Self Employed Sole Trader Planning Bankruptcy

Tiptop00

Hi all, 

I'm in a complicated situation and I'd love some advice about next steps and the budget sheet.

I stopped paying my debts, child maintenance (informal arrangement), council tax, and VAT, Income Tax and National Insurance about 3yrs ago due to poor mental health following a traumatic event. I was sectioned earlier this year with psychosis which gave me a chance to heal. Since my discharge I have been working on putting my life back together.

I'm in work, I'm a self-employed sole trader. I generally earn the same each week but my earnings increase occasionally when the company I freelance for needs an extra hand. 

I haven't submitted my VAT returns yet, I need to deregister and backdate that because the nature of my employment and earnings significantly changed at that time.

I need to submit self assessments for Income Tax/National Insurance for the past three years.

I also have other debts (CCs, loans, vehicle finance, etc.).

I believe my total debt is around £115,000 (with HMRC's estimates it is around twice that, but it should go down to around my estimate when I submit my accounts, and I hope to appeal the penalties etc)

I don't have any assets, apart from a modest car that is SORN.

I have one CCJ (unpaid).

I have a magistrates court fine for an unpaid speeding ticket that I understand won't be included in a bankruptcy. I need to set up a payment plan for that. 

I also have a UC loan, would this be included in the bankruptcy?

I have been working with Business Debtline on my budget, but it's been very tricky, partly because I've been living a very chaotic life and haven't been looking after myself, my family, or my home, and partly because they weren't able to tell me how much would be acceptable to spend in the various categories. I can't look at my past outgoings because they don't reflect what my current/future outgoings will be.

Does the OR need to see payments for things like work clothes, emergency fund, child maintenance etc going out in my past statements, or should I complete a budget based on how things are/will be moving forward?

I'm wondering whether I should hold off filing for bankruptcy for a few months to allow my bank statements to reflect my budget?

If I do that should I also hold off setting up a payment plan for the magistrates court fine, or would it be ok to go ahead with that either way? 

I have one safe bank account, do I need a second safe bank account to save for future tax bills, emergency fund, etc? What I'm asking is, does the OR need to see these amounts being paid in/set aside? If I start saving for those now, will that money be taken by the OR to pay towards my debts?

I don't have a car on the road at present (it needs some repairs, it's a modest car valued below £3000) but I do need one and will have car costs in the future. Is it advisable to have the car sorted before filing for bankruptcy, or would I be able to negotiate with the OR for this to be added to my budget during the bankruptcy? 

Is there anything else I need to think about or plan for before I file for bankruptcy?

Any help or advice right now would really be appreciated. I just want to draw a line under this and move on with my life.

Thanks for your help

RAS

@sourcrates This might be better in the bankruptcy section as some specialist members only really visit that section?

I'd suggest that making arrangements re court fine now is the best way forward.

Other than that, housing and CT, the world's barely going to worry about unpaid consumer type debt.

Do you think there's any chance HMRC will actively make you bankrupt? That's the other big creditor most likely to engage in enforcement.

Tiptop00

Thanks @RAS, appreciate it.

Should I set up a payment plan for CT in the meantime even though it'll be included in the bankruptcy?

I don't know, I do know they're trying to recover the VAT debt via a debt collection agency. I haven't heard from HMRC since end of last year because I changed address, but I'll have to update my address when I submit my returns so it's possible they may do then when they know how to contact me.

fatbelly

Hi. Set up a payment plan for the court fine and let the council know you are getting debt advice.

You are heading for bankruptcy but there's no rush. Wait until your situation is stable

If the OR allows a car then I think a 3k car would be ok. The limit went up to 4k in a DRO and 3250 in bankruptcy but debt websites may not yet reflect this change

A uc advance payment is a qualifying debt

You need to be banking somewhere unconnected to your debts

ManyWays

child maintenance (informal arrangement)
Has Business Debtline said if this debt can be included in your bankruptcy?

I believe my total debt is around £115,000 (with HMRC's estimates it is around twice that, but it should go down to around my estimate when I submit my accounts, and I hope to appeal the penalties etc)
If you are going bankrupt then there may be little point in appealing penalties but Business Debtline will explain about getting your tax affairs in order pre bankruptcy

Is it advisable to have the car sorted before filing for bankruptcy
How are you managing without a car at the moment? It sounds as though bankruptcy is months off.

JCS1

it used to be the case if a car was off the road it was taken by the OR (though my knowledge is 15+ years ago and things might have changed since then).

So worth getting it back working first.

Tiptop00

@fatbelly Thanks for the clarification and advice to wait until things have stabilised. It's tempting to rush in and get it over with, but I'm realising that's not the way to go about it. I'll contact the council now and explain the situation.

@ManyWays Business Debtline did say that debt could be included. They also said I could restart payments asap, but they advised I make a smaller payment (less than what the gov.uk calculator suggests) to allow for some money left over to pay my creditors. I'm not keen on taking that advice, but I will do if it's the right thing to do. I was paying much more previously, and I'm worried that if CMS becomes involved at any point then I wouldn't have enough set aside in the budget. What do you think? 

Good point re. the appeal. I read that sometimes tax debts aren't included in a bankruptcy, but Business Debtline said that they are eligible, so I was a bit confused. Is there any chance they won't be included?

Family are helping with lifts in the meantime, but it's not sustainable long term.

@JCS1 Thank you, that's useful to know. Sounds like I need to take the time to get things sorted before I take the leap.

fatbelly

Income tax debt is a qualifying debt.

Child maintenance debt, if the CMS get involved, isn't

ManyWays

They also said I could restart payments asap, but they advised I make a smaller payment (less than what the gov.uk calculator suggests) to allow for some money left over to pay my creditors. I'm not keen on taking that advice, but I will do if it's the right thing to do.
Business Debtline know far about your situation than we do, I am not sure what you are hoping we will say.

Tiptop00

@ManyWays Understood. I'm just trying to figure out what amount to budget for because I would prefer to pay at least the gov.uk estimate if possible. When I file for bankruptcy will the OR allow that in my budget?

ManyWays

You appear to have an extremely large amount of debt and havent posted an SOA here so we have little idea of your situation. People making generalisations about what happens in bankruptcy may not be helpful. The best place to get advice is Business Debtline. If you want people here to have a look then post a SOA.