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Bankruptcy Myths Debunked

Many of those considering bankruptcy often abandon the idea due to fear of the unknown. With doubt surrounding all manner of issues, people opt for ‘safer’ options such as Debt Management Programmes (DMPs) or Individual Voluntary Arrangements (IVAs).

Ironically, the very alternatives designed to ‘soften the blow’ often result in protracted payment plans that achieve little or nothing. Under a DMP, there is little prospect of ever repaying the capital while most IVAs are abandoned after 2 – 3 years due to the payments being unaffordable and constantly reviewed.

Indeed, 80% of our client base is made up of former DMP and IVA clients. With a maximum bankruptcy period of just 12 months and a guarantee that the debt is liquidated once and for all, smarter members of the public have seen the light. Who needs a five year debt plan when everything can be done and dusted in 12 months?

Of course, there are the usual doubts: ‘What will I lose?’, ‘Who do I see?’ and ‘Will I be embarrassed in open court?’ To put your mind at rest, here are the top eight myths and the answer to the questions:

I will have to explain myself before a Judge. This is no longer an issue as cases are now processed online and there is only one phone call involved, but no face to face interaction. Other communication will be by letter and email, but nobody comes to your house at any point during the process. You can literally enter into bankruptcy from the comfort of your armchair.

Bankruptcy will ruin my credit rating forever. Wrong. In many cases, people have good credit ratings as soon as 18 months after discharge. If active measures are taken to improve credit ratings, it is now possible to get a mortgage three years after discharge, provided there has been no trouble in between.

I won’t be able to have a bank account . It is now extremely rare for banks to close accounts unless there was debt with the bank in question. However, if you are having problems try the Barclays’ ‘Cash Account’ (which has a chip and pin card) or Cooperative Bank’s ‘Cashminder’ account. Both will welcome you with open arms.

I will lose my mortgaged property. Not necessarily. If the house is in negative equity, any decision will be deferred for 27 months pending another assessment of the equity position. Even if it was found there was some equity after two years, a forced sale is unlikely. More likely is that a charge would be placed against the property, to be redeemed when the house was sold.

Bailiffs will take everything away. Wrong. Bailiffs have got nothing to do with the bankruptcy process. Bailiffs usually only appear for one of two reasons a) non-payment of the monthly terms of a County Court Judgement or b) non-payment of Council tax following the issuing of a Liability Order. If you have neither of these you will not see a bailiff.

I will lose my job if I go bankrupt. Most unlikely. There are few professions that have restrictions and these are mostly in financial services and Solicitors, but for most everyday jobs this simply isn’t the case. We have taken countless NHS staff, teachers, Council and office workers through the procedure with no comeback.

I will have to make monthly payments for the next three years. Although it’s true that the Official Receiver will assess whether you have any surplus income with a view to placing you in a payment agreement, this is avoidable. We use the  same income calculators as the OR and know the limits of everything that can be claimed in overcoming this problem.

My Landlord will ask me to leave. If you feel that your tenancy may be under threat, you can now overcome this issue by providing a copy of your tenancy agreement to the Official Receiver upfront. Provided your landlord isn’t one of the creditors in the bankruptcy, no letter will be sent.

And there you have it, most of the issues have been debunked. There might be other factors that we haven’t covered here, but give us a call on 01425 600129 and we will gladly talk you through it.

Top 10 Bankruptcy Quick Questions

Bankruptcy Questions

For more detailed answers to the Top 10 Bankruptcy Quick Questions please visit our FAQs or Bankruptcy Questions, but for now here are our Top 10 Bankruptcy Quick Questions:

Is it true that I no longer have to attend court for bankruptcy?

Correct, everything is done online now. The case is initially referred to the Adjudicator is Bankruptcy, who then passes it on to the Official Receiver as has always been the case.

Can I get a reduction on the £680 Bankruptcy Fee if I am unemployed?

No, everyone has to pay this fee regardless of circumstances.

Will I lose my job if I go bankrupt?

No, this won’t happen unless you are employed as a Solicitor, Mortgage Broker, Financial Adviser or similar position. Every day jobs (NHS, retail and office jobs) are not affected.

Will I lose my car if I go bankrupt?

Cars on finance will be lost, but you are otherwise allowed to have a car valued up to £1,000 provided it is needed for work or you are a Carer.

Does anyone come to my house if I go bankrupt?

No, nobody comes to your house at any stage to assess whether you have assets. Bailiffs do not form part of the bankruptcy procedure and will not arrive on your doorstep.

Will my Landlord be informed if I go bankrupt?

Yes, but this can be avoided if you produce a tenancy agreement and advise the Official Receiver that your tenancy may be under threat if your Landlord is informed.

Can I have a bank account if I go bankrupt?

Yes, this no longer an issue, though you will definitely not be able to keep an account that formed part of the bankruptcy e.g. a loan and overdraft was included.

Will I ever be able to get a mortgage if I go bankrupt?

Yes, it is now possible to get a mortgage three years after discharge, provided there has been no trouble in the interim.

Should I use a Solicitor for bankruptcy?

No, this will be too expensive, but it’s important that you seek advice as the online application is fraught with danger. The Income and Expenditure section has been designed to trip people up.

Will I have a monthly payment after bankruptcy?

This relates to the previous question, where a bodged Income and Expenditure will see you tied up in an Income Payments Agreement for three years. Call us, we know how to make this problem go away.

Feel free to call us on 01425 600129 for clarification on any of the above or for bankruptcy help.

Is an IVA better than a bankruptcy?

The only way to truly answer to Is an IVA better than a bankruptcy? would be to look at the failure rates of IVAs after the first 18 months.

They sound great at the outset but a significant number fail in the first two years. More importantly, the IVA companies that arrange these debt solutions are motivated to sell IVAs ahead of anything else as there is more profit involved, and this biases their presentation accordingly.

Individual Voluntary Arrangements and bankruptcy are both legally contracted debt solutions, yet are essentially very different. The prime function of an IVA is to protect assets such as properties and businesses, which might otherwise be lost in bankruptcy. Bankruptcy, on the other hand, is ideal for those who do not have significant assets, are living in rented and holding down everyday jobs like the rest of us. They both harm your credit rating, but it is a fact that discharged bankrupts can now get mortgages within three years (other forms of credit within 18 months), whereas there is no chance of this happening for those tied into IVAs for 5 – 7 years (many IVAs extend well beyond 60 months).

The big selling point for IVAs is that part of the debt will be written off ‘using Government legislation’ based on affordability, yet any apparent savings are soon eroded by the fee structures.

We speak to  dissatisfied IVA holders who all complain about the same things : once the IVA is set up it is almost impossible to speak to anybody from the company; there are frequent ‘reviews’ and requests for more money, and there is very little understanding if anything goes wrong with your finances (illness, redundancies, etc.).

Another complaint is that nothing appears to be paid off the debt for the first two years. The reason for this is that you are paying off the set up fees during this period and not a penny goes to the creditors. Is an IVA better than bankruptcy is a question often asked. The answer each and every time will be determined by……..”What have you got to lose’.

We could talk considerably about the injustices of IVA companies that have set up arrangements for those who should have been recommended bankruptcy at the outset, but what it all really comes down to is whether you have any assets or not. And if you don’t, you certainly wouldn’t want to be tied into an IVA for five years.

Feel free to call us with any questions or for bankruptcy help on 01425 600129, we are here to help. Most of our staff are from the financial services sector and have the experience to get you best result every time.

Is My Partner’s Income Taken into Account in Bankruptcy

Many of the people we speak to are surprised when we ask about total household income. ‘Is my partner’s income taken into account in bankruptcy ? ‘ is often a question asked. Especially when only one party is going bankrupt. But believe us when we tell you that getting the Income and Expenditure right is really important, as this will decide whether you end up in an Income Payments Agreement (IPA) for the next 36 months, or not.

It’s what your partner contributes and not what they earn that is the key issue

For this reason, you need to know we need to know what your partner contributes towards household income, rather than what he or she earns. It could be, for example, that your partner takes home £1200 per month, but by the time his / her car finance, credit cards and other expenses (child support, for example) has been deducted, only £700 is available and this is the figure we are talking about – what they contribute towards the bills and food.

This would not apply in cases where both parties are going bankrupt – here we would need to know the full take home pay of both parties. It’s not all bad news, though as now we can factor in allowances for two people instead of one and that makes a big difference.

Is my partner's income taken into account in bankruptcy

People thinking about doing their own bankruptcy would do well to seek advice when attempting the Income and Expenditure as a bodge job could cost you dearly. Even an IPA of £80 per month works out to just under £3000 over a 36 month period, something you could well do without. Our experts know all the allowances and will guide you through this.

Feel free to call us with any questions relating to Is my partner’s income taken into account in bankruptcy  or for bankruptcy help on 01425 600129, we are here to help. Alternatively, post a question on our home page and we’ll help you that way. Please note, Court appearances are no longer required for bankruptcy and Bailiffs do not form part of the process.

When is My Name removed from the Insolvency Register?

We are often asked ‘When is my name removed from the Insolvency Register?’

Your bankruptcy is completely removed from the Insolvency Register 15 months from the date you entered into bankruptcy, or 3 months after discharge.

The Insolvency Register can be found using a google search and is a public record of all those persons currently involved in Debt Relief Orders, Individual Voluntary Arrangements and Bankruptcies i.e. court sanctioned arrangements.

You are automatically discharged after 12 months and in some cases people are even discharged before the end of the 12 month period.

When is My Name Removed Insolvency Register

These include persons whose circumstances are unlikely to change viz. pensioners, people on DLA, etc. It is important that you obtain a certificate of discharge when you have completed the 12 month period and submit copies to the three main credit reference agencies, as there can be delays before information is updated. There is a charge for the discharge certificate, but it’s worth paying.

Bankruptcy UK specialises in taking people through the bankruptcy process in a straightforward manner. We will assess your circumstances then submit the bankruptcy application online. Court appearances are no longer required for bankruptcy. Call us for a chat about your circumstances on 01425 600129.

Will I still have to pay Council Tax arrears if Bankrupt?

Council Tax may generally be included in a bankruptcy, but there might be complications if a Liability Order has already been issued and an arrangement with Bailiffs has been made e.g. £150 x 6 payments. Under these circumstances, you might be obliged to complete the arrangement despite having gone bankrupt and the Official Receiver might not intervene.

It is therefore very important that you make an arrangement with your Council before they issue a Liability Order. A Liability Order is the seventh and final stage a Council will take to recover outstanding council tax. You would have had plenty of notice that trouble is coming and it can be avoided by simply offering a low, affordable amount.

Bankruptcy UK specialises in taking people through the bankruptcy process in a straightforward manner. We will assess your circumstances then submit the bankruptcy application online. Court appearances are no longer required for bankruptcy. Call us for a chat about your circumstances on 01425 600129.

How do I apply for bankruptcy? I have around £25k debt and mortgage arrears

The former Debtors Petition and Statement of Affairs have since been replaced by an 8-part online form which you can access by entering ‘Apply for Bankruptcy’ into Google and following the prompts on the Insolvency Service’s website. You will initially be asked to provide some basic information, at which point a 12-digit security code will be emailed to you. Once you have this, you may proceed.

Care needs to be taken when completing the income and expenditure section as, if it is found that there is surplus income, you could be placed in an Income Payments Agreement (IPA) for 36 months. We were very surprised to find the Insolvency Service generously inviting us to claim costs for things like hairdressing, social clubs, alcohol, tobacco, entertainment, newspapers, magazines and gifts – but guess what? These things are not allowed!

We counted around 18 separate items that would definitely not be allowed and if you happened to include any of these in your income and expenditure, you would have unwittingly painted yourself into a corner. If you consider that an IPA of £250pm will cost £9000 over three years, we recommend you speak to our advisors. We are very aware of the importance of the income and expenditure and know exactly what may be claimed and for what amount.

Please note that entering into bankruptcy will not directly affect your property (you mentioned arrears) but if you intend giving up the property, any shortfall will also be included in the bankruptcy. We have found cases where people are in hopeless negative equity and really struggling with high monthly payments on mortgages / secured loans – in these cases, it might be best to surrender the property and go into rented.

Bankruptcy UK will assess your circumstances, prepare the necessary paperwork, then submit the bankruptcy application online. Court appearances are no longer required for bankruptcy. Call us for bankruptcy help on 01425 600129.

If I am an accountant how will bankruptcy affect me?

I am an accountant thinking of going bankrupt – how will it affect me? I have personal guarantees that I cannot meet. I am a partner of a licensed practice and looking for help with this debt. What should I do?

If you have unmanageable debt and need a fresh start, bankruptcy could be the answer. You didn’t mention whether you are a Director of the company; if you are, you will need to step down from that role, but can reapply after 12 months. Likewise, there may be restrictions on practicing as a Chartered Accountant during the same period, though lesser roles might not be a problem.

We would also need to establish what assets you have and whether these might be under threat. For example, if you owned a property with negligible equity it wouldn’t be under any immediate threat. You could argue, however, that even if there was, say, £30,000 equity and the personal guarantees totalled £150,000, it might still be in your best interests to proceed. Until we have a complete picture we can’t say for certain and we therefore ask you to call in when you have time.

Bankruptcy UK specialises in taking people through the bankruptcy process and submitting bankruptcy applications online. Court appearances are no longer required for bankruptcy. Call us for an informal chat about your circumstances on 01425 600129.

Bailiffs | Will Bailiffs remove my furniture if I go bankrupt?

Bailiffs

We are often asked the question ‘Will Bailiffs remove my furniture if I go bankrupt?’ The answer is generally ‘no’ but people’s circumstances can vary enormously. However, if you have high value items such as vehicles, antiques and other assets which are known to your creditors then there is a risk that some of these items might be attached.

We often hear people saying that they’ve received conflicting information about two specific things in bankruptcy: cars and household goods. There is an official stance on this as laid out in the Insolvency Service’s Technical Manual and this decides whether the value of cars that may be kept and whether household goods are safe in bankruptcy.

At the risk of sounding bookish, paragraph 30.145 on the Insolvency Service’s Technical Manual (you can find this online) clearly states that the prescribed limit for cars is £1000, provided they are needed for work or for care work. However, this figure is not set in stone and is often stretched according to circumstances. For example, a Senior Manager or company rep might need a slightly better car in terms of company policy and the Insolvency Service can’t make any decision that might result in the loss of a job.

Regarding household goods, these are safe in bankruptcy. paragraph 31.10.11 on the Insolvency Service’s Technical Manual says, and we quote: Such clothing, bedding, furniture or household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his/her family do not form part of the bankrupt’s estate. Amazingly, we’ve heard about Debt Advisers saying that household goods are attached in bankruptcy, but nobody comes to the house at any point in bankruptcy.

Bankruptcy UK has been helping people with bankruptcy since 1998 and will guide you through the process step by step. We will avoid jargon and confirm all discussions by email within 30 minutes. Call us for a chat about your circumstances on 01425 600129.

Considering Bankruptcy As An Option

 

All financially active people can end up considering bankruptcy at some point in their life.

Most individuals choosing bankruptcy as an option is the last resort.

Our clients consist of professionals and ordinary people with over £25k debts. They are ordinary folk who have jobs and lives to manage and have simply ended up in financial positions that they would never have been able to foresee that they would have ever been in this position.

Who considers bankruptcy as an option

Its not just ordinary householders that consider bankruptcy as an option. Its Barristers., Doctors, Dentists, Estate Agents, Independant Financial Advisors, Builders, architects all manner of professionals as well as Tradespeople, Property Developers, Traders, Online Gambling or Forex traders.

Ordinary people living ordinary lives with ordinary financial commitments where a change has happened that influences everything.

Retired people who have tried Debt management Plans, or have entered an IVA which has failed or is failing.

Recently divorced or separated where one or the other has accumulated debts and now has monthly payment commitments where the income just isn’t sufficient so service living cost monies and minimum repayments.

People who have entered an IVA and who realise that actually they have no assets ton protect, they have agreed that the payments are to increase and subsequently cannot mange these higher payments because there are costs that weren’t foreseen or included at the time the IVA was arranged, or they have received an annual statement only to find that no monies have been paid to the creditors at all and all monies paid over have gone to pay the IVA company’s fees.

Self Employed individuals who have run into difficulty with HMRC and its usually a demand for payment or a bailiff visit or letter that triggers them to take action.

Company directors who have ended up in a position where future trading seems impossible because of something that has happened.

These reasons usually consist of.

  1. HMRC demands for payment for monies that are unavailable through the business. It may be that personal credit has already been put into the business and options are running out.
  2. Problems with an accountant who has caused the business a serious accounting problem.
  3. A dispute with a Landlord or supplier that seemingly cannot be resolved through attempts to negotiate.
  4.  Something has happened that wasn’t foreseen and the person simply doesn’t have the skill-set or knowledge to manage the situation that is ahead of them.

How can we help You:

Very importantly we are not an advice organisation. My philosophy after nearly 20 years in this industry is that anyone who asks us for help and assistance must understand that if whatever options are going to be taken are taken because the person will be asked a series of questions that they have never been asked before. The responses to these questions empowers the person with the right amount of knowledge to decide what they want to do on their own.

My experience with companies that advise is that it feels to the client that they are being sold a solution and they use words like, you must, you should.

My team are trained to ask a short series of questions that very quickly provides us with a complete snap shot of the persons circumstances, and very importantly How or what have been the contributory factors as to how they have ended up in the position that they are currently in. Its important to understand our clients needs at the very first phone call. It really doesn’t take long at all and virtually every client feels better than they did before they spoke with us. In managing services that we provide its always been so very important that a client journey is positive and that they aren’t just dealing with the problem they are dealing and finding positive solutions and new directions that will help them to move to safer ground and be in control. Our job is to empower our clients with the basic skill sets are are needed to move into the future with.

Our job is to provide the solution that works for you.

 

How long will my IVA stay on my credit report

All debts remain on your credit file for six years, which can be frustrating for those who have recently completed a 5 – 6 year IVA, as the ‘Footprint’ stays there for several more years. There are so many people who opt for IVAs ahead of bankruptcy, despite the fact that they have no assets such as property or businesses – the purpose of an IVA is to protect assets which might otherwise be lost in bankruptcy. This results in them being stuck in a completely unnecessary IVA for at least five years, when they could be in and out of bankruptcy in 12 months or less.

While on the subject, people should note that properties in negative equity are not lost in bankruptcy, provided mortgage payments are maintained. It should also be pointed out that if a property is involved in an IVA, it will run for six years and not five. This is because there is a so-called four year re-mortgage clause in these agreements which obliges the individual to release funds from their properties after four years. Since this will never be possible because of an impaired credit rating, the IVA remains in place for a sixth year.

It still troubles us how many ordinary people have been placed in IVAs when bankruptcy was  the correct solution. People in rented and holding down everyday jobs have no place in an IVA but this is big business for the IVA companies and they will place virtually anybody in one of these wretched arrangements.

Bankruptcy UK has been helping people with insolvency since 1998 and has the experience to get you the right result every time. We will avoid jargon and confirm all discussions by email within 30 minutes. Call us for a chat about your circumstances on 01425 600129.

 

When is my name removed from the Insolvency Register?

When is my name removed from the Insolvency Register?

Your bankruptcy is removed from the Insolvency Register 15 months from the date you entered into bankruptcy or 3 months after discharge. The Insolvency Register is a public record of all those persons currently involved in Debt Relief Orders, Individual Voluntary Arrangements and Bankruptcies i.e. court sanctioned arrangements.

You are automatically discharged after 12 months and in some cases people are even discharged before the end of the 12 month period.

For those that for whatever reason have entered bankruptcy either voluntarily or involuntarily and have failed to cooperate with the Insolvency Service or trustee then there is a strong chance that they will have what is known as a bankruptcy restriction order against them. This can happen sometimes for innocent reasons such as moving home and not receiving letters from the Insolvency service. Or simply because there is sensitive information that is being requested that people either really don’t wan to answer or haven’t got or don’t know how to get information that is being requested. there is also the people who are just afraid and go into their shell and cant face what needs to be dealt with. Or they simply couldn’t find someone to assist them.

These include persons whose circumstances are unlikely to change viz. pensioners, people on DLA, etc. It is important that you obtain a certificate of discharge when you have completed the 12 month period and submit copies to the three main credit reference agencies, as there can be delays before information is updated. There is a charge for the discharge certificate, but it’s worth paying.

Bankruptcy UK has been helping people with bankruptcy since 1998 and will guide you through the process step by step. We will avoid jargon and confirm all discussions by email within 30 minutes. Call us for a chat about your circumstances on 01425 600129.

Council Tax Arrears Bankruptcy-Need Help? Call

Will I still have to pay Council Tax arrears if Bankrupt?

Council Tax arrears bankruptcy? Council tax arrears may generally be included in a bankruptcy, but there might be complications if a Liability Order has already been issued and an arrangement with Bailiffs has been made e.g. £150 x 6 payments.

Under these circumstances, you might be obliged to complete the arrangement despite having gone bankrupt and the Official Receiver might not intervene.

Its a fact that quite a high percentage of bankruptcy orders are granted from applications that are from local government in relation to council tax arrears bankruptcy.

People often don’t seem to realise that if they are a homeowner and they are about to be made bankrupt for a few thousand pounds worth of council tax then it is going to have a damaging and debt escalation to a level possibly never seen before that will appear unfair and will result in action to obtain an order of sale against the house

If you are a bankrupt homeowner because of a council tax debt then don’t delay ad simply call us today. If you have significant equity in your property and have been made bankrupt or are under threat of bankruptcy then you should get immediate help to save time and escalating costs.

It is therefore very important that you make an arrangement with your Council before they issue a Liability Order. A Liability Order is the seventh and final stage a Council will take to recover outstanding council tax. You would have had plenty of notice that trouble is coming and it can be avoided by simply offering a low, affordable amount.

Bankruptcy UK specialises in guiding people through the bankruptcy process in a no-nonsense, straightforward manner. We will assess your circumstances then submit the bankruptcy application online. call us for an informal chat about your circumstances on 01425 600129.

 

 

Bankruptcy UK

Bankruptcy UK