Going personally bankrupt

[jackfruit1234]

Hi all

After a long time of consideration I am very close to declaring myself bankrupt. I have around 55k in personal debt (25k BBL, 2 personal loans and a couple Credit cards). i'm not behind on any payments, but I did a debt management plan and it would see me paying around 500 a month over 10 years. After doing lots of research it seems bankruptcy is my best option and start afresh/reset.

My situation is a little complicated though, I have a full time job which i get paid around £2500 a month for and around 6 months ago i started an online eccomerce business which is doing quite well, but doesn't pay me anything yet (I'm trying to keep that business in the black!)

I'm aware i can not go bankrupt if i am a director, but i want the business to continue so i would put a family member in as director and then resign, does that sound ok to do?

Also - I have leant the business some money from some of my personal debt, would the bankruptcy OR look to get back some of that debt from the eccomerce company?

Separetly, I have a property which has a mortgage of 120k, but the value of the property is almost nothing now due to cladding issues. Literally they don't sell. Would the OR take this an asset even though it's in negative equity?


Any advice would be hugely appreciated

Thanks.

 

[MBE2017]

I would recommend you talk to one of the several IP’s on the forum urgently and see what they can advise.

 

[jackfruit1234]

I would recommend you talk to one of the several IP’s on the forum urgently and see what they can advise.

How do I go about getting in touch with them?

 

[ChrisCallaghan]

Hi @jackfruit1234 ,

Thank you for sharing your situation on this forum. I think there are a few issues you should keep in mind if you are considering declaring yourself bankrupt.

I did a debt management plan and it would see me paying around 500 a month over 10 years.

Assuming your DMP was worked out correctly, you will likely have to pay the same amount in bankruptcy, called an Income Payments Arrangement/Order for 3 years. See the below guidance from StepChange for a further explanation.

Bankruptcy & Income Payment Agreements. StepChange

I'm aware i can not go bankrupt if i am a director, but i want the business to continue so i would put a family member in as director and then resign, does that sound ok to do?

Typically you would be bankrupt for a period of one year, and during that time you cannot be a director of a company. Crucially, you also cannot been seen to be a 'shadow director' - i.e. acting as a director in all but name. Breaching bankruptcy restrictions can lead to fines, Bankruptcy Restriction Orders, and even criminal prosecution in the most extreme of circumstances. Please see another link from StepChange below for further guidance on restrictions during bankruptcy:

Restrictions During Bankruptcy. Free Advice. StepChange

Also - I have leant the business some money from some of my personal debt, would the bankruptcy OR look to get back some of that debt from the eccomerce company?

Yes.

Separetly, I have a property which has a mortgage of 120k, but the value of the property is almost nothing now due to cladding issues. Literally they don't sell. Would the OR take this an asset even though it's in negative equity?

This will be one for the OR to asses. If they believe the sale of your property will lead to a return to your creditors, then you will be asked to sell it or the OR may consider selling it themselves. If their is a lot of equity in it, they cannot ignore it. My gut instinct is that, with the cladding issues, OR would either consider selling the property by auction for a cash buyer or look to stick on a charging order instead.

If it is truly in a negative equity position, and there would be no benefit to your creditors if it were sold, OR may just leave it alone. The only way you would find out would be to go bankrupt.

Of the three classic personal debt solutions, you appear to have consider 2 - bankruptcy and a debt management plan. Have you considered an Individual Voluntary Arrangement (IVA)? This would be assessed in the same way as your DMP was assessed, and would typically last 5 years. You would not be banned as a director, and any balances left outstanding after 5 years would typically be written off, depending on the property situation.

The firm I work for no longer offers personal debt solutions, however if you wish to explore this, please message me and a recommend a firm to assist with IVA advice.

 

[MBE2017]

Hi @jackfruit1234 ,


Of the three classic personal debt solutions, you appear to have consider 2 - bankruptcy and a debt management plan. Have you considered an Individual Voluntary Arrangement (IVA)? This would be assesed in the same way as your DMP was assessed, and would typically last 5 years. You would not be banned as a director, and any balances left outstanding after 5 years would typically be written off, depending on the property situation.

Just to add, and I could be wrong, but this potential option is viable as long as you can make and maintain the payments throughout the five year term.

How do I go about getting in touch with them?

You have one who has replied already in Chris, if you look at other insolvency threads in the past you will find a couple of other members regularly offering an exploratory call.

Best of luck.

 

[ChrisCallaghan]

(please forgive the overuse of StepChange links! As mentioned, as my firm no longer offers personal debt solutions, we have removed most of these pages from our own website)

 

[jackfruit1234]

Assuming your DMP was worked out correctly, you will likely have to pay the same amount in bankruptcy, called an Income Payments Arrangement/Order for 3 years. See the below guidance from StepChange for a further explanation.

Thanks a lot for your response - very helpful! My DMP was based on my current income which is around £2500pm, however my contract ends in a months time and I will then become an employee of said eccomerce business on min wage. I won't be responsible for the management or finances of the company as that will be the new directors duty, but i will help with day to day operation of the business, like social media marketing and posting orders. That's my current plan anyway...

Of the three classic personal debt solutions, you appear to have consider 2 - bankruptcy and a debt management plan. Have you considered an Individual Voluntary Arrangement (IVA)? This would be assessed in the same way as your DMP was assessed, and would typically last 5 years. You would not be banned as a director, and any balances left outstanding after 5 years would typically be written off, depending on the property situation.

I haven't looked into this, but will now. My initial concern is if I start working for ecommerce company on min wage i may not be able to afford these repayments.

 

[ChrisCallaghan]

however my contract ends in a months time and I will then become an employee of said eccomerce business on min wage.

Will you still be a shareholder in reciept of dividends in addition to your minimum wage? Is the family member who is going on as director also a member of your household?

No need to answer the above, but these are all things the OR ask and take into consideration.

I haven't looked into this, but will now. My initial concern is if I start working for ecommerce company on min wage i may not be able to afford these repayments.

The simple answer is that your monthly payments in IVA will be based on what you can reasonably afford. Certain creditors will expect a minimum pence in the pound return. My advice would be contact and insolvency practice who can explore this in more detail based on your true circumstances. I have just direct messaged you who I would recommend. The other insolvency regulars on here may also offer personal debt solutions, though I wouldn't wish to speak on their behalf.

 

[japancool]

An IVA will also allow you to increase your income during it, but you may need to pay more towards it if you do (essentially, you can keep half of any increase).

It does last longer than a payment agreement in bankruptcy though.

It might be worth waiting for your contract to end, resigning and becoming an employee (as long as you are a genuine employee, as Chris mentions above) before declaring yourself bankrupt.

If you don't have any excess income, you may not be asked to make a payment agreement. "May", being the operative word here.

 

[lesliedocherty]

Hi all

After a long time of consideration I am very close to declaring myself bankrupt. I have around 55k in personal debt (25k BBL, 2 personal loans and a couple Credit cards). i'm not behind on any payments, but I did a debt management plan and it would see me paying around 500 a month over 10 years. After doing lots of research it seems bankruptcy is my best option and start afresh/reset.

My situation is a little complicated though, I have a full time job which i get paid around £2500 a month for and around 6 months ago i started an online eccomerce business which is doing quite well, but doesn't pay me anything yet (I'm trying to keep that business in the black!)

I'm aware i can not go bankrupt if i am a director, but i want the business to continue so i would put a family member in as director and then resign, does that sound ok to do?

Also - I have leant the business some money from some of my personal debt, would the bankruptcy OR look to get back some of that debt from the eccomerce company?

Separetly, I have a property which has a mortgage of 120k, but the value of the property is almost nothing now due to cladding issues. Literally they don't sell. Would the OR take this an asset even though it's in negative equity?


Any advice would be hugely appreciated

Thanks.

Also, if you are thinking of being 'in business' going forward, all credit card processing companies ask if you have EVER been bankrupt, also any application for Business Insurance asks the same question, so, in the future this may be an issue

 

[jackfruit1234]

Also, if you are thinking of being 'in business' going forward, all credit card processing companies ask if you have EVER been bankrupt, also any application for Business Insurance asks the same question, so, in the future this may be an issue

OK noted. Thanks

 

[jackfruit1234]

An IVA will also allow you to increase your income during it, but you may need to pay more towards it if you do (essentially, you can keep half of any increase).

It does last longer than a payment agreement in bankruptcy though.

It might be worth waiting for your contract to end, resigning and becoming an employee (as long as you are a genuine employee, as Chris mentions above) before declaring yourself bankrupt.

If you don't have any excess income, you may not be asked to make a payment agreement. "May", being the operative word here.

Thanks for response. Do you know if it is possible to return as a director after your 1st year of bankruptcy? and will I have to inform the OR of my income for the 1st year of bankruptcy or after that too? Might be a better question for @Chris Callaghan

 

[japancool]

Do you know if it is possible to return as a director after your 1st year of bankruptcy?

Yes, it is after you're discharged - assuming you're not subject to any other restrictions.

and will I have to inform the OR of my income for the 1st year of bankruptcy or after that too?

No, not if you're not subject to a payment agreement or payment order.

 

[ChrisCallaghan]

@japancool is spot on with both those answers.