Bankruptcy affected by cash in hand earnings prior to applying?

scotslad987

Long story short...I've been sitting on a pile of debt for a number of years and been an ostrich about it by ignoring it because the thought of facing up to it gives me severe anxiety, but I need to sort it for my own mental sanity and to be able to move on with the life.

I currently owe the bank approx £50k for a defaulted mortgage due to a marriage breakdown and house being in major negative equity, we bought at the height of the boom with a 100% mortgage and got caught out when we separated. Citizens Advice at the time recommended defaulting on mortgage, letting the bank repossess, and filing for bankruptcy to avoid having to pay the NE owed on the house.

I had some other debt accrue in around the same time and to be honest I put it to the back of my mind and for the past 6 years I've done nothing, except stress about it to the point it's affected my health. But my life has moved on, I've met a fantastic partner and `I want to get this off my back to be able to have a better life with her and our kids. 
I've been reading up about bankruptcy proceedings and seen it talks about showing you've been trying to pay off creditors in the previous time before applying for bankruptcy but I've totally neglected this on all fronts, so one of my questions I guess is whether I'd be accepted for bankruptcy?

The other thing I'm stressing about it that I do some cash in hand work which is sporadic in nature but there's a paper trail in my bank of money being deposited either by people I'm working for or that I've moved into my account from PayPal, so will that cause any issues? I've read the official receiver can look back up to 5 years looking for financial irregularities, but that it's mainly to see if you've offloaded any valuable assets to avoid paying towards creditors? 

My day job pays around £1550 per month after tax, and there could be anything from and additional £50 to £500 going in from casual work outside of my salary.

As far as assets go I don't really have many because my credit rating is rock bottom. My car is a 15 year old computer wagon for my 25 mile each way trip, I've a road bike that's a few years old, a laptop and a DSLR camera. Bar that I don't have much of any value, but I'm not really a materialistic person.

In terms of the debt I have it's approximately

NE from house £50k (was split between me and my ex)
HMRC £4.6k from old Self Assessment arrears I'd forgotten about as the letters were going to my old address
Other smaller loans/credit cards £3.5k

All in it's around £60k, and I just want the quickest way out of this mess. I want to drop a day in work to help with childcare which would mean roughly 20% reduction in wages so say £1300 per month net, and I know if I went with an IVA it would mean possibly getting turned down if the numbers don't allow for any surplus income to pay back creditors. 

I have a meeting booked with Citizens Advice to see what they suggest as options, and I'm talking to HMRC to arrange a payment plan to clear tax arrears before they plunder my wages via tax.

I'm nearly 100% sure bankruptcy would be the better option for me but those two niggles are in the back of my mind and I'm worried the curt would turn me down for it so if anyone has any info to help clarify it I'd be so appreciative.

Emmia

Could you do compressed hours at work, so longer daily hours, but no drop in salary? Options like 5 days in 4 (1 day per week less in the office) or 10 days in 9 (equivalent to half a day less each week in the office).

I've no advice on the bankruptcy front though, someone will be along shortly on that I expect.

sourcrates

Is this mortgage shortfall debt actually being chased ? because you say you have been sitting on it for 6 years already, large shortfall debts such as this rarely get chased that vigorously.

What correspondence have you had and from who?

Debt purchasing companies/banks know the average person does not have 50k sat festering under the mattress, telling them its unaffordable, backed up by a copy of your budget, will normally be enough for them to leave you alone, it only has another 6 years to run before it becomes statute barred (limitation period on mortgage shortfall debts, interest 6 years, capital 12 years).

The majority of large debts such as this never get re-paid, and eventually end up statute barred.

That would leave you with less than 8k of debt, which could be repaid by debt management, or an arrangement to pay.

I don`t know what others may think, but I see no need to go bankrupt here.

ToxtethO'Grady

Same as Sourcrates said it's too soon to think bankruptcy (BR), there's things you should look into.

Are you in England /Wales or Scotland as the rules differ?

The OR will want a 'debt narrative' on the application which is where you explain how you got to where you are so what you have explained about the relationship and respossession should cover it. It is only if you have treated your creditors differently. paid 1 but not the others etc, that it will be raised. 

Being accepted for BR is not usually a thing if you pay the fee, you are usually accepted it's that your past behaviour may result in something called a restriction where you are classed as a bankrupt for the length of the restriction, they can be 2-15 years,but it is up to the OR case examiner.

I would look into the mortgage shortfall debt as they have to send you a letter within the 6 years to say they are going to continue chasing you for the shortfall, if it is capital. If they haven't then they are out of luck and it is statute barred even if it is capital. 

Did the mortgage company get a money order/county court judgement when the property was repossessed or sold? If so the debt cannot go statute barred.

HMRC self-assessment - have you filed your self-assessments for the years missed? That can reduce your tax bill a lot, you can also appeal the late filing penalties and that could take a lot off as well. You do not have to have reams of paperwork just information about how you were managing if not self-employed, wage slips. I would also register you are not self-employed, because if you don't, even if you go BR you'll have another bill or late filing penalty coming up. However be aware that the cash in hand income could cause issues if you use your bank statements as proof.

Assets - it's usually only assets that are worth £500 or more that should be declared and the OR uses Parkers for cars. Most cameras and computers lose loads of value once they are 2nd hand.

sourcrates

OP not been online for over a month, hopefully they will return to check their post.