Bankruptcy. Any experiences?

[SweetValleyHigh80]

Hi,
I have namechanged to start this thread as I don't want it following me around the boards.

I am in a position where I might have to declare bankruptcy. I am going to ring Citizens Advice later today for some advice but I wondered if anybody had any experience of bankruptcy that they would be willing to share?

I am in debt of just under £14,000 on credit cards, store cards and catalogs. I can barely keep up with the minimum repayments. It is all my debt, not joint with my husband and he didn't know about all of it until this week, which is a whole other story. Can anyone tell me was going bankrupt something you regret doing? Was the process humiliating and awful?

I have read some articles online and I can't seem to find a definite answer to two questions. 1. Do they take into account your husband/partners income and 2. Do you still have to repay your debts once you have declared bankruptcy? I read something yesterday which says that the official receiver will look at how much income you have and decide how much of that should go towards your creditors. I thought that bankruptcy wiped your debts out, is that wrong? Do you still have to repay?

As I said I am going to ring up later for some help but I am shite on the 'phone and would be greatful if anybody has any experience or could help.

Please don't flame me, I am ashamed of myself for getting in this position and I am desperate to see a way out of it. Thanks.

14k isn't an enormous amount although I appreciate it probably feels that way. I would've thought you could arrange an IVA & low repayment plan & avoid bankruptcy.

Because it's under 15k I think you can get a debt relief order, you will need to check. It's less onerous than bankruptcy.

Do you have some insight into how you've run up the debt (not asking you for details, just checking you are able to stop spending and can survive on your income)?

If you contact one of the free debt relief charities like step change they will negotiate with your creditors and freeze interest and then you can pay them off at a rate you can afford.

Bankruptcy means that if you have any assets - car/house - they can be sold to pay off your creditors. I'm sure you already no you will have no access to credit for a minimum of 6 years, only a very basic bank account.

Thank you both for replying, i appreciate it.

I looked into a DRO and it says you only qualify if you have less than £50 left each month. I have more than that - about £100, so I don't think I can apply for one of those.

I don't have any assets. We rent our house, I have no savings and I don't own a car. My husband owns a car but it is in his sole name so I don't think that counts as an asset of mine

Hi there, I went bankrupt a few years ago and can share my experience. I was single at the time so a different situation.

It wasn't humiliating at all, much easier and more sort of 'professional' than I thought. Remember that the people dealing with it are doing it ever day, so although it feels massive to you it's not to them.

You do have to make a repayment plan. They ask you to fill in a form with all your outgoings and income and they work out what is reasonable to repay. I would recommend massaging your details on this form. For example, you can include needing to buy smart clothes for work if you have a job, and regular haircuts. If you have pets, include insurance and food. If you have children, add in everything you can possibly think of. Round everything up, because while they might knock you down a bit they aren't going to help you out in the other direction.

You obviously can't round up things like rent/mortgage as they might ask for proof of that. Likewise with income if you work.

They then do the maths on your income and outgoings and suggest a realistic repayment plan. In my experience, it was genuinely realistic. They dont assume you can feed yourself on a pound a day or anything like that! You then pay this fixed sum each month to one place, so it's easy to manage, and they divide it up between your creditors. Your creditors can no longer chase you. They won't get all their money back but they will get some. You will feel a huge sense of relief, I'm sure.

The length of time you pay back for can vary, I think I did three years. It might be less but I think it can be up to 6 years in very serious cases. Then everything left to pay disappeared. I think it's a good system as obviously you should be repaying, but if it simply isn't feasible then bankruptcy allows you to make reasonable repayments rather than running away from your debt entirely.

I think they do take household income into account, so for example if your DH earns very well then it is assumed he can cover more of the family costs, but the bankruptcy would be personal to you, and should not directly affect him. In reality of course it has a knock on effect on him. CAB will be able to advise further on this. Maybe the Martin Lewis website would also have good info?

You do have to declare on various forms if you are or have ever been bankrupt. For example, when renting a house a few years later I told the truth about this even though I was no longer bankrupt and was fairly sure it would no longer show on my record. The landlord appreciated the honesty and let to us anyway. Obviously some would run a mile.

Your credit rating will take a huge hit but, several years later, mine is totally back to normal.

I wish I'd done it sooner, my debts related to family business rather than my own life (basically I incurred significant debt on behalf of others) and I spent a long time juggling things to try to keep up, but it simply wasn't sustainable. You don't have to feel good about doing it but you need to look at your life and see how you can/cannot cope moving forwards.

One thing to consider - if the debt is limited to a fairly small number of cards, you could try contacting each company and explaining that you are likely to begin proceedings for bankruptcy, and ask if they would be willing to consider making a settlement with you and arrange a sensible repayment plan for a reduced figure. They might totally dismiss you but they migjt surprise you with what they're willing to chop off your debt. This is what will happen if they sell your debt to a collection agency or if you go bankrupt anyway. If you are able to avoid bankruptcy in this way then it's worth considering, but not if your own wellbeing will suffer as a result.

If you have any questions I'm happy to try to answer. Best of luck.

One more thing I just thought of - some professions will be very wary of someone who has been bankrupt so depending on your job, you might want to think carefully about this side of things.

It definitely doesn't count as your asset.

Have you downloaded a list of what you can count so that you can bring your disposable down to £50? Everything, haircuts - can't remember but there's millions of things.

You can also do a comparison online between the dro and bankruptcy to see which is suitable for you - the mse website has a whole forum dedicated to bankruptcy.

I went bankrupt over a decade ago (I was 24 at the time). I accrued a lot of debt at uni despite working through all my holidays. Then I spent a year working minimum wage jobs until I found a decent job and things spiralled.

I don’t know about marriage as I wasn’t married. I was living with DH (new relationship back then) and they didn’t ask about his income but they may if you’re married.

I filled in the paperwork and took that and the payment to court. I didn’t even need to see the judge. After a few questions it was granted.

The official receiver called me at some point and we had a long call where I went through all my income and outgoings. It was agreed I couldn’t afford to pay anything back at that time (I had lost my job due to illness).

About four months later I went back to work full time in a well paid role. I contacted the official receiver and asked if they wanted to reassess me as my income had gone up substantially. They said they’d contact me and they never did - I chased them up twice more but nothing came of it, and I was discharged 12 months after I filed.

If they decide you to have to pay back, I think this can go on for three years. They can also take any assets such as vehicles if you own them, they can repossess your house if you own. However, if there’s very little equity in your property they often won’t,

The year after bankruptcy was tough but the whole thing completely changed my approach to money. I was able to get a very basic Halifax bank account with an electron card about six months in. Until then DH had a savings account with a cash card which I used for my wages. Having no plastic and having to pay cash for everything taught me to be aware of every penny. Now I really struggle to spend money on myself even though I have enough.

It disappears from your credit file after six years BUT you do still have to declare it to most providers when applying for a mortgage. We went through a broker and it was 9 years after my bankruptcy - it still meant some wouldn’t lend to us. We got a mortgage with a fairly high interest rate due to that and DH having an old default on his file stemming from a mobile bill dispute. We’ve just remortgaged after two years to a much better deal.

The only debt we have is our mortgage. We both have a credits card each which we use randomly and pay in full each month, which we started doing to rebuild our credit scores.

I have no regrets, except for getting into debt in the first place.

If you have a lot of income or a lot of assets you may be better off with another option. If you’re poorly paid and own nothing of value. Bankruptcy may be best. Speak to the Money Advice Service for advice.

Yes. It will make rental more difficult if you need to find a new place, unfortunately.

I would highly recommend phoning StepChange. They will take all your details and then go through what options you have.

NameChange thank you - that's really informative - I honestly appreciate it, and everyone else for taking the time to reply.

Have you downloaded a list of what you can count so that you can bring your disposable down to £50? Oh, I didn't know there was a list - do you know where I might find it so I could download it?

forums.moneysavingexpert.com/showthread.php?t=1186921

This long thread covers so many you can put down, there's also links in it to other organisations recommended list

If you look up the family expenditure survey that will tell you what reasonable costs of living are considered by the Official Receiver.

In terms of any payments you make under an income payments agreement or order they will consider your household income, kinda. Basically they’ll allocate a portion of the family expenditure to your DP and a portion to you based on your %age of household income each.

If there is a surplus after all your expenses are considered then a portion of this will be asked for under an IPA/IPO. It won’t be onerous as the point is to give you a fresh start. Often it’s nothing anyway. It will only last 36 months max and can be varied if you have a change in circumstances.

It’s not as unpleasant an experience as you might fear. The OR staff are generally pleasant unless you’re taking the piss (hiding assets, failing to attend appointments) and it is designed to give you a fresh start. Please don’t worry about it.

Phone Stepchange. They provide a free service and will explain all options available to you. You'll need to have your income and expenditure and should allow around 45 minutes. Or you can do it online.

Agree about getting advice about setting your budget on the Moneysavingexpert bankruptcy or DRO boards as your budget needs to be sustainable and comprehensive as you will be effectively banned from any credit for 6 years.

forums.moneysavingexpert.com/forumdisplay.php?f=159

forums.moneysavingexpert.com/forumdisplay.php?f=136

Also, people in unmanageble debt often scrimp on things like groceries, dentists, haircuts, clothes etc in an attempt to keep up with debt repayments, when what you should really be doing is paying all normal household expenses first, including saving up for annual and irregular expenses like insurance and white goods replacement.

So whether bankruptcy or a DRO is appropriate will depend on how comprehensive your current budget that indicates you have £100 spare per month is. If there are a few things missing, or the grocery budget is less than what the OR considers reasonable, you could possibly get the surplus down.

For your DHs income, it will be taken into account as in he will be expected to contribute to the household budget too. It obviously isn't acceptable for you to say that you pay all household bills to make it look like you have no surplus while he keeps all or most of his income.

If bankrupt, you will get an income payments order for 3 years, which will take probably all your surplus to pay towards your debts. If this does end up being £100 pm, that means you will pay £3600 towards your £14k debt, so you should find life much more manageable and won't be hassled by creditors.

If you end up with a DRO, you don't make any payments, they review your finances after a year and if you are still in the same position, all your debts are written off. I don't know what happens if your circumstances change for the better in that time and it looks like you can pay some or all of your debts.

Just wanted to say thank you to everyone who replied, it was really helpful and I really appreciate it.

In the end, I spoke to an advisor at StepChange yesterday and they are convinced that I can go onto a debt management plan, rather than have to go bankrupt. I don't qualify for a debt relief order and they didn't think it was the right solution anyway. They are going to send me the forms that I need to set up a DMP so hopefully I can get things back on track. Sorry to be a pain and ask yet more questions but does anyone have any experience of a DMP? Is it just my income that is taken into account, or will they want to know my husbands' as well. We have seperate accounts, no joint one. I know I should have asked the adviser on the 'phone but I was so nervous and panicky I could hardly talk to the woman without getting tearful. Pathetic, I know!!

Thanks again to everybody it really helped.

Oh another question I should have asked - do I carry on paying the debts whilst the DMP is being set up, or do I let them default?

You can phone them back and ask.
My husband works for stepchange and I'd advise you to ring your creditors and tell them you're starting a debt management plan. You'll just pay stepchange directly from now on.

Thank you skintbutok

I had a DMP through stepchange; for a little more than yourself; once the paperwork went through it was very simple.
I managed to make a few small increases on my payment over the seven years; I think one was an extra £10 a month when I got a pay rise but it keeps the creditors happy that you a making meaningful payments.

The only additional thing I did was write to my creditors and asked that they only contacted me in writing as I was getting a lot of phone calls during the first few months of the DMP.

One thing to watch out for with a debt management plan, especially if you have no assets and are not in a job that requires you to not be bankrupt is the estimated length of time.

If it is significantly more than 6 years, or you don't foresee your circumstances changing, eg your disposable income increasing when DC go to school, so you could pay more and the time would come down, then a DMP might not be the best solution.

You say you have £100 pm to pay towards your debts and you owe £14k, so that's 140 months, or nearly 12 years unless a portion of your debt is to be written off - that's a very very long time to be in serious debt.

They have said that they predict I will be paying back for 7 years, if my circumstances stay as they are. I am very hopeful that things will improve in the next 18-24 months as I have a potential promotion at work.

Only child is past school-age so there won't be any changes in that respect, it will just be if I can increase my earning power.

Thanks again for your informative replies, very helpful

Mine was 10 years and 4 months; but I managed to clear it in 7 years; even at 10
Years it was a better option than bankruptcy.
On a DMP your credit rating won’t get better or worse. Which for me was helpful.
Having to have a basic bank account wasn’t an issue; just took a while to change direct debits across.

Hi Whyismycatanasshat (great name!) - why did you have to have a basic bank account, if you don't mind me asking. Were you told to close your current account?

It’s part of the DMP conditions, or it was, as a current account can have an overdraft and you can’t take new credit during a DMP.

I also had debt at the bank my current account was with so any monies could have been taken by them so I set up an account at Barclays who I had nothing to do with.

It may seem a nightmare at first but it’s so much better to be using a DMP rather than an IVA or bankruptcy.

And the name reflects the real life cat. Total knobhead he is!