Self employed bankruptcy

RustyB

Good afternoon all, 

I was looking for some advice, my wife is staring down the barrel of bankruptcy.

She is self employed approx 10k net with a 12.5k gross. And currently averaging at around 900 take home this year.

Her "books" have always just been done using the bank statements, filtering out expenses etc as she is a very low earning sole trader and it's working around kids etc.

Will the OR need receipts etc or are they happy with the completed relevant self assessments?

I might add none of the debt is currently a business debt just personal debt.

Any input from those who have gone through a similar thing would be really greatly appreciated.

sourcrates

How much debt does she have, as you don`t say in your post ?

RustyB

Sorry she is in 22.5k debt on 3 cards and a catalogue.

flipflopflo

Is she a home owner?

RustyB

No she's not a home owner, she has no assets at all either.

fatbelly

Sounds like it might be a Debt Relief Order then.

If she can't afford the contractual payments on the cards and catalogue, she should probably go to token payments or zero payments while she takes advice and decides

RustyB

Unfortunately cab said because of my wage she is unlikely to qualify for a DRO.

fatbelly

Your wage is not directly relevant as DROs are an individual solution. It will be relevant in terms of dividing up the joint expenses. For instance, she averages 900 take-home. If you average 2700, then she takes 25% of the rent, council tax  etc etc.

If at the end of this calculation her income/expenditure shows less than 75 surplus she qualifies. 

We have seen a lot of problems with CAB recently and it does not surprise me that they do not want this gig.

Stepchange have opted out completely from doing DROs but they are referring to Money Wellness and if you can get over the hurdle of them wanting you to have an IVA, then they do seem to be doing DROs pretty quickly.

Anyway, what I'm saying is that she does have options. The first thing though is that when in a hole, stop digging. Stop paying the non-priority debts and see if as a couple you can make expenditure match, or be less than, your income. 

RustyB

Thanks, and yes I did wonder about this.

I'm in 28k debt but have managed to sort mine a little bit so it should be gone in 5 years...not via any debt solution though.

I might be wrong but from what I can gather her being self employed bankrupt just means her tax code will change and again looking into it as her self assessments are done by "cash basis" ie money into account and money out I think I have everything needed for her.

It's a !!!!!! situation caused by covid lockdowns, something I've finally managed to chill about so I won't rant about that one.

We have the access to br money and I think with how bad money has got and Continually getting into more debt on a monthly basis it feels like we have to stop the cycle in its tracks before it snowballs anymore.

Relying on a DRO decision coming through sounds really tough especially as I wish us to be transparent, although I will have a look at money wellness just in case.

flipflopflo

I really think that going bankrupt may be a sledgehammer to bang in a nail. There are posters on this board who are advisors for various agencies so why not pop up your joint SoA and let them have a look. Fill it in with how things are at the moment, maybe mark which debts are yours, your wife’s and joint. Format to MSE and copy and paste here. 

https://www.lemonfool.co.uk/financecalculators/soa.php

sourcrates

Bankruptcy is a much more intrusive option, although not as bad as it used to be, and if the debt was a lot higher I would say no problem.

But you can carry off a DRO and barely notice any change, and as her debt sits at 22k, she would fit in that niche quite nicely, after 6 years, all is forgiven, and no one will ever know.

With Bankruptcy it lives forever in the London Gazette, and a lot of lenders ask "have you ever been bankrupt ?" on credit agreements.

It may be a little bit of a faff getting a DRO just now, but once done and dusted, it will be worth the extra effort, I honestly would not have bankruptcy as a first choice here.