After you go bankrupt, you will have an interview with the Official Receiver, an Income Payments Arrangement may be set, and most people will be discharged after 12 months. This page looks at these events and how much difference going bankrupt makes to your life.
It is the last of three pages about bankruptcy. The first page dealt with the main questions people want answered and the second page looked at getting ready for bankruptcy and the bankruptcy application.
This page assumes you have already taken the decision to go bankrupt – but it’s useful reading even if you are still thinking through your options.
The interview with Official Receiver
The interview with the OR’s office will occur after your bankruptcy application has been approved – often a week or two later. It is usually a telephone interview but it can be at the OR’s offices. If you don’t want a telephone interview you can ask to have one in person. It will normally last for 3-4 hours. Occasionally there will be a need for a further interview.
Insolvency Service leaflet
You may be asked to complete a questionnaire in advance or to provide certain documents – in practice bring all your financial documentation, not just the items specified. If your interview is by phone, clear a large table and spread the stuff you may need out.
You may be asked questions about your bankruptcy application by one of the OR’s examiners, who will be mainly interested in what has happened in the last five years. You are likely to be asked in more detail what you spent money on.
Don’t worry if you haven’t got written records going back five years (who has?) or if you can’t remember something, or if you borrowed money on one credit card to pay the monthly payments on other debts – you know now that is foolish, but it is very common and it will not result in a Bankruptcy Restriction Order unless you have done it on an enormous scale for years.
You must co-operate with the OR and don’t try to conceal anything. If you do not co-operate you may be arrested and questioned in court and ultimately you may not be discharged in 12 months. At the interview the Perjury Act will be explained to you and you will have to sign to say that you have understood this.
They are asking all these questions so that they can feel reasonably sure that you are telling the truth and aren’t hiding anything. They aren’t judgmental – no-one is going to suggest that you shouldn’t have bought a new car or gone on holiday, even if you now think that was a stupid thing to have done. They won’t get angry or criticise. If you have ended up going bankrupt because of a business failure or a messy divorce, you may feel that you don’t get much sympathy; if you cry you will be given tissues, not hugs. They are professionals doing a job, not counsellors.
At the end of the interview you may be asked to find certain written records – statements, receipts etc. Just do your best – you are not going to get a Bankruptcy Restriction Order (BRO – see below for more about these) because your paperwork is missing bits provided the OR doesn’t think you are concealing anything.
Life when bankrupt
You should immediately stop making any payments to your unsecured creditors. You should carry on paying the mortgage and any secured loans unless you have left the property or intend to shortly. You should also carry on making payments towards any debts which will not be extinguished by your bankruptcy – check with the OR if you are unsure if a debt is being wiped out by bankruptcy or not.
The OR will inform your creditors of your bankruptcy but this can take a few weeks. If you are contacted by any of your unsecured creditors during this period, just quote your bankruptcy reference number to them – that will be the last time you hear from them.
If you have sufficient disposable income, you will have to make monthly payments to the OR under an IPA, see below. You must inform the OR of any assets and increases in income that you get before you are discharged, including any lump sums which you may receive such as a bonus, a redundancy payment or an inheritance.
You must stop using your existing bank accounts, credit cards etc straight away, but you are allowed to open a new Basic Bank Account.
You must not obtain credit of more than £500 without informing the creditor that you are bankrupt.
The tax owing for all tax years up to and including the tax year in which you are made bankrupt will be paid to the OR. So if you pay tax under PAYE, your tax code will be changed to a nil rate code for the remainder of the tax year. If you are self-employed, your duty to pay tax directly to HM Revenue and Customs will no longer apply to the tax year of bankruptcy or any previous year, except for self-employed workers in the construction industry, who will continue to have tax taken off their earnings at a flat rate of 18% after bankruptcy. You won’t be better or worse off because of these tax changes – you may get more through your pay packet, but that will increase the amount you pay to the OR. If you are unsure of what to do, ask the OR to explain.
Construction worker’s tools
If you are self-employed, your existing business is normally closed down and any employees will be made redundant. They may be able to make a claim to the National Insurance Fund for outstanding wages, redundancy etc. Any business assets will become the property of the OR unless they are exempt (eg tools that you will need to continue in business). However you can start to trade again, subject to restrictions. You are not allowed to be a Company Director and as mentioned above you are not allowed to obtain credit of more than £500 without informing the creditor that you are bankrupt. You will need to register again for VAT. If you would like to discuss how bankruptcy will affect you business, call Business Debtline.
If you want someone to buy out your share of the equity in your house, or any of your other assets, they should contact the OR as soon as possible after your bankruptcy order to progress this. If house prices rise, the amount that has to be paid will also increase.
Will I have to pay an IPA?
Most people don’t have to pay an IPA. In the last three months of 2015, only 13.4% of bankruptcy orders made resulted in an IPA – that is about 1 in every 8 people going bankrupt.
If, after looking at your monthly income and expenditure, you have over £20 of disposable income, you will be have to make monthly payments under an Income Payment Agreement (IPA). This is an amount which you will have to pay each month for three years from the date the IPA is made i.e. you will carry on making these payments after you are discharged. If you refuse to agree to an IPA, the OR can go to court and get an Income Payment Order set.
This may all sound very scary, but the Guidance Notes for the OR state:
Whilst the assessment of income and expenditure with regard to obtaining an IPA/IPO is intended to provide a return to the creditors where possible, it must also be remembered that the bankruptcy legislation is intended to provide the individual with an opportunity to start afresh and remain solvent in the future, so his/her expenditure should not be cut to a level where he/she will have difficulty funding his/her reasonable domestic needs.
If your income or expenses change during the three years, the IPA can be reviewed. So if you lose your job or go on maternity leave, your rent goes up or you get extra expenses after having a baby, these will all be taken into account. Equally, if your income increases or you get a bonus, your IPA will go up. An IPA has to be started before you are discharged – if one isn’t, then you will not have to pay one even if your income increases significantly after your discharge.
Your partner (or spouse – being married is irrelevant) doesn’t have to contribute money to your IPA, but they do have to make reasonable contributions to household costs, which will reduce the expenses that you have to pay.
The OR can’t generally have any effect on what you earn – if you want to walk out of your well-paid job and be a student for three years that is your choice. (The only exception here is pensions. This is a complicated area and if what happens to your pension affects your decision to go bankrupt, you should get advice on this.)
When will I be discharged?
You will receive an automatic discharge from bankruptcy after 12 months unless either you have a Bankruptcy Restriction Order (BRO) made against you or you have not co-operated with the OR.
The Insolvency Service says:
“If your conduct has been dishonest or you have been in some way to blame for your bankruptcy, a bankruptcy restrictions order may be made against you. This will mean you will continue to be subject to the restrictions of bankruptcy for a further 2-15 years.”
That may sound worrying – almost everyone feels that they have been in some way to blame for their bankruptcy, and many people may have exaggerated their income a bit when applying for credit cards. But if this is the first time that you have gone bankrupt, you are unlikely to get a BRO unless a lot of your debts come from gambling or you have ended up owing large tax debts from your business.
After you are discharged from bankruptcy, all the restrictions and obligations mentioned above will cease, except that any IPA will continue until three years have passed and if you have an IPA you still have to inform the OR of changes in your earnings.
For full details about discharge, read What happens when I am discharged from bankruptcy?
Your credit record
Bankruptcy stays on your credit record for six years. During this time you will find it hard to get credit, although you can start the process of repairing your credit record after you are discharged.
Bankruptcy – summary
Pros gets rid of your debts, you only have to make payments for 3 years and they can be decreased if your expenses go up or your income falls, certainty – this can’t ‘fail’ like other debt options can
Cons may affect your job, your house is at risk, will always have to be declared when you apply for a mortgage
Debt Camel says If you don’t own a house and your job will not be affected, this is a good option if you owe more debt than you can hope to repay in a reasonable timescale. Other people need to balance the pros and cons of this against the other possible debt options.
If you haven’t yet looked at them, this would be a good time to check out the Hard Choice pages: IVA vs bankruptcy, long DMP vs insolvency, and Selling the house.
The big questions people have about bankruptcy
Timing, fees, applying to go bankrupt
Answering your questions about bankruptcy
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Fred says
I’m seriously considering bankruptcy but I’m worried about a few specific things.
I don’t have any assets worth more than £500 except for my car (£1000 ish).
As a licensed firearms holder I own 6 guns, worth around £1K in total, but only £150-350 individually – would the OR look at these as a grouped asset worth about £1K or likely leave them alone as low value items?.
I worry about having to pay an IPA. If they do set one up, is it 3 years minimum?
My current credit card and loan payments are about £700 a month, give or take about £80 depending how close to the limits I am each month, and I have had to pay some cards with cash from other credit cards in the last 4 months. If I declare BR does this amount of my income suddenly become “surplus” that the OR will require me to pay some of it to an IPA?
My wife will probably also need to go for bankruptcy too as we have historical debts (some joint) that have fallen off our credit file, and we were paying through a DMP, but stopped and haven’t really been chased. I worry that if she goes for a DRO then our joint debts and historical debts will either push her over the DRO limit or if we don’t find everything (old debts) then she will still be liable for some after the DRO – is this something to worry about?
Thank you for the great site and articles – really helpful and the best I’ve found so far!
Sara (Debt Camel) says
I think you two need to talk to a debt adviser about the details of your and your wife’s situation. I suggest ou call National Debtline on 0808 808 4000.
I don’t know how the OR would treat your guns – it may depend on how easy they are to sell. If you sold them it would get the money for your bankruptcy fees?
You seem to have a lot of spare income – not all your current debt paymenst would be set as an IPA – some of them are not genuine disposable income but being paid by new credit.
Try to find the list of debts in your old DMP – how long ago was this? Unless you can show they are unenforceable (see https://debtcamel.co.uk/ask-cca-agreement-for-debt/) they should be isted on a DRO.
Farrokh says
Hi Sara,
Thanks again for all your help. I’m coming to the end of my bankruptcy and was wondering if I’d be able to open an ISA after my discharge?
Many thanks
Farrokh
Sara (Debt Camel) says
Yes you can.
This page covers what happens after you are discharged: https://debtcamel.co.uk/discharged-from-bankruptcy/
Farrokh Kouchekpour says
Thank you :)
Kate says
Hi Sara
My husband went bankrupt on the 10th April 2019 hes just had a tax free code applied to his wages we haven’t had any info from the OR as to what happens now or who we pay this excess money too or how the amount is worked out as his wage varies every week. We have contacted the OR but no response this was over 1 week ago he seams very laid back over this we dont want to get in trouble thanks Kate
Sara (Debt Camel) says
You won’t get into any trouble over this. If your husband has any feel for how much tax Is normally taxes off, you could try putting that aside for when the OR gets back to you.
Polly says
Hi Sara,
I have an appointment set up with CAB for next Friday but after seeing some of your wonderful advice thought I would be able to ask some questions before Friday so I have a little bit more information that may create new questions. I like to be as fully armed with as much knowledge as possible.
I am considering going bankrupt. I owe over £40k in unsecured debts, which stems back to when I had to leave the family rented home with my two children after a physical assault from my then partner and start again from scratch as he wouldn’t allow me to have anything except the couch. Debts consist of unsecured loans and credit cards only. Personal credit was also used to start our business as we were unable to get any business finance whatsoever.
TBC
Polly says
I am currently a sole trader in a partnership with my husband. We deal in the sale of what can be classed as livestock. I rent a house and my car is worth no more than £600. We run the business from home. I only have debt in my name – no joint debts whatsoever.
1. If i do decide to go bankrupt, I understand I can still continue to trade as a sole trader, but my concern is for the stock that we hold. Would it be wiser if i ceased being self employed and I severed the partnership to protect the OR taking that sort of interest in the business? I would be classed as unemployed/ stay at home mum received working tax and child benefit? If this is a wise move how soon from ceasing my self employment could I look at applying to become bankrupt?
Sara (Debt Camel) says
I am glad you have an appointment booked with CAB, but that is quite a specialist question. I suggest you talk to Business Debtline https://www.businessdebtline.org/. They give advice to people with small limited companies, partnerships and the self employed, about business and personal debt.
Polly says
Many thanks Sara, will get in touch with them.
Have a great evening :-)
Polly says
Apologies I had a couple more questions that are not business related –
Bank accounts. I have a joint current account with my husband in good standing. All my benefits go into this account, and our wage as well as all my direct debits. Would it be a good idea to open a basic bank account in my name to have my benefits paid into this and my utility DD’s go out of this one for minimal disruption? Before applying for bankruptcy.
Should I get my husbands name removed off the joint account to disassociate him from our only financial tie. His credit rating has improved drastically recently and I wouldn’t want to further hinder that progress.
Sara (Debt Camel) says
You need to get your name or his name taken off the joint account before you go bankrupt or it will harm his credit rating. As you will need a basic bank account it’s probably easier to remove your name and for you to open a new account.
James Webber says
Hi Sara.
I have just had my Bankruptcy application approved and I am awaiting the meeting with the OR.
On our I&E info that I submitted we have a negative disposable income, mainly due to my salary dropping massively over the past 2 years. This would likely mean no payments via IPA if I understand the current process.
Could you please help me to understand what would happen if in 6 months time my take home salary increased by £1000 per month? The I&E currently shows -£200 household disposable income.
I would not want to avoid any payments and would declare any raise in income immediately but I cannot find any guidance anywhere that would help me to understand how much of the salary increase I would have to surrender.
Thanks,
James
Sara (Debt Camel) says
I suggest you wait until the time and look at a new I&E then. I am sorry but a lot can change.your pension contributions may increase, you may lose benefits, if you have a partner, your income would be larger so you would be expected to pay more of the household costs etc.
But if there is a way of not getting a pay rise until you are discharges after a year, that would be best!
Peter says
I am 68 years of age and following a collapse of my business, I am faced with debts of £28K. I believe bankruptcy is my best option as my sole income derives from a State Pension, Pension Credit & benefits. Can I be sure that I will not be required to make an IPA, as I was led to believe that Pension Credit merely ‘topped up’ my State Pension to the minimum income I needed to ‘live off’, yet I have been advised that I might be required to make an IPA over 3 years? Your advice would be greatly appreciated. Many thanks, Sara, and thanks for the DebtCamel website … it really has been so helpful. Many thanks, Peter
Sara (Debt Camel) says
“yet I have been advised that I might be required to make an IPA over 3 years? ” can I ask who said this, and did they think that bankruptcy was a suitable option for you?
steven foster says
I have been bankrupt now since 12th february, suddenly out of the blue they wnat to do another income expenditure form, is this normal, i told them next year 3 months after im discharged from bankruptcy im ginf to take some of my pension when i reach 55, i now have a feeling they are now trying to set up an ipa so that they can claim that pension if i cash it
Sara (Debt Camel) says
Why did you tell them what you were going to do next year, did they ask?
It’s not normal to be asked to do another form unless there is a reason why something may have changed. But if they want you to do another I&E form, then that’s what you need to do. If you need a hand with this, talk to National Debtline or post on here: https://forums.moneysavingexpert.com/forumdisplay.php?f=136
Steven Foster says
I told them because I was trying to be honest, and I needed a new phone so I was basically asking if it’s OK to upgrade my phone too, this was after they hijacked my 2 life insurance policies and I had to buy them back of them, I’ve done a bit of overtime this year so far I’m wondering how would they know all this stuff lol
Sara (Debt Camel) says
from HMRC… it may not be a good idea to be doing overtime if they are going to set an IPA!
You are also supposed to inform them if your income increases.
Steven foster says
I told them about my payrise and my bonus and they wasn’t interested in it, guess I best do no more then
Diana says
My husband (both retired pensioners (68 & 65) and I presently have an IVA which is failing and we are now considering bankruptcy because we can not afford £420 a month and we do not own a property.
We both receive government pensions and my husband receives full disability benefits.
The IVA considers his benefits and our government pensions as income and from some of the discussions on here, I understood that in bankruptcy the OR discounts these as income. I have just phoned and asked the OR’s office and they said government pensions count as income so I now really confused, can you please clarify?
Sara (Debt Camel) says
Hi Diana,
sorry to hear your IVA isn’t working out. How long ago did it start? How large are each of your debts in it?
when you say government pensions, do you mean the state pension and possibly pension credit? Or do you mean things like civil service or NHS pensions?
Diana says
Hi Sarah,
It started nearly a year ago via Stepchange and its about 60K.
To clarify I am referring to our state pensions.
Sara (Debt Camel) says
If your only income is state pensions and disability benefits, I’m not surprised you find it hard to afford £420 a month to an IVA! They do count as “income” in bankruptcy but you are allowed larger than normal expenses because of the disability benefits so the net result is that you will have no “spare income” and shouldn’t have to make any monthly payments.
You can discuss this with StepChange, or would you prefer to talk to someone else about it before talking to Stepchange?
Diana says
We do also have private pensions of approx £1400 per month Sarah which is counted as income. The IVA was £320 a month but we have just completed a new expenditure because I now receive a state pension albeit at £380 a month. It probably is worth talking to someone else Sarah rather than Stepchange. Are the disability state benefits really counted as income though in bankruptcy?
Sara (Debt Camel) says
Disability benefits are counted as income BUT you can include a line in your expenses that is the same value as the disability benefits.
Your state pension is also counted as income – but if you didn’t have the private pension, then that wouldn’t be enough income for you to have to make any monthly payments.
I think it might be a good idea for you two to talk to someone else about your options. You could phone National debtline on 0808 808 4000 and say you are struggling to afford the IVA and you would like them to say if you would have to make monthly payments – and how large – if your IVA failed and you went bankrupt.
David T says
After entering Sequestration the Trustee can ask to see bank statements. Will they also be interested in a PayPal account or Ebay ? Im wondering if I should stop using it. I am not using either for business purposes just small stuff occasionally.
Sara (Debt Camel) says
Hi David, it sounds as though you are in Scotland. I’m not an expert on insolvency in Scotland, it is quite different from south of the border. Can I suggest you talk to National Debtline who have Scottish experts? Or leave a comment on this other blog by a good Scottish debt adviser: https://www.advicescotland.com/
Raf says
Hi, couple of questions I didn’t understand right. When you send your application before it has been approved and you are made bankrupt can you still withdraw cash (if it hasn’t been approved yet) ? I read that once bankrupt your bank accounts will be frozen but since I read here that it might take a few weeks for the OR to inform the banks will they not know for a long time? So does that mean my bank accounts will still be open since they don’t know? Is it a good idea to call my banks and tell them I’m bankrupt once it has been approved so that they don’t even bother contacting me? I’ve opened a basic account before going bankrupt so I don’t have any debts with that bank and the bank said it shouldn’t be frozen if I go bankrupt but in this article it says I should stop using all my bank accounts after going bankrupt so can I use it? Thanks
Sara (Debt Camel) says
Approval normally only takes a couple of days, I think you are overthinking this. Take the cash out before hand that you will need for the next week or so. Have you asked the bank the basic bank account is with if you can keep it after you go bankrupt?
Steve says
Hello,
When you’ve gone into bankruptcy and the debt is written off, who covers that debt? Is it the government?
I know technically it’s just numbers on a piece of paper but you can’t just change those numbers to zero.
Many thanks
Sara (Debt Camel) says
No, it is the creditor writing down the amount owed to zero.
All lenders plan for a default rate – not every loan will get repaid. And if the debt has been bought by a debt collector then may have paid 1 or 2 p in the pound for it – so they lose little money.
Steve says
Oh I see. I wanted to pay the debt back but had to go to bankruptcy. It’s a shame the company has to write it off. I felt the government would have more means to cover it.
Thank you.
Stev says
Hello
I was made bankrupt in feb this year, after sending bank statements payslips etc along with my wifes because they didnt believe i pai 80% of the household bills, anyway no ipa was set up, In july they requested the same, in april and may i was working the bank holidays which is double time so they are now wanting me to pay £207 saying its no longer acceptable that i pay the bills so they have calculated it accordingly. my wife is only on a low income, Working out what i will be paid for the next three months with the allowances they say i can have plus there payment i would be aout of pocket by £315 on the allownaces they say i can have. ive tried to argue that there figures do not add up to what my current shift pattern and take home pay are, either i sign it or i go to court
Steve
Sara (Debt Camel) says
Do you earn 4 times as much as your wife?
If you don’t, then why isn’t she paying a larger share of the bills? They should normally be split in proportion to your relative incomes.
steve says
no. it’s not even double
A few years back she lost her business to an accountant mess up which n turn lost her the house, she owed the taxman 40k plus what was left on her mortgage which she as to pay back leaving her with very little each month. so i have paid the Rent CT G&L the last two years, in february the trustee took this into account but now are saying its not acceptable, even taken into account the allownaces i am allowed and the wife was paying 50-50 split over the next 3 months im paying then 207 pounds a month which leaves me -£186 the next two months and over the 3 months -£315. how can that be fair, also can they take my peoples pension next year if i take 5000 pound out of it, read conflicting stories on this web site, but the insolvency agent says they will definitely claim it.
Sara (Debt Camel) says
I think your wife should take some debt advice.
From the OR’s point of view, it is not reasonable that she should pay her creditors and not pay her share of the bills, leaving you with less money to pay yours.
If you would like someone to look at your situation in detail, you could phone National Debtline on 0808 808 4000. You could also post on the MSE bankruptcy forum, where you can complete income & expenditure sheet and post that there: https://forums.moneysavingexpert.com/forumdisplay.php?f=136
Steve says
Thank you
secondly im 55 next year a wanted to take some money out my peoples pension, reading previous posts i was under the impression they couldnt touch it if i drew out a 5k lumper, but they tell they me if do then they will claim it, any advice would be much appreciated
Sara (Debt Camel) says
This article works through the different cases: https://debtcamel.co.uk/pension-safe-bankrupt/
steve says
Im guessing case 3 would apply to me if discahrged, so why is my case officer telling me they will claim it no matter what, its only worth 4k after tax. it says something diffrent on the insolvency web site
https://www.gov.uk/government/publications/guide-to-bankruptcy/guide-to-bankruptcy
Paragraph 5.3 pension payments
even my trustee said she will claim it, read it out over the phone to me.
Sara (Debt Camel) says
well the simple answer is obviously not to draw it, but I am making some enquiries.
Sara (Debt Camel) says
A lump sum is now treated as a way of taking income in advance and there is a sliding scale which determines how much the OR/Trustee will look to claim, depending on how far into the 3 year IPA you are:
o 24-36 months remaining – 75% of the lump sum
o 12-24 months remaining – 50% of the lump sum
o 1-12 months remaining – 25% of the lump sum.
So you should probably need to reconsider taking a lump sum out of your pension. Can you delay this until your IPA completes?
I will be amending the article I linked to above to reflect this.
Steven says
This is the email i received this morning from my trustee/still confused lol
Dear Steven
Regarding the lump sum, as with anything in law, it can be somewhat open to interpretation. The Official Receiver’s guidance states:
“For the purposes of an IPA or IPO “income” is widely defined as any form of income. In addition to periodic payments the bankrupt might receive by way of salary or wages from any employment, business or vocation, pension or state benefits, lump sum payments might also fall within the definition of income. For example, a bonus payment from an employer, arrears of maintenance payments or a lump sum from a pension. Income received at any point after the making of the bankruptcy order, to the point of discharge, might be included in an IPA or IPO and therefore can include income which is already in the hands of the bankrupt”.
Therefore as long as you take it out after discharge (and I see now you will be 55 in May next year) then it can’t be claimed as income.
Sara (Debt Camel) says
Are you paying an IPA?
steve says
I am now from 11th nov i start paying
Aly says
Hi I’m really concerned about debt I owe to my ex partner which is my debt but it’s in his name. I’m worried because part of the debt he got out for me is actually secured on his property. I don’t live in the property anymore. If I don’t keep repaying him the agreed monthly repayments I know he won’t be able to keep the payments up! What will happen to the debt I owe my partner when I press the button to become bankrupt? Will the insolvency people go after him to recover the money I have repaid up till now?
Also if I have a basic bank account that I have not used before and is dormant, so I have to put it onto the bankruptcy application?
Hope you are able to help. Thank you
Sara (Debt Camel) says
How much are you paying him a month? How much is left to pay?
Are you paying your other debts at the moment? How large are they?
Yea a bank account that isn’t used needs to be listed on your bankruptcy application.
Aly says
I pay him £600 a month and there is approximately 12k left to pay him. I have stopped paying all other debts/creditors and have not paid them for 2 months now but I have kept up the payments to my ex partner.
I have no option but to go bankrupt as my debts add up to nearly 80k. I have no assets at all. Im scared for him and don’t know how me going bankrupt will affect him?
Sara (Debt Camel) says
And can you afford to pay this 600 a month?
Aly says
I basically pay him with my PIP payment so I don’t see any of that, I just give the full amount to him. Can I afford it … no not really but I would rather not have any money if it means he can be safe in his home. I am on maximum benefits (Income Support) as a single parent so we live on that and child tax credits and I give the PIP to my ex partner..
Sara (Debt Camel) says
I’m sorry but I think you need to go back to StepChange and talk through the situation. You have huge debts, yiu took this urge loan from your ex, I can’t see how you can have been paying the other debts up to a couple of months ago. This is a complicated situation that doesn’t seem to make much sense and there could be some big parts I am not aware of.
Aly says
Your right it is very complicated. I had a decent income up until 3 months ago but my situation changed drastically for the worst for many unfortunate and unforeseeable reasons.
Ok I will go back to step change. Thank you for your guidance and well done on the whole debt camel thing, it’s a fantastic and very helpful place to scroll through …
Billy says
Hi,
I’m not sure if this is how I state my situation,
Me and my wife currently owe roughly £50k in unsecured debts cards and loans. We don’t own a house we rent from housing association.
We are trying to tackle are debts in a sensible way now but find it difficult to find who to speak to for the best advice, we have spoke to stepchange who recommended an Iva but have spoke to a financial advisor who recommended bankruptcy.
We don’t have any valuable assets apart from my wife’s car worth roughly £4000 but she does need this for work.
If we entered an Iva could we pay the payments for 6 months and then offer a lump sum to end the Iva? If this is correct step change seemed to think we would be liable for £5k so if we offered a lump sum so soon would they accept the remainder of your payments or would they require more?
If we went bankrupt would we be tied into 3 years of payments coming out of our wages?? We don’t earn great just trying to find the best solution, I average £1800 per month take home and my wife £1000 per month but we have two children and a dog to pay for.
Sara (Debt Camel) says
If we entered an Iva could we pay the payments for 6 months and then offer a lump sum to end the Iva?
where would this lump sum come from?
I average £1800 per month take home
how variable is your salary?
You are getting child benefit? any other benefits?
Billy says
The lump sum would be a payment from my parents, they can offer to help with some money but obviously not £50k
My wages are pretty stable so i usually clear £420 per week after tax but I would say roughly 10 weeks if they year may only be £380ish
Benefits is only child allowance of £130 per month
Sara (Debt Camel) says
And how much have StepChange said you would have to pay a month in an IVA?
Billy says
Hi,
They said £80 per month for 5 years
Sara (Debt Camel) says
Is that £80 each or between you? £80 between you seems very little to be accepted as an IVA on 50k of debt.
Billy says
Hi,
They said £80 a month between us this was just a quote, he was saying on the phone the would write off 90% of the debt as we didn’t have hardly anything spare after an I&E form. The problem we keep reading and hearing so many different things we are just trying to find sound advice to get us out of this mess.
Kasia says
Hello , if you could kindly advise me with few things I would be very grateful..
I became a bankrupt in September last year I received a letter from revenue and tax office that my tax code changed for nt, because of that I received more money (salary +tax). Should I inform official receiver about it? Is that treated as increas of my incomes? I use this money for life as I had to leave my current job and I am looking for a new one, so basically my life didn’t improve by this ?
Also I would like to ask if I will find a new job with better pay how much of this I will have to give away to or?
3. Also the price of my rent might drop around 200-300£ do I need to inform or about it?
Thank you
Sara (Debt Camel) says
Your tax code would have been changed because you went bankrupt… you should be paying the tax that you have saved paying to the OR, have they not asked you for this? Talk to your OR about this. It will have now got more complicated as you are out of work.
I can’t guess of you will have to pay an IPA (monthly payments) if you get a better job. that will depend on your expenses and your income.
yes you should tell the OR if your rent falls. But if you are out of work, you won’t have to pay an IPA.
Steevie says
Hi, I was made bankrupt 18th December 2018, so have just come out of the initial year. I have an IPA and my house is up for sale. My debt was tax man £50k (they took me to court) and loans/credit cards £45k. There is plenty of equity in the house (£300k) – what i cant get is a straight answer to what i would expect to pay and settle when the house is sold. My IPA is for £1,600 a month for 36 months – so £59.5k overall. I have paid off 12 months of that – so £19.8k. What should i expect to pay back if house is sold in the next 3-6 months as the market has now picked up and people are viewing houses again?
Thanks Steevie
Sara (Debt Camel) says
You should expect to have to repay all your debts in full, plus 8% statutory interest, plus the OR’s fees. Likely to be well into 5 figures. Talk to your OR/Trustee in Bankruptcy about this.
Mercia says
Hi,
I have just been made bankrupt 29/1/2020, after 1 year of IVA which I didn’t think was the right option for me. I am employed but have no assets except for my car worth about £1250.
Now I am worried that the official receiver works in the same office as my IVA insolvency practitioner. Will I at any point be disadvantaged because of the failed IVA.
Also OR said she is sending out some forms for me to fill. What is this about? Does everyone get that. Feeling very nervous at the moment.
Sara (Debt Camel) says
You have been made bankrupt by your IVA firm? Or a creditor? Or you let your IVA failed then went bankrupt yourself?
Gareth says
Hello,
I’ve been made bankrupt by HMRC August 2019, I have been told that I have equity of £59,000. They have informed me that I have to sell my family home unless my wife can raise the cash. She can’t get any funding anywhere so far, now I have just received a letter informing me that I have to make a £250 IPA payment every month for 3 years. Do I have to make these payments even after losing my home?
Sara (Debt Camel) says
Hi Gareth, I think you need to talk your full situation through with a good debt adviser. I suggest you call National Debtline on 0808 808 4000. Some points to discuss include:
– how much equity you have
– how large your debts are (if the money from sale of the property was enough to clear your debts and the ORs costs, you would not have to make IPA payments in addition)
– assuming you would be renting afterwards, how that would be likely to affect your income and expenses, as the IPA is based on that. So if you have to pay more to rent you would be likely to have a lower IPA
– timing considerations. If your wife owns the house jointly, you could choose to see now or wait, the OR has to realise the value of your home within three years. It is not always best to wait.
Robert says
Hi, question about going bankrupt and IPAs. I’m looking to going bankrupt after a bad few years. Currently have around 45k unsecured debt, I own my own home, however there is zero, and likely negative equity in it so OR unlikely to be interested in selling it. My plan is to walk away from the property once I go bankrupt as there are a lot of bad memories attached from the relationship and family breakdown that these debts have caused. I will be moving back home with my parents, and wanted to know where I would stand per an IPA as I have a fairly well paid job, and once I walk away from the house I will have very few outgoings, basically helping my parents out with bills, and car tax and insurance will be my only committed expenditure, from what I’ve seen on here my car is likely safe as it’s essential for my job and not worth much more than £1000, so are they likely to decide they can stop the majority of my pay, and if they did I would be surely overpaying what I owe to creditors as it last 3 years? Any advice is appreciated.
Sara (Debt Camel) says
So you think if interest is frozen on all your debts and you moved back with your parents you could repay all your debts in 3 years?
Robert says
Possibly, I was just not sure about the house situation, as I owe just over £85k on it, however with its current condition and the local market I’d never hope to achieve this selling it, and if I defaulted on the mortgage are the bank not likely to make me bankrupt anyway?
Sara (Debt Camel) says
So you think it is definitely in negative equity – that makes a difference. What could you rent it out for?
Thomas says
Hey Sara,
Me and my partner have been thinking of going bankrupt for a few months now because of 80K of personal guarantees from our insolvent business.
Is this the right time to do it with everything going on with coronavirus?
Do you think we have a opportunity to settle the debts with the lenders at a lower amount?
We have no assets and currently have no income due to the pandemic but we could potentially borrow some money from family to try and settle the debts.
Thank you
Sara (Debt Camel) says
I think that is a difficult question.
Is there any chance your business will be able to get going again? What will you both do for jobs? I assume you are renting – have you applied for benefits?
Thomas says
We are both self employed but unable to work due to the Pandemic.
We have both applied for UC and we are due to receive £78 per week each.
Hopefully we will be able to return to work once everything is over.
We live in private rented housing at the moment.
Our Limited Company went into voluntary liquidation last year.
We have been managing the debts from the business directly with the lenders and we have sent them I&E sheets and arranged monthly repayments but due to the large amount owed, we were already struggling financially and mentally.
It’s impacted both of our mental health having this large secondhand debt hanging over our heads.
Most of the lenders have agreed to accept a £1 token payment for 3 months due to the pandemic.
I’ve read in a few places that lenders took really low full and final settlements after the last financial crisis and if that was the case in the future, we might be able to avoid bankruptcy.
Sara (Debt Camel) says
UC should also help with your rent. Have you applied for Council tax Support?
What is your aim for employment when this is possible again? Self-employment? Are you likely to make a profit?
Sara (Debt Camel) says
The problem is, you can’t be sure that all your lenders will accept a very low settlement. If one or two do, that may not really help you and you may still need to go bankrupt.
Honestly I would have thought that bankruptcy now, with your nice relatives paying the fees, may well be your best option. It may be that you can’t get back to a good employment for a year – in that case you wouldn’t have to make any monthly payments. After a year you could be directors again if you want to set up a new company.
And if you need any capital for the new company, the money from your relatives may be better used for that, not to try to settle these old debts. Bankruptcy is there to give people with impossible debts a clean start.
Can I suggest you talk to Business Debtline about this if you are worried about the impact of bankruptcy on what you might do in future. https://www.businessdebtline.org/
Ronald says
Good evening Sara
I was made bankrupt in 2017, because I was self employed and , the only asset I had was my house, that was sold to clear the debts.
I have received a letter from the trustee listing all payments to creditors, and the remaining funds return to myself, however my pension, which I was getting a small amount every month have stop, tried to join Check A trade, I was refused membership because of outstanding debts.
The Courts have been contacted, but I am just going around in circles.
Sara (Debt Camel) says
I was made bankrupt in 2017
so a creditor made you bankrupt?
the remaining funds return to myself
so the house cleared all your debts plus the OT/Trustee fees?
I was refused membership because of outstanding debts.
Do the debts show on your credit record as still owing?
The Courts have been contacted
can you say some more about this?
Sarah says
Hi I was made bankrupt 2 months ago after loosing my job I currently owe 25k approx , I think I could be starting work soon , what’s the most I could be taken off me with an IPA for example if they took 1000 pound off me for 3 years that’s would be 36,000 more than what I owed , so is there a maximum they can take off you 25000 divide by 36 months would be just short of 700 quid is that the most they could take off me ? Thanks
Sara (Debt Camel) says
No, what an IPA is will depend on your income and your expenses. If at any point your IPA payments had repaid all your debts plus the OR’s fees (which will be large) then the IPA would stop at that point.
but how much are you likely to earn? And what would your living expenses be?
Paul says
I had a my interview from the O.R. 5 weeks ago (June 26). I have not heard anything back from the O.R. Should I expect some kind of reply, confirmation or something else from them? Or is that it?
Sara (Debt Camel) says
Some people never hear anything else! Were you expecting to have make monthly payments? Do you own a house?
Scarlett 7 says
Husband likely to go bankrupt.
Income is private pension, PIP and Retirement pension, housing benefit
We live in private rented accommodation with one adult chiid.
My income is carers allowance and “keep” from adult child.
How do we explain our income/outgoing do l have to list my debts as well.
Are we likely to get a IPA
Thank you
Sara (Debt Camel) says
Has your husband had debt advice? Have you?
Jeff says
My wife and I have just been declared bankrupt (the very next day We submitted our online forms) on Thursday morning which a relative paid for us on the understanding that we pay him back as soon as the self employment grant I applied for gets paid out to me(it’s the covid 19 grant).
The money has just gone into our bank as from Friday morning.
Are we allowed to withdraw the money to pay back the relative or is it now classed as an asset?
Any advice would be much appreciated Sara.
Thank you.
Jeff .
Sara (Debt Camel) says
oh dear, why on earth did you not wait and go bankrupt after you had received the grant money?
I don’t know how the OR will treat the grant – it may be handled as “income” rather than “an asset”. Are you currently getting Universal Credit or any benefits?
paul says
Hi,
I’m probably considered a high earner taking home 4.5k a month however after 4 months of furlough all my debts are maxed out to the tune of nearly 50k… I have no assets live in a rented house and my car is worth about 1500. I’m about to press the button on my application to declare bankruptcy, After filling out my expenses I literally have 200 spare a month so will not be able to keep up debt repayments. I guess my question is how do they calculate the monthly payment I will have to pay?
Sara (Debt Camel) says
First have you taken advice on bankruptcy? It may well be the best option for you but it is always worth an hour of your time to go through your situation in detail with a debt adviser. I suggest you talk to National Debtline on 0808 808 4000. The debt adviser can help you draw up a budget which can be useful for completing the bankruptcy application and may give an indication of what an IPA is likely to be.
You could also post on this MSE forum: https://forums.moneysavingexpert.com/categories/bankruptcy-living-with-it. If you can post what they call a Statement of Affiars there, you may get some useful guidance about a likely IPA level. there are several good debt advisers who post on that forum.
You say you are on furlough – do you expect to be able to go back to your normal job & pay soon?
Bicky says
Hello, I have unsecured debts through credit cards and loans £36000 I live in private rented house on housing benefits, the only income I have is ESA and PIP. I used to keep up to all the payments by borrowing and then getting loans to pay back and have got into a lot of debt. My daughter was on Furlough but sadly lost her job and has put us in financial crisis as she helped out, she’s applied for universal credit but will not be getting the full payments. I have been ill and borrowing of my other daughter for food and medicines door to Change charity said to me to go bankrupt. I’m only on benefits can they still afterwards ask me to make some payments towards the debts? One thing I’m afraid of this year when times were tough and I’ve been borrowing from my eldest I took out money transfer on my credit cards totalling £6000 on different cards, I sent the money to my daughter as she’s paying for my food sand medicines. Could this impact me if I go bankrupt? It’s just she was struggling and I thought I’d pay her back not knowing my youngest daughter would loose her job and make it impossible to pay back. Please help before I file for bankruptcy
Sara (Debt Camel) says
door to Change Charity – do you mean StepChange?
I’m only on benefits can they still afterwards ask me to make some payments towards the debts? If your only income is benefits you won’t have to make any monthly payments.
I took out money transfer on my credit cards totalling £6000 on different cards, I sent the money to my daughter as she’s paying for my food sand medicines Over how long a period was this £6000? If you were doing this as your daughter was spending that on food and medicines, that may not be a problem, but was it a lot more than what she was buying for you?
Tamara McCabe says
I have been bankrupt since Feb 2020. I have a certificate stating I could keep my car and in my expenses this included the obvious car insurance, road tax etc. My insurance came to an end this week and the insurance company I was with will no longer exist after this (it was with the AA car insurance who emailed me to say that I won’t be able to renew with them as that particular part of the AA won’t be existing anymore). Anyway, I have now obtained new car insurance with tesco bank. My question is, do I need to declare this to the OR since it’s technically a loan isn’t it? I pay monthly like I did with my other car insurance so I would think I would have to. Thank you.
Sara (Debt Camel) says
In this sort of situation I always suggest you should email your OR’s office and explain that you are changing your car insurance and so you are notifying them about the new credit. I would be surprised if they have any interest in this, but an email means you have notified them.
Abigail says
Hi,
I became bankrupt in April 2020. I am now living in Ireland and am thinking about returning to education. Would a student maintenance grant and fees be deemed income that would need to declared or how would this work when I am living outside the UK now. Thanks so much for your help.
Sara (Debt Camel) says
I am reluctant to assume that Irish student grants and loans would be identical to English ones.
Can I suggest you talk to National Debtline: https://www.nationaldebtline.org/EW/Pages/contactus/debtadvice.aspx? They can be phoned from abroad or you can use the webchat.
If you feel the situation is unclear, then a simple option may be to wait until after you are discharged in April 2021. After that you can borrow and earn as much as you want and no IPA can be imposed.
Abigail says
Thanks Sara I will do that. I’m so grateful for the advice and the service you provide.
Stuart says
Stepchange are advising bankruptcy, but are unsure whether the £400 pcm that we are “expected” (according to Government guidance) to contribute towards our daughter’s university living costs will be regarded as surplus that we can contribute towards debts. Does anyone have experience or guidance on this?!
Sara (Debt Camel) says
Do you mind saying how large your debts are? And how long until your daughter finishes uni?
Stuart says
Dear Sara,
Thank you for replying. My daughter has just started uni (i e. Locked in halls of residence!) in September, so another 3 years.
we are renting.
Our combined debts are over £50k (£20k with my wife, so DRO is a possibility for her). Our combined salaries showed we are expected to contribute around £400pcm to my daughter’s living costs – she is happy to work and earn too, but currently isn’t allowed to leave her halls.
My fear is that the bankruptcy will squeeze us in living costs (which is kind of ok) but also require most out all of the money we contribute to her Uni living costs. Thus far it seems inconclusive – yes, we can only ‘keep’ our living costs, but no – bankruptcy should give us a fighting chance of a fresh start.
Kind regards,
Stuart
Sara (Debt Camel) says
Sorry a few more questions:
So far are you up to date with the debts? Or in payment arrangements?
Can you say what your joint debts are? What your sole debts are? What your wife’s sole debts are?
Do you earn a lot more than your wife?
Stuart says
Happy to answer, appreciate the support.
Token payment plan for past 12 months (unemployment) just ended as back in work, but earning £10k less than before
I have £30k+ sole debts, my wife £20k sole debts (so suitable for DRO)
Combined take home earnings around £4,100 pcm. Wife earns slight more than me.
Modest expenditure, renting, one dependant child at home, old unreliable (costly) cars (2) both needed for work with high mileage costs due to rural commuting
No assets or savings
Estimate £400 pcm to support daughter at university (according to gov.uk calculator)
Excluding uni costs, between £1 and £85 available to pay debts each month (subject to living costs being scrutinized further).
Debt charity suggest bankruptcy and DRO, but I’m worried that £400 uni costs will be deemed as available to pay towards debts for 3 years as part of bankruptcy.
Hope that helps.
Best wishes,
Stuart
Sarah says
Hi, I was officially made bankrupt on 2nd Feb this year and they have allowed me to keep my car. I am now also going part time work instead of full time (claiming working tax credits as I am a carer and had a breakdown last year about my debt and caring role). I would dearly like to start a social enterprise that supports people with the full process of their disability benefit claims including follow through to judicial process. However, I do understand my restrictions and the following in particular:
● You must not be concerned (directly or indirectly) in promoting, forming or managing a company or act as a company director (whether or not you are formally appointed as a director), without the Court’s permission (Section 11, Company Directors Disqualification Act 1986).
I am only looking at doing the research and doing the back ground work to be ready for a business when i am discharged. However, I have desperately tried to see what I need to do with the courts to ask permission but unsure they will a) give me this, b) how much is costs and c) whether I need to get court permission for what I want to do as it will be a social enterprise and I will not be collecting money to begin with.
Help please and advice.
Sara (Debt Camel) says
Business Debtline https://www.businessdebtline.org/ would be good people to talk to about this.
Chloe says
Hi, I have approximately £20k worth of debt which I have been trying to manage.
One of my debtors who I have been unable to pay has applied for a CCJ. As this impacts my credit file further anyway I am just wondering if bankruptcy might me a better option for me now?
I separated from my husband 4 years ago and this is when financially things start to get difficult.
At that time I was self employed on a good salary but due to unforeseen circumstances later in 2018 I had to give this up and look for a FT job. As I result I am also behind on corporate tax, PAYE, companies house etc. What would happen with these debts as I am not in a position to pay (the amount of this isn’t included in the £20k owed).
I have concerns about how my employment may be impacted by bankruptcy but I also don’t know how much choice I have. How would my salary be paid to me during the proceedings when the account is frozen? Any advice would be much appreciated. Thank you.
Sara (Debt Camel) says
A CCJ wrecks your credit record for another 6 years and also makes it hard to rent privately without a guarantor and may affect a few people’s jobs. So as your debts sound way too high to pay off, then this does seem a good point to look at debt solutions including bankruptcy.
As some of your debts come from the time you were self employed, I suggest you take advice from Busines Debtline https://www.businessdebtline.org/ who are specialists in that area.
There are three types of insolvency in England – bankruptcy, IVAs and DROs. If you have no assets then you can probably rule out an IVA – you pay more, for longer, than with bankruptcy and more than 30% of IVAs fail, leaving you back with the debts. At the moment you can only get a DRO if your debts are under 20k – this would include the business debts such as tax if you are personally liable for them (Business debtline can help with that point).
How would my salary be paid to me during the proceedings when the account is frozen?
The simplest approach is usually to time your application so it is just after you are paid. Then you can take out cash for the next few weeks and open a new basic bank account the day after your bankruptcy is approved (usually a few days after your application) and get your salary paid into the new account by your next payday.
Paul Bolton says
Hi Sara I am going through bankruptcy at the moment I currently have a pcp car contract but will run out within my year of bankruptcy, my mum has offered to give me cash to buy a car what is the limit you are allowed to spend please
Sara (Debt Camel) says
What you are suggesting will not work well. If you mum gives you cash to buy a car, thst cash can be claimed by the Official Receiver. But there are better alternatives.
Your mum could buy the car and give it to you. Then the car’s second hand value – what you could sell it for, ie a bit less than what she paid for it – should be £1000 or less. Although in practice your OR will be very unlikely to interested in it if it is a few hundred over that, you may feel this is risky.
But the best option if your mum can afford more is for her to buy the car and continue to own it but let you drive it. You can still insure this in your name and be the registered keeper even though she owns it. Here the car can be worth an amount. She can send you a Letter or email saying that to help you out she will let you drive and insure the car, but it still belongs to her and if her circumstances change she may need to drive it herself or sell it. You can then show this to your OR if it is queried.
Sarah says
Hi. I am already bankrupt (feb this year). I am wanting to set up as a sole trader for consultancy. Am I able to do this whilst an undischarged bankrupt? It will not be a limited company. Just me trading under my own name?
Sara (Debt Camel) says
Yes you can – I suggest you talk to Business Debtline about this: https://www.businessdebtline.org/