Self Employed and thinking of going bankrupt but not 100% sure

happy2017

Hi,

I’m after some advice for a family member who doesn’t use the forum yet and is considering bankruptcy.

Essentially, she is self-employed, requires a car to get to work 3 times a week 100 miles away and works in Milton Keynes 1 or 2 days per week.

She has a car on HP and pays £400 per month with the half to be paid off by the time Nov 2023 arrives.

She has average gross income of around £5k per month.

Debt payments come to £2.5k based on £60k debt.

Her average gross income is reducing with the nature of the work she does, and she is considering going bankrupt as she is getting close to being in the red.  She understands the negative impact but is unsure if its possible to keep the car for work purposes.

To add to the situation, she doesn’t pay any maintenance to her ex-husband as he has the kids full time (its complicated) but does pay half school fees.

Hoping someone on the forum could kindly give some advice on what to expect going through the bankruptcy process.

Thanks for taking the time to read.

happy2017

I should say that the debt is personal debt and not as a result of self employment, thanks

elsien

Is it genuine self-employment, or a company she is working for trying to avoid their obligations? And just to clarify, this is personal bankruptcy and not business bankruptcy as a sole trader? 

According to gov.uk,  

A vehicle under a finance agreement cannot be exempt from your bankruptcy. The trustee will review your financial agreement to see if there is a benefit in claiming the vehicle for the estate.

If the trustee decides they will not be claiming the vehicle, they will give notice to you and the finance company.

The finance company may decide to take back the vehicle when you become bankrupt. It may let another person take over your agreement if your payments are up to date. If someone else has already made payments for you, they’ll become a creditor in your bankruptcy.

Guide to Bankruptcy - GOV.UK (www.gov.uk)

happy2017

genuine self employment, thanks

fatbelly

My first thought is that someone with an income of 5k per month should be able to service 60k of debt.

The big factor that you don't mention is whether she is a property owner. E.g. does her ex live in their jointly owned house? Is she in rented accommodation at the moment?

Bankruptcy is a very easy process to start, particularly if the £680 fee is not a barrier. However it's very difficult to get out of if you realise you've made a mistake.

Has she taken advice from someone impartial, like National Debtline, Stepchange or Payplan?

elsien

I think she'd struggle with having school  fees as an allowable expense unless she can put up a very good reason indeed. Not liking the local state schools probably doesn't cut it. 

happy2017

Hi, she doesn't own any property and is currently renting.
Lots of the creditors are high interest %.
She hasn't spoken to anyone just yet, I've use this forum before and thought it would be a good start on her behalf

fatbelly

I don't think school fees would be allowable and neither would the HP payments. It's likely she would get a very large Income Payments Order.

Really needs to take advice before jumping into something she might regret

RAS

Absolutely needs to get proper advice from a debt charity, not paid for advice. Bankruptcy is hard and costly to reverse. 

She might want to consider a DMP?

What's the difference between the cost of the school fees and Child Support?

fatbelly

happy2017 said:

Hi, she doesn't own any property and is currently renting.
Lots of the creditors are high interest %.
She hasn't spoken to anyone just yet, I've use this forum before and thought it would be a good start on her behalf

Maybe she should post here herself. Sounds like she has got herself into a mess.

sourcrates

On that kind of income, even if its reducing, bankruptcy would be a massive gamble.

If she went into debt management, and all interest was stopped, she`s only looking at a potential 3 year plan, where she can keep up the school fee`s and service the car debt.

Of course it would depend by how much her income reduced, but flexibility is the name of the game.