HMRC & bankruptcy - how quickly do they act?

JensaT

A bit of a difficult situation here regarding a family member. We know he owes a huge debt to HMRC, and there doesn’t appear to be any way of paying it. We also know that HMRC have already issued their “statutory demand” (which I think is the final warning before proceeding to bankruptcy), and the deadline for responding to that has passed. Unfortunately, the family member has pretty much shut down on us and is not telling us very much. I’m concerned about the other members of his household, who obviously now face losing their home (they fully expect this to happen and are resigned to it).
I guess my question is, if anyone here knows what happens next and when? I know there’s a deadline of (I think - but I am no expert and have been trying to research this online) 4 months after the statutory demand within which HMRC can start bankruptcy proceedings - but, in practice, it is something we can expect to happen fairly quickly, say within a few weeks?
Another point is, the family member in question has said they are now looking at an IVA - but I suspect this can’t be the case if the statutory demand has already come and gone. (Surely the time to discuss an IVA would have been earlier in the process?). 

I’d be very grateful for any thoughts / experiences.

sourcrates

They should have been a lot quicker to look at an IVA, in this case its about the one thing that could offer a lifeline.

Its a race to the post now, if an IVA can be approved before the bankruptcy order, then HMRC will be forced to abide by it, but the clock is ticking, bankruptcy can be approved a lot quicker than it takes to approve an IVA.

JensaT

Many thanks for your response sourcrates.
Unfortunately, from what I know, there appears to be very little prospect of an IVA in this case, as they have very limited income (and I understand the HMRC debt is well into 6 figures). So I suspect bankruptcy is imminent. Unfortunately, the family member is not telling us anything - he seems to be in denial, which I imagine is not uncommon in cases like this, but it’s not helping him or the rest of the family.
The HMRC statutory demand deadline passed about a month ago, we think.

ManyWays

With that large a debt, HMRC would be able to veto any IVA anyway.
Is the house jointly owned and how much equity is there in it? 

JensaT

The house is jointly owned, but there’s a large equity release debt on it. The equity remaining would only be about 20% of the HMRC debt.

ManyWays

Was the equity release fairly recent, if yes, what happened to the money that was taken out? 
If it predates his recent financial problems it isn't an issue, but if the money was taken out deliberately to reduce the amount of his assets with potential bankruptcy coming up, that would be different.
If the house is owned with his partner and only 20% of the equity remains, then his share is 10% unless special arrangements have been put in place

How old are the other people in the house, do they have adult children living with them, are they paying rent? Could they get together the 10% of the value of the house that it sounds like is at risk in bankruptcy and buy his share of the equity from the Official Receiver so the house wouldnt have to be sold? 

JensaT

Unfortunately the equity release was taken out over 10 years ago. His share of the equity remaining in the house is only about 20% (at most) of the HMRC debt he owes (the debt is just under £1m). There has been debt for years, and unfortunately the family only discovered this very recently. (There is quite a back story here about what he has concealed from everyone, but none of it helps us with this particular issue). While the family might, in theory be able to pull together the £200,000 which we think is the value of his share in the equity, this does not solve the equity release issue - we checked the terms, and the equity release providers are entitled to force sale if a borrower becomes bankrupt. Even if they didn’t, the family wouldn’t really “own” the house because they cannot pay off the equity release debt which is now close to £800,000 and will continue to increase. It is quite a mess.

JensaT

Also, there are just two of them in the house. They’re in their 80’s. They have adult children who live in other parts of the UK.
The HMRC debt has elements that go back over 20 years.

ManyWays

Could his bankruptcy and a sale of the house be the best way forward, his partner gets her share of the equity, family members get together and buy them a much cheaper place using her equity and the rest of the family owns 50%? 

JensaT

I think that is where we will end up. For the moment, we’re just trying to work out when things will actually start to happen in terms of the bankruptcy itself. We know it’s coming, but we don’t know exactly when.

ManyWays

It may be best to take control and for him to apply for bankruptcy. HMRC have very little reason to move fast.