Bankruptcy questions

Sam2022

Hello Everyone
I am going to declare myself bankrupt following advice from Stepchange.  I am trying yo get all the info they require to get breathing space before my actual bankruptcy.
I am on UC and PIP living in housing association property.  I understand that this should be a straightforward bankruptcy and I just need the fee to pay.  My only asset is my car which I own outright valued at around £10000.
I have been going to sell my car anyway as I hate driving nowadays and only ever go to hosp/drs appointments and the supermarket.
If I did this prior to bankruptcy and used some of the money to replace some household items I desperately need and also pay the bankruptcy fee will I be penalised by anyone?
Thanks in advance.

Brie

I think it will depend on what you buy.  If you sell the car and replace your 20 year old washing machine and 15 year old fridge, then fine.  If you buy a top of the range turntable and speakers, then no.  

Can I ask what's the total of debts you have?  If you don't have a car, you live in rental property and have debts of under £50k you should be looking at getting a debt relief order perhaps instead of going bankrupt.  One advantage is there's no fee for a DRO.  It's possible that they didn't consider this as an option if your debts are between £20k & £50k as the top amount for a DRO will increase to £50k in June so they might not have been aware of this when they advised you. 

Double check on the car value too - it's about to increase from £2k to £4k.  You might find that if you sell your current car (if it is actually worth £10k) and bought something much cheaper you could still have a car and also buy yourself a couple of household essentials as well. 

Suggest you go back to StepChange and discuss these options with them to ensure you are making the best choice for you. 

fatbelly

Yes, if it's only the car that is preventing a DRO, then sort that out, get your ducks in a row and then do a DRO.

You will save £680 in fees, still have a car, and an easier insolvency.

Your comments on Breathing Space indicates you are worried about what creditors will/can do whej the answer is pretty much nothing.

Stepchange will not tell you that as they lobbied hard for BS and are determined to show it's necessary. The government also really likes debt to be presented as scary

Stepchange refuse to do DROs so you will have to go to CAB or Money Wellness. 

Sam2022

Unfortunately my debts are much higher than a DRO allows, they over 74k in total.
I got caught in a debt spiral, where I ended up taking out cards to transfer balances to avoid interest.  Eventually there were no more cards so stupidly I started drawing cash on other cards to pay down debt.  Over time it just all caught up with me and got on top of me.  So I stopped paying some cards to make bigger payments on others which was stupid I know but it somehow made sense at the time. 
My mental health was pretty bad and I then decided to bury my head in the sand as I didn't know what to do.  So I stopped opening mail and answering calls thinking it would all go away.
So realistically bankruptcy is my only way out.
I cant even say I lived a lavish lifestyle or had holidays abroad most of the stuff in my home is 2nd or 3rd hand or even older.  My car is the only asset I have and that was inherited when my Mother died.
I realise that I am not going to have access to any credit for years and rightly so after I've made such a mess of things!!
I thought if I could sell it now and get the things I desperately need it would be a great help.  I dont want to fall foul of the law or anything like that by doing it, if that makes sense.

fatbelly

There will be some questions about it but there's no point going into bankruptcy with a 10k car. Get a sub-2k car and make out a case for it being essential.

Get it serviced, cambelt, new tyres etc

Get household equipment that will be reliable over the next few years

Leave £680 for the bk fee

RAS

fatbelly said:

There will be some questions about it but there's no point going into bankruptcy with a 10k car. Get a sub-2k car and make out a case for it being essential.

Get it serviced, cambelt, new tyres etc

Get household equipment that will be reliable over the next few years

Leave £680 for the bk fee

You also need to think about the impact on UC of having over £6k in your account. Buy the replacement car, get it fettled, and buy replacements for household items that are on their last legs until you are sure you are under the £6k limit. Then if there are any queries about deprivation of assets, you have evidence to prove otherwise. 

Using money released from a higher value inherited car to fund a cheaper one and replace worn out household goods is good sense. 

Sam2022

Thanks for the advice its appreciated.  From what I've read over the last few weeks, am I correct that because my income is only benefits I will not have to make payments towards any debts during bankruptcy?
I've read a fair amount online regards bankruptcy but sometimes the info isn't all that clear.  I know the OR can increase the length of bankruptcy, if they believe you have been reckless and I expect that to happen.  I should have taken action maybe 3 to 4 years ago, I realised then I was fighting a losing battle but I just kept thinking I could find a way out.
Can the OR impose anf fines or other penalties against me for selling the car and using the money for things instead of handing it back to pay debts?

RAS

Bankruptcy allowances are quite generous compared with IVAs, based on the budgets I've seen on here. It's difficult to see how any one on benefits could breach the limits. 

sourcrates

No one declares bankruptcy having acted like a saint, the OR`s office is well aware of the circumstances that can lead to bankruptcy, unless you have been seriously intentionally reckless and/or fraudulent, they will not come down any harder on you than anyone else.

It has been known for clients to withdraw cash on a credit card to pay the bankruptcy fee`s, and that was not given any sanction, so keep an open mind.

You won`t get an IPA if your income is solely benefits based no.

stu12345_2

am I right that the receiver checks your income expenditure , inheritance, windfalls during the 12 months of bankruptcy and if eg you restart work and have a decent surplus then an IPA will then be added

if so then the ideal situation is avoid full-time work from the job centre

fatbelly

You are correct. No IPA if benefit-only income.

On UC you continue to receive it if you have capital 6k to 16k but they assume an income that they call tariff income, which reduces your award

That has been the equivalent of 20% for as long as I can remember, and you are not going to get that as interest so it makes sense to spend it (wisely)

If you get a restriction order, your bankruptcy is extended for a bit. It doesn't really make any difference.