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

Moderators: TalbotWoods, JaneClack

By MMel
#241455 I am a single parent, have a mortgage, work full time, claim Working Tax Credit and Child Tax Credit as well as DLA. I have lots of debts;

Credit cards about £5,000
Mortgage £50,000 (no equity)
A secured loan £7,000
Student loan £2,000
Tax Credit overpayment £6,000
Bank overdrafts £2,000
Unsecured loans £4,000
Catalogue £1,000

I'm deeply embarrassed to look at the above debts but I have to get real here and seek some help.

I have been in a debt management plan for around 5 years but the debts are taking an age to repay. I'm not in arrears with anything but I am finding that I have to take out more and more loans just to get by and deal with monthly expenses.

Would bankruptcy be a good option for me? I am quite happy to get my house taken off me - I am looking to move anyway and would be happy to rent.

I have a few questions;

* Would all my debts be included in any bankruptcy?
* Would I qualify for bankruptcy?
* Would I get any help with the cost of bankruptcy?
* Would my employer be informed?
* Can I choose to be made bankrupt at a court other than the one in my home town (to avoid any publicity in the newspaper)?

Any advice would be most welcome.

By nomlas
#241463 I dont know all the answers sorry but as it will be quiet on here I will answer what I know. I am sure someone will be along with all the info within the next few days. 1- Dont think the student loan is, not sure about tax credits, 2- Yes. 3- You may qualify for help with court costs but not with the main BR charge. 4- Not necessarily however your tax code will be affected. 5- Not sure but your name would not be in the local paper unless you are newsworthy. This pratice ceased a good few months ago. Hope this helps. Regards. -- nomlas
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By JaneClack
#241503 Hello

Nomlas has answered all of your questions and I should say that if you are in a debt management plan that has put you in a position where you have had to borrow more money - which will be at a higher rate of interest due to an impaired credit rating anyway - is NOT a good thing.

As Nomlas said, student loans do not go into bankruptcy and although overpaid benefits and tax credits are provable debts in bankruptcy they do seem to try and recoup them.

If your property is in negtive equity you will now have to wait until well into the third year after bankruptcy to get the property valued to see if you can buy back the beneficial interest will belong to the Official Receiver as soon as you go bankrupt - in the past you could buy it back for £1, plus the inhouse conveyancing fees, if it were in negative equity but now you have to wait - they are trying to maximise revenue into the bankruptcy estate.

The OR may well discuss the viability of you staying in the property if there is a large amount going out on the mortgage and secured loan as any mortgage shortfall would go into the bankruptcy but of course if rental costs are lower then there would be money available for an income payments arrangement but still would be quicker than this DMP seems to be.

Your employer is not informed although you may have a nil tax code as any tax you are liable for in the tax year in which you go bankrupt is the property then of the OR/Trustee - ie bankruptcy estate.

As Nomlas states unless you are newsworthy or self-employed it will not go into the local newspaper but unless you work in the local court for example you will need to go bankrupt at your local counrt that does bankruptcies.

You will need to fill in an EX160 to see if you can get the court fee of £150 remitted but I am afraid that the bankruptyc deposit of £450 has to be paid - often union welfare departments will cover this so it is worth applying.

I would recommend contacting your local Citizens Advice Bureau or Payplan or CCCS who will be able to offer you more detailed advice on bankruptcy and put together a budget for you to see - but honestly a DMP where you end uup borrowing more money is not a good idea!