Questions you have before making a decision to go Bankrupt and the Bankruptcy process

Moderators: TalbotWoods, JaneClack

By tintin10
#224814 hello, I am so glad boards like this exist. I have been reading through the old posts and they have helped to put me at ease a little and have answered so many questions, but i am looking for some advice for my own situation.

If i go BK how will i know if i have to pay an IPO if i am self employed and don't know what my salary will be? will it be based on my last few months earnings and what if my income drops even more?
I tried a test on the business debtline flash I&E form and i will only have around £60 a month disposable if, as expected, next year is like this year.

Here are some other details of my situation..

I have £34k debts with 3 creditcards, overdraft and an unsecured loan.
I am self employed and have been carrying these debts for the last 4 years, but due to the recession i can no longer continue paying as i have earnt 70% less money this year. I have no assets.
I am in the process of setting up a DMP and I have some work lined up which will keep things ticking along for the next 3-4 months.
The problem is the end of the year until april is always very quiet workwise and with 2 tax bills to pay i fear i will be wiped out and so maybe BK is the best option.

This is not a decision i will take likely and so i wanted to work out the possibilities, pros and cons and make a decision at the start of the new year.

I am currently renting a flatshare in london, but the contract is up in november, so i am going to move up north and stay with my parents.

My first plan is to go BK, stay at my parents during the quiet months and move back to london to rent/crash at mates places once there is work again (things seem to pick up from june onwards)
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By JaneClack
#224818 You will not get an income payments arrangement or order if you are not working. When things change you have to let the OR/Trustee know and things might change then but if you have been discharged then nothing can change.

Unless you see you income increasing exponentially in the next couple of months, have no assets to protect and your living arrangements are safe then bankruptcy would clear the lot.

If you did get an income payments arrangement before you were discharged it would only be for a proportion of your surplus income. And if one starts it can change again if your working income changes. They last for 36 months from when set up so unless your disposable income if very very high it is still the quickest and cheapest way of ridding yourself of debt.
By tintin10
#224820 hi sarah, thanks for answering.

So, if i haven't been working for a month or two and go BT there will be no IPA/O. If my situation changes i'll let them know and one may be put in place. Would it be too much to change things back again if the money stopped within 12 months and still get a discharge after a year? Even pre-recession my income was quite sporadic.

Being self employed I have to do my own taxes. How many years accounts will i need to take to the interview generally? Would it just be for the last year?
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By JaneClack
#224826 Take as many as you have - they will take what they need or would ask you for more. Some people go to the interview with bags of receipts! I am not suggesting for one minute that you do that. :D

You would be discharged in a year whatever happened - unless of course you did not co-operate with the OR/Trustee as s/he can suspend your discharge until he does.

If an IPA is set up during the term of your bankruptcy and your wages drop then you have to let them know and would need to let them know again if they increased during the 36 month period from when it started. It would not delay discharge. Also if no IPA was set up in the time you were bankrupt then none could be set up afterwards - and you said income picked up in June - that's nearly a year away and unless they can tell from your accounts that you are rolling in cash every June you could well have been discharged by then.

It would never last for more than 36 months from when it started and could go up and down or disappear throughout this period depending on your income. AND IT WILL STILL WORK OUT AT A LOT LESS THAN YOU EARN!

After me saying this I can see you winning the lottery on Saturday!
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By Ransid
#224857 If you are self employed post bankrutpcy you have to supply details of your BUSINESS income and expenditure periodically to your trustee - this is seperate to your PERSONAL income and expenditure (eg an IPOQ form)

Under Rule 6.200(5) of the Insolvency Rules 86 you have to give business information to your trustee not less often than every 6 months. I think most OR's ask for 3 monthly and I've heard of those who've been asked for it every month.

The trustee/OR can then assess your profits/drawings from the business and extrapolate over the year to assess any surplus.

What's important is to include provisions for all business debts (eg bookkeeping etc) and in your personal expenditure calculation to make a provision for any income tax + NI payments that will be necessary from the projected business profits.

This is ESSENTIAL to avoid OR/trustee's over assessing your ability to pay under an IPA. don't rely on them to remember to do it for you!!
By tintin10
#224872 Actually, there was just one more thing.

If i get any work during the rest of the year it was to pay my tax bills in january and july, plus living expenses. And then take BT to clear my creditcard, loan debts.

Is this the best thing to do or do taxes get counted as debts?
By tintin10
#224915 Oh thats interesting. I am not sure whats the best thing to do... try and get some money saved up and moved to somewhere safe for the bankruptcy tough months or stretch to pay the bill, so my debt is only on creditcards (plus a loan)

If i included the tax as a debt-

would that make the tax man angry and make it more likely for a audit in the future and on previous returns?

And what if i paid my january bill and then went bankrupt? Would the july bill be included as a debt? It is not is arrears as it is not due until July 2011?
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By JaneClack
#224916 All I can say is that any tax arrears up to the date of the bankruptcy are included in it as are any bills due in the tax year in which you go bankrupt - Ransid would know exactly but surely payments on account account for tax year in which you are going bankrupt.