800......0.........0
HSBC Loan......................7051......0.........0
L2G............................2870......0.........0[b]
Total unsecured debts..........40069.....0.........-  [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 4,000
Expenses (including HP & secured debts). 1,068
Available for debt repayments........... 2,932
Monthly UNsecured debt repayments....... 0[b]
Amount left after debt repayments....... 2,932[/b]

[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -40,069[b]
Net Assets.............................. -40,069[/b]

[i]Created using the SOA calculator at www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using Firefox browser.[/i][/font]

theoretica

My understanding of bankruptcy and your SOA are that you might actually end up paying more if you went formally bankrupt, than if you just pay off your debts with your monthly income.  In your case, I don't see the benefits of bankruptcy over simply paying the debt over the next year (and trying to negotiate reduced settlements).  Have you spoken to a debt charity?

fl123

I plan on doing that, for the moment I have just been researching to try and find potential options and understand how things work. Paying more is strange, I was under the impression that payments go towards the debts, but why would more money be paid if the debts are then paid in full ? Thank you for your comment !

The main issue is that due to my gambling and trading addiction, I never actually saved anything or kept anything. All of the money left over, would go to feed the addiction.

theoretica

I think you may be over-optimistically thinking that the HMRC out of the goodness of their heart cancel income tax for people who go bankrupt - they won't. It looks like they often collect it differently, as part of the debt.  https://www.insolvencydirect.bis.gov.uk/freedomofinformationtechnical/technicalmanual/Ch25-36/Chapter31/part7/part3/part_3.htm#31.7.63  'Where bankruptcy occurs, HMRC submits a claim in the bankruptcy proceedings for the whole of the outstanding tax due in that tax year, '

Brie

I put this on your other thread but thought it might be helpful to others here as well.

A Guide to Bankruptcy in England, Wales and N.Ireland (debtcamel.co.uk)

theoretica

fl123 said:

I plan on doing that, for the moment I have just been researching to try and find potential options and understand how things work. Paying more is strange, I was under the impression that payments go towards the debts, but why would more money be paid if the debts are then paid in full ? Thank you for your comment !

The main issue is that due to my gambling and trading addiction, I never actually saved anything or kept anything. All of the money left over, would go to feed the addiction.

Running the bankruptcy system is expensive - and you want to look out to be sure you don't end up paying for it. 

fl123

theoretica said:

I think you may be over-optimistically thinking that the HMRC out of the goodness of their heart cancel income tax for people who go bankrupt - they won't. It looks like they often collect it differently, as part of the debt.  https://www.insolvencydirect.bis.gov.uk/freedomofinformationtechnical/technicalmanual/Ch25-36/Chapter31/part7/part3/part_3.htm#31.7.63  'Where bankruptcy occurs, HMRC submits a claim in the bankruptcy proceedings for the whole of the outstanding tax due in that tax year, '

Thank you for this, and good thing you posted it on this thread so others may see it ! It is quite interesting and really doesn't make much sense for this approach. Why not just take the amount of tax at that moment in time rather than then taking it back but as part of the proceedings. Thinking it would be more beneficial to just give the option to the person going bankrupt to decide, since if I was in this situation I would prefer to pay the taxes normally, rather than have them added as an additional debt. The bankruptcy option doesn't look that appealing anymore, at least for me, after learning about this. Thank you !

theoretica

Somewhere in the document it said it was so HMRC are treated equally with self employed people (who don't have the tax taken at time of earning option) and employed on PAYE.  It isn't really about the person going bankrupt, but about fairness to the other debtors.

fl123

theoretica said:

Somewhere in the document it said it was so HMRC are treated equally with self employed people (who don't have the tax taken at time of earning option) and employed on PAYE.  It isn't really about the person going bankrupt, but about fairness to the other debtors.

Makes sense, thank you ! So basically what this translates to, in my head, is that instead of the employer paying the taxes to HMRC, the OR gets the tax money and then decides on how to split it, with some of it going back to HMRC anyway. So just for the sake of an explanation using some random numbers, if someone has a debt worth 10k, then has 2k left after expenses per month, and pays 10k in taxes when they are bankrupt, then the amount they would pay on taxes would cover the debt so initial debt would be covered from that, but then the extra 2k would be paid for 5 months as well to cover the 10k in taxes that was supposed to go to HMRC.

theoretica

fl123 said:

theoretica said:

Somewhere in the document it said it was so HMRC are treated equally with self employed people (who don't have the tax taken at time of earning option) and employed on PAYE.  It isn't really about the person going bankrupt, but about fairness to the other debtors.

Makes sense, thank you ! So basically what this translates to, in my head, is that instead of the employer paying the taxes to HMRC, the OR gets the tax money and then decides on how to split it, with some of it going back to HMRC anyway. So just for the sake of an explanation using some random numbers, if someone has a debt worth 10k, then has 2k left after expenses per month, and pays 10k in taxes when they are bankrupt, then the amount they would pay on taxes would cover the debt so initial debt would be covered from that, but then the extra 2k would be paid for 5 months as well to cover the 10k in taxes that was supposed to go to HMRC.

Worse than that -you are assuming payments stop when all debts are paid - which is what would happen in a debt management plan (DMP) or a personal arrangement with the creditors.  

There was a poster on here who inherited during their bankruptcy and it looked like they were going to lose far more of the value of the property than their debts had been.

theoretica

Bankruptcy was designed for people who really won't have the money to pay their debts over a few years - so it can work out ridiculous when applied to other situations.