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[sengat1t]

I have an appointment with a local debt advisor in 2 weeks but my head in swimming in the meantime...........

I understand I should not pay back loans to family and friends before sequestration. I am a bit worried though because about a ten months back (this was before I was insolvent though) I paid around £350 back to my dad on his credit card.

How likely is it that they will ask to see statements this far back, and what would happen? The worst thing would be for them to demand the money back from my dad. I will do anything for this not to happen. Not only this, but since around three months ago I have been making minimum payments of £25 each month directly to his card for another purchase. There is no hiding or avoiding this. WIll I be able to continue making this payment during bankruptcy? If I don't make this minimum payment the account will go into arrears. The balance on his card is about £650.

I am tempted to wait a few months before my application so that the initial £350 will 'drop off' my account statements. But then of course there is no hiding or avoiding the minimum payments I am currently making.

ALso, I understand that the sequestration laws in Scotland are changing in April. But I am not too sure what that means for me..................

[Hayden]

Hi sengat1t and welcome to the forum

I am glad that you have made an appointment to see your local Money Advisor. That is always a good first step if you are thinking about going Bankrupt in Scotland.

In terms of paying back debts before you go bankrupt generally speaking you should not do this. It is known as making a preferential payment. However the real no no is if you make a payment to someone when you have already made the decision t go Bankrupt with the view of paying them back before hand and thus keeping them out of the process.

Having said that if you made a payment to your Dad 10 months ago this will not be a problem. It was a long before you decided to go bankrupt and you did not make the payment specifically so your Dad would not be involved so there is no need to worry there

In terms of being asked for bank statements it is normal to be asked for the last 10 months statements. If this shows the payment to your Dad there is no need to worry.

Re the £25 payments you have been making this is also not a problem and you will not have to pay these back. They are treated as legitimate payments as per the agreement with your Dad. It is only large unusual payments which are clearly done to keep someone out of the bankruptcy which are a problem. Once you are bankrupt you will not be able to include a specific repayment to your Dad in your living expenses budget. However you can keep paying him if you use money from the other budgets that you are allowed (see the Beat My Debt living expenses guide for more information on this).

Hope this all helps to put your mind at rest. in terms of the potential change in the law coming up in April I am not sure about that but I am sure someone will be along shortly to give more info

[sengat1t]

THanks for the help. This is the best site I have come across for proper information. There are so many people out there who don't know what they are talking about yet they are somehow in positions to advise............

Once I do go bankrupt, regarding the payments to my dad by diverting it out of monthly expenses, is this something I will have to do subtly ie. cash rather than a direct debit or is it allowed by the OR? I mean, do they monitor your account to make sure you are spending your money on what was agreed on or simply to make sure you do not have any surplus left which could be used to pay back creditors? Is there a specific rule against borrowing money from family/friends and paying this back to them through diverted monthly expenditure?

I have another question-I need to pay my orthodontist £800. I want to do this before going bankrupt. Would this be considered a preferential payment? I had thought that as it was dental work it would be allowed but since it is quite a high amount and not strictly essential I feel they might object. THis is for work that has been ongoing but my treatment is almost finished and it is the last installment. It wasn't a credit agreement as such but just a 'pay up' arrangement. I hven't made any payments to them in almost a year so there is no paper trail. Would saying that I simply had to see the dentist for some vital work wash with them? ALternatively I could pay a series of a few smaller amounts to arouse less scrutiny.

Thanks for the help

[Hayden]

Really glad you are finding the site useful sengat1t

In terms of on-going payments to you Dad I would make this in cash. Given they are being made out of your agreed living expenses budget there should not be any really issue. However the letter of the law is that you should not continue to pay any of your creditors (whether they are friends and family or not) while you are so probably best to keep it under the radar

The Trustee (This is the name of the Official Receiver in Scotland) does not monitor your bank account but they do have the right to periodically ask you for bank statements (although this is by no means certain) so best not to pay your Dad from the account. As you only pay £25 a month I assume it would not be a problem.

Paying your dentist for work done is potentially an issue. At the end of the day they are a creditor and so if you pay them £800 just before you go bankrupt that is a preferential payment and in theory the Trustee could demand this money back from them. The best solution is not to pay them and include them as a creditor.

[sengat1t]

Thanks for clearing up issues regarding family, that has definitely settled my mind on that one.

I have the citizen's advice appointment in a week but I'm making myself ill with worry before then.

I would ideally apply for a LILA but I would need to dwindle my money down artificially to below £1000 to do that.............don't really want to come under scrutiny for doing that. ALternatively if anyone has any bright ideas for ways to dwindle money down legitimately, I'm listening.

If I apply through a certificate with say £1500 savings........Would they take the £500 or all of it? I am unemployed but not on benefits, been living on my savings. Been told this is unlikely but I am worried. COuld they take my savings and force me to go on benefits?

Re the dentist, I'm considering just making a single payment of around £200 to them. If it comes under scrutiny I'll argue that this was needed for work to be completed.

[Melissa S]

Hi sengat1t

In response to your question regarding the changing laws of sequestration in Scotland that come into force on the 15th April I have done a bit of research. The changes are due to the implementation of a law called the Bankruptcy and Debt Advice (Scotland) Act 2014. There are a few important points.

The first thing to say is that you will be required to get advice from an approved money adviser before declaring bankruptcy. However given you are already planning to do this it is not a great issue for you.

One of the biggest changes is that if you are required to pay anything towards your debts because you have disposable income after April 15th it will now be for a period of 48 months (currently 36 months). The payment you would be asked to make will no longer called an 'income payment agreement' but a 'debtor contribution order'. If you have no disposable income you will not have to worry about this.

If you have a debtor contribution order you are able to apply for up to 6 months payment holiday if you have a financial crisis, however, you will still ultimately have to pay for 48 months as an extension will be added to the end to cover the months you missed.

It is also important to be aware that after April 15th at the end of your sequestration period you will no longer be automatically discharged. Your Trustee will need to apply for this (although I cannot see there will be much problem with this). My understanding is also that if you are discharged but then come into any assets that the trustee deems claimable under the bankruptcy they could to appeal to re open your sequestration. I have to say I am not 100% sure about how this will work in practice and what will fall under the category of "claimable".....

The last thing to mention is that after April 15th you will get 6 weeks of breathing space form your creditors once you have had your appointment with the approved money adviser. This means they cannot take any action against you in this time, and gives you time to decide what is best.

It looks as though there are some quite significant changes here which overall make going Bankruptcy more onerous in Scotland. I am sure there will be much more comment here about it before 15th April so watch this space.....

[Geraldine]

Thanks for that info on the impending new rules in Scotland Melissa.

Hello sengat1t

If you have £1500 of savings the first thing to say is that this is definitely an asset which could be at risk if you go Bankrupt. Given you are unemployed and have little or no income it might be possible to argue that you need to keep some or all of it to maintain your living expenses. Unfortunately it is hard to say how the Trustee will react to this request as it is so subjective. I think that the Trustee will question why you are not claiming benefits to help with your living expenses. Why are you not doing so?

In terms of the dentist I would agree with your plan. I do not think there will be any issue with you paying £200 to them. Remember you will also need to pay £200 for the bankruptcy itself and with your living expenses (draw a bit of cash etc) between now and going bankrupt I would have thought you can get the savings figure well below £1000 and not have much to worry about.

[Geraldine]

By the way sengat1t how much do you owe in total? I mean why have you decided to go bankrupt? At the end of the day if you owe considerably more than £1000 then even if some the saving you have are taken when you go bankrupt try to look on the bright side. You will have still achieved your goal of writing off a considerable amount of debt that you have no hope of repaying.

Please try not to worry about the small amount you might lose. Try to focus on the massive benefit you will gain I know that helped me when I went through the process. I cannot believe it is over 5 years ago. Time really does fly. Try to keep positive. Soon all of this will be behind you.

[sengat1t]

thanks for doing the research and for the nice messages!

I agree, I'm getting bogged down with what little I may lose and losing sight of what I am gaining- becoming debt free, ridding myself of a huge amount of worry, and gaining a fresh start.

I now understand that whichever route you take, LILA or certificate, ANY amount of savings is at risk. It is untrue that in a LILA the £1000 is protected. The £1000 threshold is simply a route into sequestration.

I'm just going to live my life until applying in March and spend what I need within reason. To be honest I know I'll come under scrutiny anyway as after the new year I definitely started spending more than usual- I've lived like a monk for the past 6 months but have now started seeing a counsellor which is £50 a week , volunteering, eating better and getting out a bit more. Whilst it is unusual for me it is certainly not extravagant- £1600 in almost 3 months. Does this sound like an unreasonable amount? I'll have to explain the sudden spending but I can definitely justify it. I

At the end of the day the worst that may happen is that I get a restriction order and lose whatever savings I still have when I apply. I feel though that not going crazy and emptying my account right before appplying will count in my favour-is this correct?

Thanks again for the support

[Geraldine]

No problem at all sengat1t

Please let us know if you need more help. Are you still going to your appointment with the money advisor?