Advice on bankruptcy or IVA with debt and reduced income

[Tiredboymum22]

We’re a low income family on UC and my husband has just had his hours drastically reduced. We have 20k of debt between us and we’re thinking of filing for bankruptcy or getting an IVA. A DRO might be tricky because our assets are over 2k although they are work related (PC, drone, cameras). Our disposable income also varies as my husband is self-employed (so stepchange wont help us).

Does anyone have any advice before we make a decision. Personal stories would be helpful. ChatGPT is recommending bankruptcy 🙈

M6 ex left me with £110k to clear when we divorced. I got an iVA through PayPlan and cleared it all within a few years. It really is a lifesaver

Take a look at debt camel, which is an excellent resource for managing your debt and finances.
https://debtcamel.co.uk/

Good luck

Do you own or rent? An IVA is only a good idea if you have property equity to protect or you're in one of the tiny minority of professions where bankruptcy meant you'd lose your job.

I'd check carefully about the drone etc, the second hand value is probably low and they might be protected if they're work equipment. Do you have a vehicle?

How is the debt split between you? If it's mostly on one name it might be only necessary for one of you to go down the formal route.

You first need to make sure you have a sustainable budget in place because you're facing 6 years without access to credit. So you need to account for annual and irregular costs like insurance and white goods replacement. Also sundries like batteries and it's not necessary to skimp on groceries which a lot of people do when in debt. So you might find your surplus available for debt repayments is lower than first thought.

You'd do well to look at the dealing with debt forum on Moneysavingexpert.com especially the bankruptcy, IVA and DRO sub boards as you'll get loads of good help there and be able to see other people's experiences.

But if you're not a homeowner, don't be scared of bankruptcy. It's a practical solution for many with unmanageable debt.

Can I just clarify what you mean by your DH being self employed but has just had his hours cut? Can he look for other clients to make up the missing income or has demand for some of the services he provides declined?

Call the citizens advice national debt helpline, they have hubs around the country with qualified debt advisors who will be able to talk through all of your options that are available to you

I went bankrupt in 2015, it worked for me because I didn’t have any assets to protect and drove a banger of a car so they didn’t expect me to sell it. The relief when it was approved was unbelievable. I couldn’t get any credit for 6 years and had to budget carefully (as pp said make sure you put something aside each month for car repairs/ white goods because you won’t have access to credit to pay for them).

I have credit cards now but use them responsibly.

I went bankrupt 13 years ago. I had no house or car so nothing was seized (they don't take ordinary household goods). I didn't have to wait 6 years before getting credit, most restrictions only last while you are an undischarged bankrupt which lasts for one year (in fact the restrictions on getting credit while undischarged are that you cannot borrow more than £500 without telling the lender that you are bankrupt, so you are never not allowed to get credit, though it's very unlikely that a lender would offer it). I got an Aqua credit card after 2 years, which I just got for convenience and rebuilding credit and paid off in full every month. By the time 6 years was up the bankruptcy came off my record and my credit was fairly good (and these days it is excellent, the bankruptcy has no bearing at all).

I switched to a Coop basic account before going bankrupt as they allow you to keep the same account. It operates like a normal account with debit card and online banking, just no overdraft. There are other basic accounts, most normal current accounts will be shut down. I rented a council flat and the bankruptcy made no difference - if you rent privately and then need to move it might make it difficult to find a new rental. My income was just from benefits so I had no repayments to make. My other services like gas/electricity/mobile were unaffected as I wasn't in debt to them. So the majority of my daily life wasn't impacted, and the restrictions that I was subject to (eg being barred from certain jobs) weren't relevant. There are certain banks which I owed money to which I can't get any kind of account or service with now (they obviously have their own records of my bankruptcy, as it's no longer on my credit file), but I've been able to open accounts with some other banks even though I owed them money. Generally it's not a big problem as there are so many banks to choose from.

There are some restrictions that would affect a self-employed person though so you need to be aware of those.