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

MalMonroe

Hi, I totally agree with those on here who are advising that your friend would benefit from speaking to someone in the know.

Someone like an advisor at StepChange, National Debtline or Citizens Advice (all the links are in sourcrates' signature, above).

As a personal recommendation, StepChange helped me to turn my life around when I was flailing badly.

Going bankrupt is a big step and is certainly inadvisable without having any expert help.

Hopefully, your friend will be able to use the advice in this thread, the people above all know what they are talking about - and as I said, I've also been in big debt and am now out of it, thanks to StepChange. The advice is free, extremely knowledgeable and non-judgemental. 

happy2017

Hi there, I thought I would add an update the above, see what people think.

She managed to sell the HP car a few months back, and ended up with a few hundred pounds to pay the finance company.

She purchased a car in cash shortly afterwards which is worth around £1,900.

Her circumstances have changed, she is still self employed but making less.  She is now claiming Universal Credit and is making around £1000 profit per month.

She is now studying at a University close by for a couple of days per week, she wants to secure a job at a later date after obtaining her degree so this one is a long term goal for the future.

She is struggling to keep up with payments on the school fees but her ex husband is helping her financially.
The children are in years 7 & 9 so she is worried about a move away from the school and all that will come with it.

She is in rented accommodation and really wants to get on to the property ladder but that is less of a priority I think, but she doesn't want to speak to any debt advisors as she struggle with anxiety and panic attacks.

She knows she has to do something but she is not sure what to do.  Her main worry is the kids education keeping them at the school and keeping the car she purchased cash.  She went bankrupt over 12 years ago when she was an employee so she said she feels like a failure if she has to go through that again.

I'm not a professional or anything like that so don't know what her best options are as her outgoings are more than her income.

fatbelly

And what about the debts?

happy2017

fatbelly said:

And what about the debts?

Debts are credit cards, unsecured loans all totalling £55k

fatbelly

If the car is necessary then it is of value that the OR will allow.

I take it she's not paying the debts then

Is it the school fees that are worrying her about bankruptcy?

I will check if there's any guidance on whether that is allowable expenditure

Ok, there is

https://www.gov.uk/guidance/technical-guidance-for-official-receivers/35-income-payment-agreements-and-orders

Section 35.61 (can't paste)

It's generally a no but could be a yes if the children are e.g. in their GCSE year

Spendless

Having an income low enough to mean you qualify for UC and also trying to pay school fees even if it's just 50% is madness. The youngest has only just gone into the secondary school years, he could be moved elsewhere. The eldest hasn't started the GCSE years of yrs10& 11. If she thinks eldest is already  too old to be moved I'd be looking at paying these for 2.5 years max then looking at state sixth form.

maxmycardagain

happy2017 said:

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

i think you will find the self employed and personal are not separate as wilth a ltd company, all S/E profits or losses are the persons own... S/E, the person is the business, the business is the person

Kim_13

Spendless said:

Having an income low enough to mean you qualify for UC and also trying to pay school fees even if it's just 50% is madness. The youngest has only just gone into the secondary school years, he could be moved elsewhere. The eldest hasn't started the GCSE years of yrs10& 11. If she thinks eldest is already  too old to be moved I'd be looking at paying these for 2.5 years max then looking at state sixth form.

I can see a problem there in that the youngest will feel his/her elder sibling was given a chance in life that they themselves weren’t. That’s not a resentment I’d want growing in my family, but the OR isn’t going to care about that. If you are in the position of needing means tested benefits and debt solutions, it always has been that you do lose an element of choice. That such debts have built up might suggest that she couldn’t afford the school fees in the first place.

Therefore, she should look at how much maintenance the CMS would assess her as liable for and pay that to her ex as maintenance rather than paying any school fees. If the amounts aren’t similar, either both children move schools now before one gets the benefit of private GCSE’s - higher grades are usual - and the other doesn’t (Year 9 would be the last point to move a child without a serious impact) or the ex husband pays the fees if he does not wish his children to be moved into the state system. There may be VAT applied to those school fees before the children finish, which should also be borne in mind when making a decision.

ToxtethO'Grady

HP car is too high a payment and she would have to prove it was essential for her work, named in her contract that she is essential vehicle user for work. Think a district nurse or support worker. If it is for her commute then they will only allow it if no public transport at the time she commutes. £250pcm is the highest I have ever seen and this was a support worker who had to do home visits and it was in the contract they were on.

School fees/tution are only allowable when a child is in the last year of school and going through exams.

As others have mentioned she needs free debt advice and I would think that a DMP may be the best option rather than bankruptcy or an IVA

happy2017

RAS said:

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?

She is considering a Self Managed DMP.  
Is this just a case of completing an income and expenditure form and sending these off to all her creditors?