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

Moderators: TalbotWoods, JaneClack

By Donmonster
#4479 Ok first of all thanks for a great site and so many good informative posts - I have been reading through all of them trying to take everything in - but just wanted to put a few questions to the experts on here to see what I should / can do....

Ok the situation is I ran up about £20,000 worth of Debt at university through Student loans, grad loans etc. I then came to London and got a job in 2001. Suddenly I was able to get more credit and soon after the gambling started. To say they were the worst two years of my life is an understatement. I soon had Debts totalling £50,000 and it was then that I had to let my partner and family in on what had been happening.

This was almost 2 years ago now and since then I have been on a DMP with the CCCS - and presently pay £474 each month to my creditors.

The thing is recently I have just started thinking how depressing all this is and started to wonder if going bankrupt would be an option to getting rid of the Debt - I was told at the time when I did my DMP that I could not if any of the Debt was due to gambling - however from reading posts on here that seems to have changed. Now for the facts and it is here that I need the help.

1. Can I go bankrupt? All the Debt was racked up prior to April 2004 which is a date I have noticed.

2. If I do go Bankrupt which of the following will take place - as it is these things that I am most worried about and want to know if anyone else has ever been in the same position:

I work in an Investment Bank as an Analyst - not dealing with peoples money or anything - just a back office job. Will they be contacted about this or will they find out? I understand if I apply for another job then I will have to say and that may affect things - so this might be the biggest stumbling block for me as do I have to claim on these employment forms for the rest of my life that I went bankrupt?

I also have about £1100 left each month after paying rent, bills and the CCCS - will the O/R take all this or is there anyway I can keep most of it?

Will my landlord be informed of the fact that I have gone bankrupt?

I have one Credit card left that I got from Capital One to start rebuilding my rating - only a £200 limit and paid in full every month - will this be cancelled?

Will my bank account automatically be closed? As I am paid by BACS if I do not have a bank account then that is sure to set some alarm bells going for my employer?

So just wanted to know if anyone could help with these things - as at the moment it is these that are holding me back....any thoughts or answers appreciated.

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By JaneClack
#4481 Let's take these points one by one.

Student loans cannot be included in bankruptcy anyway as you probably know.

However gambling is what really racked up the debt but you have been on a DMP now for two years so if you were to go bankrupt although you MIGHT be asked to agree to a bankruptcy restriction arrangement or order this would probably not be for too long after the normal bankruptcy had ended as you have shown responsibility in the last two years.

You will need to check your terms of employment - if there is nothing in there prohibiting bankruptcy then it might be as well to have a hypothetical word with your welfare department. If you went bankrupt your payroll department would notice the nil tax code you would get for the year in which you went bankrupt. This means that no tax will be collected by the Inland Revenue but by the OR or you would have to put this aside to give to the OR. However, bankruptcy is not the only reason for a nil tax code. Also there would be a notice in the local paper which MIGHT be seen by your employers or colleagues at work.

It's the final point that really worried me - you say you have about £1,100 left per month after paying your bills and the CCCS. This means you should be paying an extra £1,100 per month to your creditors as this would repay the debt in a fairly rapid period of time and the OR is going to want 50 - 70% of this i.e. the money you paid to CCCS and the surplus left over. There is no way you can "keep most of it". In fact if you can pay off your debts in under 5 years - which on the figures you have given looks very likely then that is what you should be doing. Bankruptcy is a way for those who have an unsustainable level of debt get a fresh start. Are CCCS aware of your large surplus as if so they would normally be sending revised offers out to your creditors?

If your rent is paid up to date and you can show a rentbook it is unlikely your landlord will be contacted.

No, all debts have to be included in bankruptcy. If it is paid off then it wouldn't be included but technically you should inform the creditor that you are an undischarged bankrupt. However the law actually says that you must inform any lender from whom you want to borrow more than £500. When Capital One see your credit report however they will see the bankruptcy notice and several people have found their card frozen after a few months who were in your situation.

Yes, bank accounts are automatically cancelled - usually by the bank itself not the OR - but you can open a basic bank account the very next day. We recommend the Nationwide Flex Account Cashcard and the Co-op Cashminder accounts. But the nil tax code is more likely to set alarm bells ringing with employers than changing a bank account does.

I would go back to CCCS - tell them your new salary and ask for revised offers to be made to your creditors and you may find bankruptcy is not necessary at all.