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

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Byjonnie000
#4440 Hi all. Hopefull a quick simple question. What is the purpose of the NIL tax code when you become bankrupt. I believe this runs for the tax year current to your BO. If this is correct is it beneficial in any way to go bankrupt before April, or doesn't it make any difference. My situation is personal debts of 30 k , a house i can't afford to keep (mortgaged) so letting that go too, i have no income tax outstanding. Work full time, not on huge salary. Think I'm border line IPA/IPO. My wages vary quite a bit, i.e. this week 240quid, last week 340quid. How is this handled when OR considers IPA/IPO?

I'm planning on moving out of the mortgaged house. I plan on arranging this accomodation prior to the bankruptcy, but probably moving after it. Is this OK?

OK, one question turned into several. Apologies! I look forward to any advice anyone has.

Many thanks.
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ByJaneClack
#4451 Although you will have a nil tax code for the tax year in which you go bankrupt this money has to be paid to the Official Receiver so do not think of it as an extra paypacket - put it to one side so you can hand it over. Sometimes it doesn't seem to happen if you were to go bankrupt at this time of year as it often takes them a couple of months to set it up.

IPAs are varied as necessary and you should inform the OR of any change in circumstances during the term of the bankruptcy. I say should but it is a legal obligation anyway - you have 21 days. If it varies quite a bit they will probably average out.

Well the house will go anyway and any equity will be paid into the bankruptcy estate. If you move before and hand the keys back and have got into rented accommodation before the bankruptcy it should not be a problem. Most letting agents will vet applicants - credit checking also - but a month's deposit is also helpful. Getting that together after bankruptcy might be problematic unless someone is prepared to lend it.
Byjonnie000
#4456 many thanks. I wasn't hoping to be able to hold onto any tax! I just wondered if the NIL tax code meant you are more susceptible to an IPO? I'm guessing you are. Thinking I might go ahead asap to avoid this possiblility.
Last edited by jonnie000 on Thu Mar 03, 2005 11:06 pm, edited 1 time in total.
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ByJaneClack
#4458 No it doesn't. An IPA - you always want the Agreement so they do not impose the Order - is done if they think you have enough income left over after reasonable living expenses and is only 50 - 70% of the surplus anyway!
Byjonnie000
#4459 but doesn't the fac that I wouldn't be paying tax add to the surplus? I'm confused! SOrry
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ByJaneClack
#4460 No - the tax you don't pay whilst on the nil tax code goes to the Official Receiver. It isn't taken from your salary but doesn't belong to you so will be taken by him - either by you putting it to one side and paying him or going to him directly. You are in fact still liable for tax but in the financial year of the bankruptcy it goes to the Receiver!
Byjonnie000
#4462 ok. that makes sense now. thanks ever so much.
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ByJaneClack
#4463 No problem! :wink:
Byjonnie000
#4781 I've been reliably informed that going ahead before the change of the tax year is best becuase it means I may not have an IPA to sign (depending of course on income and outgoings). They can ask you to sign an IPA purely for the tax you will be saving if an NT code is to be applied. Thought you might be interested!
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ByJaneClack
#4783 They could but rarely do - as the income tax saved is theirs anyway but once the tax code comes back into force you would let them know and the IPA would be suspended. The law is woolly here as if you are discharged but an IPA had been set up you should strictly let them know of any changes for the whole three years - but they have no way of enforcing it after bankruptcy at the moment! But it is as well not to wait anyway!
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