Is Bankruptcy right for me?

Emmia

Can I ask if your partner is aware of the level of debt and your financial situation?

WBMK

Not had chance to come on this week so going to reply to everyone I've missed.

sourcrates said:

In bankruptcy, you only pay towards your debt, if you have sufficient disposable income to do so, the amount left after all your budgetary requirements are met, normally anything over £20 per month disposable income would attract a three year IPA (income payment arrangement).

You don`t have to pay any more than what your actual disposable income is, so if its £30 a month, then you just pay £30 for 3 years, no point working extra hours just to give it away, and you are still discharged after 12 months.

The OR may decide to question any spend that may appear to be "excessive", but as long as you can justify it, it should be allowed.

The bankruptcy application is very simple, and to become bankrupt is very easy these days, you pay your fee, and the deal is done, usually within 48 hours, the hard part is not returning to your old ways of using credit to fund aspirational lifestyles, learning to live within a defined budget requires a "must do" approach from you.

You most defiantly do not want to be doing this twice in your lifetime.

Your point about not working extra hours is exactly what I've been trying to get across to the other 2 in here that are all about bringing in as much money as possible, I don't see any point in working extra hours and sending my partner back to work just to pay it all out. I don't plan to ever go back to using credit unless I absolutely have to, I earn enough now that I should be able to save a healthy amount to cover any unforseen expenses.

ManyWays said:

I don't see a lot wrong with your SOA that cant be fixed by some shuffling. Your water bill is what it is, with 2 children it may not drop at all on a meter. The groceries can be higher and the clothes, ignore the people telling you they can be reduced. Move some things into chldrens costs. Sign up for a pension with your employer now if this is an option. 

Lets see a revised version

You should be looking for the best way forward for you and your family and decide your debts options based on that.

Agreed, family always comes first, think a self-managed DMP is the correct option for me and I'll be re-enrolling in the pension scheme.

MattMattMattUK said:

WBMK said:

MattMattMattUK said:

WBMK said:

MattMattMattUK said:

You say you and your partner's finances are separate, but you list a very low income for them, do they work? You list no benefit but if you have two children, based on your income would would get child benefit at a minimum. Some of your costs look quite high, they would also be horrifically high if you are only paying half of them and your partner is paying the other half.

WBMK said:

My income varies quite a lot depending on how many hours I work, so I've calculated my income as my guaranteed hours, would they accept this value as my income or would I need to prove it with payslips, etc? I don't want to commit to a bigger payment based on my recent income and then not have the same amount of overtime going forward.

They would want to look at averages and they would want payslips and bank statements, not just your say so, bankruptcy is a legal process. They would also question large cash withdrawals as hiding money etc.

To clarify, when I say our finances are separate, I mean we don't have any joint accounts, everything is in my name as I'm the sole earner hence the low income for them, the £173 I've listed is child benefit as that is in their name.

Does your partner have the capacity to work, if not are they entitled to any benefits, disability/PIP? If they are then unfortunately this is really a situation where they need to be looking at getting a job.

WBMK said:

fatbelly said:

Yes you're right . I thought I had hit the reason why you didn't want a DRO.

The limit is 50k. You are at 42k

Entertainment, holiday and emergency fund.

It's an individual application so your partner's income is only relevant in calculating their share of joint expenses.

The majority of the entertainment amount is actually fees for dance school for my children that's under contract for 12 months, there wasn't another field that I felt this came under on the SOA, would this be an allowed expense? I don't have any subscriptions, etc.

A bankruptcy would terminate those contracts, you would be able to end them and save the money.

WBMK said:

Emmia said:

Looking at your household income and expenses, you're only just covering the things you've budgeted for - no emergency fund to repair or replace a car that fails/breaks down for example, or headroom if the gas bill goes up.

Setting aside whether a DRO or bankruptcy is better, does your partner have any ability to work to raise your household income overall?

I've calculated the income based on my guaranteed hours of 45/week, however I often work upwards of around 60 so it's usually higher, but these overtime hours are not guaranteed. I also have to take mandatory unpaid leave every now and again to reduce my average working time under the working time regulations as I drive a HGV.

What is your average over the last year? That is the figure you should be using, at least for your initial purposes. If you went bankrupt then they would want to look at a year's figures.

WBMK said:

Emmia said:

Looking at your household income and expenses, you're only just covering the things you've budgeted for - no emergency fund to repair or replace a car that fails/breaks down for example, or headroom if the gas bill goes up.

Setting aside whether a DRO or bankruptcy is better, does your partner have any ability to work to raise your household income overall?

Also, if we was to increase our overall household income, my understanding is I most definitely wouldn't be eligible for DRO and my bankruptcy payment agreement would surely increase by the additional income, is this correct?

I agree with Emmia, you should not be looking at eligibility and specifically trying to qualify for a DRO or bankruptcy, you should be looking at what is the best outcome when taking a holistic view. If your partner got a job that netted £2k a month then that would make a lot of things easier, an IVA or DMP would then be on the table and you have more options, not less.

Yes my partner does have the capacity to work, however only within school hours so realistically would only net ~£1000/month, however, increasing overall household income is only going to increase the monthly payment by the same/similar amount or do I have this wrong? Seems they would ultimately be working for nothing to me.

It depends on specifics, but in general your partner netting your household an extra £1,000 a month would make things better during almost all kinds of debt arrangement, DRO, IVA, DMP or bankruptcy, others can advise of the specifics but it is absolutely going to put you in a better position. I would also say that even choosing to ignore that, working to pay debts off quicker is not working for nothing.

WBMK said:

My average for the previous tax year was around £3240/month.

That is the figure they would likely want to use and that would be used for bankruptcy, but they would allow for variable income, it is £510 a month higher than your previous stated income which again adds even more headroom and increases your options.

WBMK said:

No offence, I really do appreciate the help and advice, however your comments read like you don't have children. I don't want to terminate the contract with the dance school, dancing has done wonders for my kids mental health and confidence over the past 1-2 years and they now compete regularly, last thing I want to do is take that away from them. Also, not sure that it would actually terminate the contract, dance school is actually treated the same way as a regular school (fines for missing x amount of sessions from local council, earning ACAS points, etc)

I am not offended, I do not have children, but that is irrelevant. What is allowable would be decided by the official receiver, but those contracts would almost certainly not be allowed and would be terminated as part of the bankruptcy process. The are entirely optional activities, bankruptcy terminates service contracts such as these. If you choose to become bankrupt it will not be your choice to continue those activities and they will be unlikely to be allowed to be paid for.

WBMK said:

MattMattMattUK said:

WBMK said:

Monthly Expense Details

Water rates............................. 54.31
Go onto a water meter, this will probably come down to around £40
Already on a water meter

Mobile phone............................ 28.16
A SIM only plan with basic data that would cover you would cost £5 a month.
Cost is for both sim only plans, I average around 40gb of data/month, partner averages around 8gb/month, cheapest deal that was available at the time and is still under contract

TV Licence.............................. 15
Get rid of this and stop watching live TV. 
Kids watch live TV, we occassionally was live too

Internet Services....................... 39
You should be able to get a budget package for around £25
Still under contract for 22 months

Groceries etc. ......................... 600
Depending on the age of your children there might not be a huge saving here, but with a non-working partner who does not appear to have any disabilities (from the lack of disability benefits) then you should be able to cook nearly everything from scratch and save around £100-150 pm
This cost includes all food/drink, toiletries, nappies, hygeine products, tobacco products, etc. It's actually likely slightly more than this and not much wiggle room, I've tried to cut our spending down a few times over the past few years but we always end up running out of stuff and spending the difference anyway.

Clothing................................ 80
If this is for everyone then it is probably a little now.
Agreed it probably is a little low, not sure how much we actually spend as we only buy when its necessary due to not have spare money for it
Petrol/diesel........................... 300
This seems very high, unless you are driving something huge that would indicate you are driving over 2,000 miles a month, when you drive full time for a living that seems very high. 
I use around £50/week for commuting to work (around 300 miles), partner uses around £20-25, travel to and from school, parents house, etc and we use it at the weekend.

Road tax................................ 55.99
This also seems very high, a normal family car is currently in the £190-195 range, yours are an average of more than £300.
One is ~£33/month, the other is ~£22/month

Car Insurance........................... 184.78
This also seems very high for two cars, average for 25-55 is around £510 per year in 2025, you are paying more than twice the average.
Mine is relatively low at £39/month, however my partner is a new driver and is ~£132/month, also includes breakdown cover at around £13/month
Car maintenance (including MOT)......... 50
This seems very round, are you accounting for tyres, wipers etc. and is this based on actual, or just a guess?
Only accounted for regular servicing and MOT's, other servicable items (tyre's, wipers, etc.) have all recently been replaced so should be good for a few years

Presents (birthday, christmas etc)...... 100
£1,200 a year would appear high based on current circumstances.
2 kids = 2 birthdays, 2 christmas. Me and my partner don't buy for each other and haven't for years. However we also have 6 nieces & nephews, 3 parents to buy for so this is actually pretty low compared to what we actually spend 

Haircuts................................ 0
No haircuts?
I do my own, my partner does the kids

Entertainment........................... 186.47
High based on current circumstances
Agreed, however this is subscriptions/hobbies, majority is dance school for the kids

Holiday................................. 150
Need to drop this for a year or two
Agreed

Emergency fund.......................... 100
Sensible

Total monthly expenses.................. 2827.46

Revised figure - £2,038
Saving £789 pm

The savings might be small, but they do add up, to nearly nine and a half thousand pounds a year, that makes a huge difference and gives you a lot more headroom.

With regard to the debts, how have they been accumulated? Has the money been accounted for within your spending? One off purchase, a short rush over the last few years, built up over a decade? Once you start the process that route to money is going to be cut off so you need to know where that spending went as well, and how to account for it going forward if any of it went on essentials.

Debts have been accumulated over the past 12 years, started when I was young & dumb and on a low income, never managed to get away from it. It's been a series of refinancing and top up loans, borrowing money to pay other creditors, and sometimes because something broke and needed replacing and not having any savings.

Ok, so again, others will give you specific advice, but when you start this process you will need an emergency fund because once it all hits the fan you will no longer have access to credit when those things do need replacing. 

On the other side of this and please do not be offended, but your posts read that you are looking for the easy way out of this. It seems you are not prepared for the cutbacks and sacrifices that are going to be required to deal with this debt, you need to cut back expenditure to the bone, your partner needs to get a job, you need to entirely change your relationship with money and especially debt, especially as whatever option you take borrowing will be off the table for several years and going back to borrowing again would be the worst thing you could do. The alternative is to really crash and burn, which is what will happen if you do not tackle this head on. 

I just don't understand how working more and earning more would have any benefit in a DRO or BR situation? If as a household we had £50/month surplus, we could get a DRO and pay nothing or file BR and pay £50/month, if we had £1050/month surplus, DRO isn't an option and with BR would pay £1050/month, what exactly would be the point in earning more to pay towards a time-limited debt solution that doesn't fully clear the debt anyway, I'd much rather pay £50/month than £1050/month for 3 years then it be written off as I'm sure many others would. I can fully understand earning more will clear debt quicker with a DMP and possibly other solutions, it just doesn't make sense to me with a DRO or BR.

Already started on an emergency fund and should have a decent/healthy amount by the time I start making payments.

I'm not looking for the easy way out, however it would be daft to not look for the easiest way, right? Who wants to pay more than they NEED to, that's like opting for 50% APR over 3% APR because someone else told them that's the right option. When I stopped paying a few months ago, I fully commited to the plan that I was going to start a DMP once defaults start to land and pay it until it's clear, this was after dismissing all other options without doing much research (hence why I came here for advice), however it seems a DMP is still the best option for us as a family. You say I'm not prepared for the sacrifices and to cut my expenditure to the bone, I've been trimming my expenses like crazy to make payments for years, and as I've said previously, I work 60+ hours a week and don't see any of it, every penny goes to putting food on the table, clothes on the kids backs and paying bills. Until a few months ago, I was paying £1600+ towards debt and it was due to increase by a few hundred in a few months once a couple of 0% CC deals ended.

Emmia said:

Can I ask if your partner is aware of the level of debt and your financial situation?

Yes, my partner is fully aware of all our financials, income, expenses, debts, etc.


In summary, to those of you who believe you should be earning more to pay more in BR, my opinion is you shouldn't be giving financial advice, what sense does it make to work more hours and earn more money, just to pay out the extra money on debts that will be written off in 1-3 years anyway.

And to those of you who understand there's a human side to all of this and it's not just numbers on a screen, and that kids shouldn't have to suffer and go without because of stupid mistakes that were made before they were even born, I appreciate your comments.

I will be moving forward with the DMP option, and looking elsewhere for advice in future

fatbelly

Best of luck.

Don't be in a rush to start your dmp

See if you can get any joy out of affordability complaints first

Wait for the defaults.

Save a pot on the side for F&F

Use NEDCAB resources.


Feel free to post again (or in your case pm me) if you have specific questions

sourcrates

I`m with fatbelly, go down the affordability complaints route first, people are having a lot of success with these.

Getting into debt is easy, why should getting out of it be any different.

Good luck with it.