Bankruptcy and Shared Living Expenses

millie2021

My husband is currently facing bankruptcy following the collapse of his business in 2019 and a particularly aggressive creditor. The original lender sold the debt which was in the region of £45k, and the purchaser has now escalated it to over £100k including all the interest and costs and obtained a CCJ. They’ve refused all offers to settle so far and are pursuing the full amount plus 8% interest accruing daily - would be £1800/m for 7years which is not viable. 

We live in a house in my name (bought pre marriage), which he has no beneficial interest in, but does make a monthly contribution towards our living expenses (including cars, kids expenses, groceries etc all which I pay). 

If he was to be made bankrupt or declare himself, how would his living expenses be calculated, as he doesn’t pay anything directly. He is self employed, and thinks he may be able to switch 2 clients to a sole trader basis, but would lose his major clients by closing his LTD company. This would mean he was likely to be able to earn c.£36k/year gross / £2,400/m net after tax. Is it likely he would still be allowed to contribute £2000 per month towards living expenses? And is it likely he would end up an IPA?

sourcrates

First off, I would caution filing for bankruptcy himself, if this creditor wants to do so, let them do it, in other words don`t jump, wait until pushed.

Its very unlikely they will file for his bankruptcy, as it will cost them the best part of 2k to do so, and as far as they are aware, he has no assets, and adding daily interest just makes this debt less and less affordable, and less and less likely they will get any money out of him.

Currently he is actually in a very strong position, they may have a CCJ, but what can they do with it?

He is self employed, so they can`t make an attachment to his earnings, he has no assets for bailiffs to seize, and no property to levy a charging order on.

Basically there is very little they can do with this, they are simply relying on intimidation and threats of bankruptcy none of which have any substantial basis.

If they do go down the bankruptcy route, if they do, then deal with it, until then, do nothing.

millie2021

He is panicking as they have previously sent bailiffs to the house and he has very poor mental health and would rather “jump before he was pushed”. As you say, he has no assets for them to seize, so it didn’t work but it was extremely stressful for him. 

He has said he’ll wait for them to send a statutory demand, and even then from what I read, he has reasonable grounds to contest as he has offered the full balance over 7years, but now they want interest as well as it is just isn’t viable and also there becomes a point it just is t sensible?! He just doesn’t want to not contribute towards our living expenses, but equally doesn’t want to get tied into an IPA for 3 years. We found a calculator online but when I put my income too, it said his full income would be available for an IPA - is that correct, that it would be based on total household income for a debt in his sole name?

sourcrates

Household income is the benchmark they use yes.

millie2021

So if he earns nothing, could he still end up with an IPA if I have surplus household income after covering all our expenses? 

sourcrates

IPA`s are decided according to the amount of disposable income your household budget allows you.

The budgeting allowances in bankruptcy are surprisingly generous, although they are not published, and your OR would question anything that appeared to be excessive.

Any amount over £20 left over in your budget would mean an IPA could be granted, however, only his half of that money would be payable, so say your household income left you with £100 disposable income, the IPA figure would be £50.

millie2021

Sorry, I’m really dragging out this point as I don’t really understand. 

If my income was £5000 and his was £0, and our household budget had £100 left over, surely there wouldn’t be an IPA as he has no income, it would mean I would be paying it and the debt / bankruptcy isn’t to do with me? I can understand that a bit more if he was earning  

PurpleMouse5

I think it's more like if you earn 60% of the household income, they would expect you to contribute 60% of the household costs and then they would calculate his surplus income (on money he earns) accordingly. Like if he earned 40% of the household income he couldn't say he was covering 100% of the household costs to keep his surplus down. 

millie2021

PurpleMouse5 said:

I think it's more like if you earn 60% of the household income, they would expect you to contribute 60% of the household costs and then they would calculate his surplus income (on money he earns) accordingly. Like if he earned 40% of the household income he couldn't say he was covering 100% of the household costs to keep his surplus down. 

Thank you, that helps me to understand it a bit more!