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

Moderators: TalbotWoods, JaneClack

By woodyuk
#1926 Hi

Sorry if any of this is random!

I have about 30k worth of debt (Bank loan, and 3 credit cards) - plus a possible inland revenue debt - which I cannot even imagine how much it is but could be another £30k. My debt was caused by using personal credit to keep my Ltd company going - which itself is not in debt and has now closed! yes I know having a ltd company was meant to protect me - but if no one will give a new company credit you end up using your own. Anyway about six months back I gave up my rented flat, sold my TV etc and moved abroad to work as a freelancer (however was not able to secure a long term visa) so have come back to the UK. I am now crashing with friends, with zero funds and the above debt. I am starting to look for a job, and in my specialist field could get one above £40k + - its just I decided to have my own companies for the last 5 years! - will be odd being employed again!

So some questions:

I am thinking of going bankrupt rather than IVA as I have no assets, apart from my laptop (3 year old and worth nothing). I do have a car on an agreement so I assume that will go back.

Will they go though my credit card statements, personal bank statements to see why and how I spent the money - find this a real invasion of my privacy.

In terms of the inland revenue - I assume that will all come out! I also used my personal joint account at the time to move money around from clients etc to try and keep the company afloat. Will they go into my company affairs even though the company is now closed ?

I understand under the new rules that I will only be bankrupt for a year, after that I assume I have six years before it will drop off my credit record ? and be able to get mortgage etc ?
Now lets say I go bankrupt today, (I am not working and not signing on), and 1 month later I get a job for £40k++ will they take money from that during my bankruptcy time ? How do they assess your living expenses? How do people rent flats when you are bankrupt? If I find a new flat tomorrow for £££ can they say its to expensive you can live in this smelly bedsit! Are you expected to live at income support levels ? If I am earning £40k +# and buy a car for cash say £1000 from my salary etc ... would that not be allowed?

Am I able to work as a contractor ? Self-employed ? Or do I have to get a normal job - I undersatnd I cannot be a director of a compay.

Some other questions ....

- How far back to they go looking for information ?

- What happens if £7k of the debt was secured by someone else ?

- My current account was a joint account which is now closed .. as of today I have no bank account... so no statements in fact when I went abroad I chucked most of the paperwork out (ignoring the problem!)

-what happens if I "forget" about a debt - which someone then chases me
for X months time ?

-As I don't have anywhere to live and will be moving into a new place

"after" I am bankrupt how does that work ? gas, water, electric, phone.
Do I have to declare to these people I am bankrupt ?

-Insurance ? ie contents insurance etc ? How does that work ? Can I obtain it ?

User avatar
By JaneClack
#1929 Mmm! A lot of questions.
Yes, if you have no assets bankruptcy would seem to be a sensible alternative if you have lived in the UK for six months during the last three years as I see you have been abroad.
Right rest of the questions:
1) We have always given the advice that the car will go back. Even if the OR deemed that you needed a car to get to work the HP company will terminate the agreement. On the plus side the money owed will go into the bankruptcy. However, other experienced advisers have found this is not the case. You would need to check "hypothetically"!
2) Yes - they can go through bank statements and credit card statements. What they are looking for are large amounts of cash moving around as they will want to know why. Yes, it may seem an invasion of privacy but is the price you pay for being debt free.
3)Inland Revenue - yes they will be contacted but any money owed to them will go into the pot and be written off. Just be careful there is nothing there that could be construed as fraudulent.
4) Yes, unless there is anything untoward, you will be bankrupt for only a year and maybe even less. Yes, it will sit on your credit file for 6 years and then drop off. Only problem is that then there will be a 6 year gap on your credit file which will cause questions to be asked when applications made for credit. Do remember that you have to answer the question truthfully - have you ever been made bankrupt or made arrangements with your creditors. But it does come back slowly - usually people get a car on HP and pay for it and build up like that. With regard to mortgages - you will need a specialist IFA or broker who deals with people with adverse credit but should have no real problem after bankruptcy if it is clear you can pay. Look at it this way - Jo Bloggs with his squeaky clean credit report may get a 100% mortgage at 5% and someone like you would get an 85% mortgage at 6 or 6.5% . It's the price you pay. 15 years down the line and you will be like everyone else!
5) Yes, if you get a job within the period of bankruptcy they will look at your income and expenditure again and 50 -60% of your surplus income would go the OR in the form of an income payments arrangement or order. One of these lasts for 3 years. However, if none has been set up in the term of the bankruptcy then none can be set up at all. However, you do have a duty of care to inform the OR of any changes in circumstances during the time you are bankrupt - you are given 21 days to do this. If not and you are found out a Bankruptcy Restriction Order could be imposed which could extend the restrictions of the bankruptcy from 2 - 15 years - so not a thing to play about with.
6) No the OR does not expect you to live at Income Support levels but putting down £100 for fags per month or £150 for social life will not be allowed! If you need a car for work and can afford to buy an old banger there will be no problem. Just remember no credit of over £500 without telling the LENDER you are an undischarged bankrupt. The OR will go through a budget with you!
7) You would be able to work in any form you liked - except be a director of a limited company. However, some employers may not employ a contractor who is bankrupt. You can be self-employed - a lot do. What you cannot do is trade under any other name without letting them know the name you were trading as when you became bankrupt.
8) They can go back for seven years to investigate but this is unlikely unless they think something is untoward which doesn't sound likely here.
9) If the debt was secured by someone else then the creditor will go to them to repay it.
10) all bank accounts will be frozen when you go bankrupt. Just give the OR all the information you have.
11)Forgotten debts - you must tell the OR as soon as you find out. Otherwise it will not be included and you will still be liable.
12) Landlords and letting agencies often have a clause asking this so you need to disclose. If they do not ask you to you do not have to tell them
13) Yes you can obtain insurance but it will be more difficult to pay things in instalments.
I think that's covered it all! :lol:
Good luck.