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Renting to bancrupt couple

117 replies

loosenknot · 07/11/2018 19:40

Hi. I own a property that is my sole source of income. A couple have asked to rent it. It took three weeks for the credit checks to come through and when they did it turned out that the couple have been declared bancrupt. (Although this will apparently run out in March, whatever that means). They are self employed and apparently preciousky good Tenants. The estate agent says they pay themselves a high salary. What is the risk if I rent to them? The letting agents said I could ask for six months rent in advance (although the cash would push me into a higher tax bracket). I feel mean saying no but st the same time I feel they were not upfront with me. If they had disclosed this when we met I would have considered but the fact they did not (and the house has been off the market for two weeks as they were meant to move in next week) really annoys me. What would you do.

OP posts:
MissMalice · 08/11/2018 09:50

I don’t understand the lying/dishonesty point. The letting agent knew they were bankrupt. I’ve rented for years and never spoken to a landlord at the point of application. In their position I would have disclosed the bankruptcy to the letting agent. In this case, the letting agent already knew.

Of course the OP doesn’t have to rent to anybody, bankrupt or not.

Bombardier25966 · 08/11/2018 09:55

If the question said "Are you bankrupt" and they are not currently bankrupt then no they haven't lief by omission.

If two apparently intelligent people fail to mention BR when asked to do a credit check, that's lying by omission.

Whatdoesitmatteranyway · 08/11/2018 10:03

Bombardier, no it is not.

When you go bankrupt you get lots of advice on how to answer bankruptcy questions from the debt charities / citizens advice.

You are told to answer questions as I indicated as that is the correct way to answer them.

Have you EVER been bankrupt - you always have to declare yes even if its 20 years later

Are you bankrupt / have you been declared bankrupt - you only need to say yes in the (normally) 12 month period until you are discharged. Although it stays on your record for an extra five years, you are not actually bankrupt after the 12 months.

They have not done anything wrong. And if they are, then I was a liar as well.

loosenknot · 08/11/2018 11:33

it's more that they knew that the LA would do a credit check on them, so they knew that their omission would be revealed by the credit check. They're bookkeepers - they're meant to be savvy with money - and so they could easily have explained the situation up front, and, if it's not an issue, explain why it wouldn't be an issue (e.g. one of us declared bankruptcy but the other did not, we can pay cash up front, we have a guarantor, this happened x many years ago but it's the past, here are our references). I would most certainly have considered them then. As it was they were evasive with the LA and so it took two and a half weeks to complete the checks and only then was it revealed that their financial situation was not as rosy as the LA believed (which again annoys me as the house was taken off the market during this time and so I lost rental income from other prospective tenants).

OP posts:
MissMalice · 08/11/2018 12:12

Didn’t you say they’re already renting through the same letting agent? So the letting agent already knew they were bankrupt?

HauntedPencil · 08/11/2018 12:39

To be fair bankruptcy stays on your file for ages and I've known some really decent people who have been made bankrupt.

It's definitely a bit weird though - and I don't think you can be an accountant if you are bankrupt?

Have they seen a few years accounts?

I would if they had normal jobs but I'm a bit hmmm on this.

SushiMonster · 08/11/2018 13:07

they would have been thrown out of membership of their professional body for declaring bankruptcy.

So they are no longer proper accountants.

Actually accountant is not a protected title and anyone can call themselves an accountant.

loosenknot · 08/11/2018 13:12

Missmalice - the estate agent said they’d rented with the other house for a while - it was at least three years - they moved out a few months ago when the owner moved back in (the LA says). Presumably they had not declared bancruptcy when they first rented and managed to keep payments up (the LA said both were bancrupt but when his colleague came to pick up the keys today he said it was just one of them - they were together self employed bookkeepers so maybe she kept on practicing). I don’t want to ask more now as it’s just too nosy!

OP posts:
Whatdoesitmatteranyway · 08/11/2018 13:55

You can be an accountant if you are bankrupt - will people stop saying you can't. None of the bodies have an automtic bar to being a bankrupt accountant.

Its because of misconceptions and prejudices such as this that people don't disclose it unless they have to.

ACCA:

graduate.accaglobal.com/content/dam/ACCA_Global/Technical/fin/financial-difficulties-2013.pdf

If a member notifies ACCA that (s)he has been declared bankrupt, it will then be necessary to show the
Committee that (s)he remains eligible for continued membership.
In making the decision whether to allow the individual to remain a member, or be readmitted to membership, the
Committee will consider the following;
• Does the member’s record at ACCA show any current or historical complaints or disciplinary findings?
• Is the individual eligible in accordance with relevant regulations, satisfying the relevant factors regarding
character and suitability?
• Do the circumstances that led to the bankruptcy appear to be an isolated incident, not deliberate or
reckless?
• Is there evidence that the individual understands and appreciates the causes of the bankruptcy?
• Is there written confirmation from the trustee in bankruptcy or official receiver to show that the individual
has co-operated with the bankruptcy process?
If the Committee has positive responses to these considerations, or even to most of them, the member will
almost certainly be able to retain his/her membership.
Therefore, an ACCA member will not necessarily be excluded

CIMA:

www.cimaglobal.com/Members/Your-Membership-Information/Members-handbook/Conduct-and-oversight/

Bankruptcy does not automatically affect your membership or student registration. A member or student who is declared bankrupt is required however to notify the Institute, and should continue to act professionally within the Laws of the Institute, including the Code of Ethics. Declarations will be assessed on a case by case basis and CIMA will request further information from you once we have received your initial declaration.

ICEAW: Who seem to be the strictest

www.icaew.com/membership/support-throughout-your-career/support-members-scheme/information-sheets/chartered-accountants-in-financial-difficulty

In addition you would automatically lose your membership of ICAEW. For this reason you should always stress to any insolvency practitioner the additional adverse consequences of bankruptcy to you as a chartered accountant.

If bankruptcy cannot be avoided you can normally expect to be made bankrupt for one year. Any debts still unpaid by the end of that period would be written off (subject to your assets being realised) and you would be discharged from bankruptcy. After that time you could re-apply for membership of ICAEW although members should be aware that this is not always granted and strict criteria apply.

Although there is no prohibition on you being employed in an accountancy role during your bankruptcy you may find that some employers are reluctant to take you on. In particular accountants in practice may be concerned that this could have an adverse effect on their status. In such circumstances it may be worth suggesting that the practising accountant seeks advice from their own professional body.

CIPFA:

www.cipfa.org/~/media/files/membership/conduct%20and%20ethics/updated%20guides%20as%20at%2030%20april%202015/guidance-re-bankruptcy-and-ivas-april-2015.pdf?la=en

CIPFA is aware that the financial and other circumstances experienced by
members and the actions of each member in the face of those circumstances will
be different. It, therefore, ensures that each case is assessed individually before
any determination is reached on its impact on a member’s suitability for
membership. Thus the existence of a bankruptcy or arrangement or composition
with creditors generally should not, in itself, be considered a bar to membership
of CIPFA.

HauntedPencil · 08/11/2018 15:00

Alright it was only a question 😂

Whatdoesitmatteranyway · 08/11/2018 15:11

HauntedPencil

It wasn't just you - it was every other poster on this thread saying they must be lying about being accountants as you can't be one and be bankrupt.

As you can probably tell it hit a personal raw nerve.

HauntedPencil · 08/11/2018 15:16

I work in financial services and you often have problems with jobs you see. I thought it may be similar.

SassitudeandSparkle · 08/11/2018 16:06

FFS! We don't need chapter and verse from the Professional Bodies!

OP, it seems very likely that the (potential) tenants have gone bankrupt fairly recently, ie within the term of their last tenancy and kept it secret from the LA - which is a concern, tbh. No wonder they were evasive about the checks for your property!

MissMalice · 08/11/2018 16:09

Sassitude the OP has already said the bankruptcy drops off in March 2019. Bankruptcy is on your record for 6 years so they were made bankrupt in March 2013.

People being made bankrupt are advised not to tell their letting agent unless there are rent arrears.

SushiMonster · 08/11/2018 16:11

People being made bankrupt are advised not to tell their letting agent unless there are rent arrears.

Not much of a penalty is there to being declared bankrupt?

Whatdoesitmatteranyway · 08/11/2018 16:19

There are plenty of down sides to being bankrupt but it’s not meant to be a punishment more a clean slate with restrictions.

It’s not a criminal offence to go bankrupt regardless of what people think.

KristinaM · 08/11/2018 16:24

Why wouldn’t their adult child buy a house and have their parents pay the mortgage ? Who would throw away 5 k a month on rent ?

MissMalice · 08/11/2018 16:29

Not much of a penalty is there to being declared bankrupt?

No, apart from potentially losing your job, your home, any valuable assets, difficulty renting, difficulty obtaining any credit including a mortgage or running a business in some cases for the rest of your life, the social shame, not being allowed to spend any money at all on Christmas or birthdays even for your children during the time you’re undischarged... Hmm

Jack65 · 08/11/2018 18:19

MissMalice Not to mention the possibility of an IPO/IPA and having to justify most payments to the OR via your financial statement. And indefinite suspension from discharge if you don't cooperate with the OR. I think it's clear a lot of people on here yet again don't know what they are talking about . . .

Racecardriver · 08/11/2018 18:26

Bankruptcy normally only lasts a year that’s why the estate agent didn’t know. I wouldn’t worry too much. If they are high earners then it’s unlikely that the bankruptcy was over something small like unpaid rent. They probably borrowed money then invested poorly or something.

Racecardriver · 08/11/2018 18:27

@sushimonster some professions don’t allow bankrupts to practice. It also effects your credit score.

dontalltalkatonce · 08/11/2018 18:39

This is a no-brainer. Wouldn't rent to them in a million years.

MissMalice · 08/11/2018 18:53

Bankruptcy usually only lasts a year but it’s on your credit record for 6 and is public record for life. If this couple have been renting with same the letting agent then their previous tenancy must have started before March 2013 or the letting agent will have seen it on previous credit checks.

Jack65 · 08/11/2018 19:37

Racecardriver bankruptcy frequently lasts three years and an IPO (income payment order or agreement) is highly likely if there is more than £50 or so spare cash each month. This is determined by submitting your financial statement to the OR who makes allowances made for items such as rent, food, utilities, clothing etc. In this case rent of £5000 per month would not be allowed unless the partner is paying the rent solely, and the bankrupt would be required to move to a property with a reasonable rent. Obviously it would be very unfair to creditors if the bankrupt were allowed to pay out such an extortionate amount in rent, but at the same time claim they are unable to make payments to creditors. Hence the IPO/A.

There are very few professions, in fact I am struggling to think of one, barring bankrupts totally from practising their profession. Even solicitors as bankrupts can practice with some restrictions, as with accountants etc. Such barring has been challenged successfully and now each case quite rightly is required to be decided on its own merits by that persons professional body. Businesses go wrong, people split up from their partners and are left with massive debt, etc etc, which although might question their ability to judge risk, doesn't mean they are unable to practice their profession with certain safeguards. Indeed to bar people from their profession would mean they cannot make any payments to creditors, which rather defeats one of the the objects of bankruptcy.

UatuTheWatcher · 09/11/2018 17:44

@Jack65 Bankruptcy only last 12 months. If there is an IPA then the bankruptcy is discharged after 12 months and the repayments are for 36 months. If there has been misconduct then a BRO can be issued for anywhere up to 15 years. Your bankruptcy details can be found on Insolvency Service website for 1 year and 3 months. On your credit report for 6 years and on The London Gazette in forever so if you input the persons name it will show when they went bankrupt.

www.thegazette.co.uk/insolvency

You can be an accountant and be bankrupt as shown ably by another poster.

If the question on the forms is Have you ever been bankrupt? then you have to answer yes. If the question is Are you currently bankrupt? then the answer is yes. So it depends what was asked, they don't have to declare it if not asked and showing your reaction then you can't blame them. People go bankrupt for a multitude of reasons from relationship breakdowns to mental health problems to clients not paying there bills to buying to lets to you name it. The matter is between them and their Official Receiver.

As former bankrupts they will probably make incredibly good tenants as they are used to working to a budget set by the OR and making sure priority bills like rent/mortgage, council tax, utilities etc. They are usually some of the best tenants to have.

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