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A good starting point for bankruptcy questions
By Leerhendy1
#33558
hi, please would you be able to advise as per my questions below.

I have suffered from gambling addiction most of my life but have managed to stay in control the most part. Due to recent stresses in my work and personal life, this spiralled out of control ending up with me accruing debts of almost £40000 a mixture of unsecured loans and credit cards.

I own no property as rent privately, my car is valued at just £395 and I have no other assets. My monthly take home income is £2000 and I live with my fiancé.

1. When declaring bankruptcy, what is included in the household income? (my partner works part time, receives child benefit, monthly income from a property she owns (mortgaged) and maintenance from her ex-partner for her son that lives with us full time)
2. I have a 12 year old who lives with us 2-3 nights per week and we are expecting our first child together in July, so our household income will change. How would this affect a potential IPA?
3. I have already spoken to a debt management company who recommended an IVA (I assume due to the increased income for them) The proposal recommends a payment of £205 pm for the lifespan of the IVA. If I were to be declared bankrupt, would this payment be the same?
4. What are the industry standard prices for an IVA nominee and Supervisor?
5. Due to the majority of my debts being due to gambling (approx. 75%) I would expect a BRU to be applied. If this was for 3-4 years as the register examples would suggest, would this be from the date the bankruptcy was lodged and as such, be finished 3-4 years from when the bankruptcy started? (less than the length of an IVA)
6. When completing an expenditure for the OR, which aspects require evidence ie utilities?

Thank you in advance for your help, regards Lee
User avatar
By Geraldine
#33559
Hi Lee. Welcome to the forum :)

From what you have said about your situation and the fact you have nothing to lose it sounds as though bankruptcy would possibly be a better solution for you than an IVA.

However your situation does have various complexities. As such before making your decision on whether to go BK or do an IVA I strongly advise you have a chat with James Falla at Beat My Debt.

In the mean time I have answered your questions as best I can:

1. When declaring bankruptcy, what is included in the household income? (my partner works part time, receives child benefit, monthly income from a property she owns (mortgaged) and maintenance from her ex-partner for her son that lives with us full time)

A - You will need to include all her income in your income and expenses budget. However I would be inclined to leave out the income she gets from her rental property (and the associated costs) as this would simply confuse matters

2. I have a 12 year old who lives with us 2-3 nights per week and we are expecting our first child together in July, so our household income will change. How would this affect a potential IPA?

A - Clearly this change will affect your household income and expenses meaning any surplus income will also change. You would need to make this clear to the official receiver at your interview. If an IPA is set up on the basis of your initial income and expenses this can always be amended later when the changes happen.

3. I have already spoken to a debt management company who recommended an IVA (I assume due to the increased income for them) The proposal recommends a payment of £205 pm for the lifespan of the IVA. If I were to be declared bankrupt, would this payment be the same?

A - It is difficult to comment without knowning all your figures. However in my experince the payments would be no more and are normally a lot less if you go bankrupt compared to an IVA.

4. What are the industry standard prices for an IVA nominee and Supervisor?

A - As far as I am aware the standard nominee fee is around £1000 and the nominee fee is 15% of ongoing payments into the Arrangement.

5. Due to the majority of my debts being due to gambling (approx. 75%) I would expect a BRU to be applied. If this was for 3-4 years as the register examples would suggest, would this be from the date the bankruptcy was lodged and as such, be finished 3-4 years from when the bankruptcy started? (less than the length of an IVA)

A - As far as I am aware this is correct yes.

6. When completing an expenditure for the OR, which aspects require evidence ie utilities?

A - When I went bankruptcy I did not have to give any evidence. My expenses were within the guidelines and so they were not questioned by the OR. As long as nothing is unusually high I do not believe much evidence is required. Have you downloaded the Beat My Debt living expenses guide. This will give you a good idea of the allowances.
By Leerhendy1
#33564
Hi Geraldine,

Thank you for your reply, I have lots of conflicting advice as to what would be the best course of action and I am struggling with the potential risk of being asked to pay a much larger amount to an ipa (which I will not know until I have spoken to an OR)

Does anyone have any experience of initially seeking advice for an IVA and given a monthly figure they would be expected to pay compared with what they actually paid as part of an IPA?

Thanks, Lee
By Leerhendy1
#33565
Hi,

Can payments my partner pays towards her unsecured debts be accounted for when an OR calculates the household surplus income for an IPA?

The bankruptcy will be mine only.

Thanks, Lee
User avatar
By Geraldine
#33566
Hi Lee

Hope you are well :)

If you are living with your partner and your finances are intertwined the official receiver will usually do a household income and expenses budget. In other words they will include the total household income (both you and your partner's income) and the total household expenses. The household surplus is then split between you and your partner on the basis of what % of the income you each generate.

Now and this is important. The OR will not allow the cost of any of your partner's unsecured debt payments to be included in the household expenses. If they were included it would not give a true reflection of the surplus income.

Your partner's debt payments must be left out. The household surplus is then calculated and split between you. The OR will expect you to pay your share towards your debts. Your partner will keep her share. She must pay her debts out of this share. If she does not have sufficient to do this then by definition she is also struggling with debt. As such she may also have to go bankrupt or use an alterntive debt solution.

Hope this helps
User avatar
By Geraldine
#33567
By the way Lee. In regards to your other question.... as far as I am aware (and I hope some others will weigh in here) the way that surplus income is calculated in an IVA is pretty much the same as for bankruptcy. As such it would not be logical for you to pay more in a Bankruptcy IPA than an IVA.

Personally I read about more people complaining it is the other way round. ie they are struggling to pay the £120/mth their IVA company says they can afford so then they go bankrupt and pay less or nothing at all....

If you have been speaking to an IVA company and they are suggesting that somehow the OR would ask for more money than they have calculated you can pay in an IVA I think they are trying to sell you and IVA rather than have your best interests at heart.... Just my view of course :)
User avatar
By James Falla
#33572
Hi Lee

I have been advising people about IVAs and bankruptcy for 20 years. In that whole time I can safely say I have never come across a sitution where someone was asked to pay more in bankruptcy than an IVA. I have seen a lot of people who have started an IVA and then stopped it to go bankrupt and I can tell you their payments are always lower.

The very concept of paying less in an IVA simply does not make sense. The point of an IVA is that you need to pay as much back as you can to your creditors. As such how could an IVA company somehow "hold back" part of your surplus income for you to keep which would magically become available in bankruptcy.... Given that IVA company fees go up the more you pay it is in their interests to make sure you are paying as much as you can. They will never shoot themselves in the foot by asking you to pay less than you can afford.

In regard to calculating your surplus income be VERY careful as I believe you may have misundestood how the OR does this. They will NOT allow a budget for your partner's debt payments to be included in the household expenses. If they did this would mean you were contributing to these payments while not paying your own debts. This is not allowed.

They will strip her debt payments out of the budget. Then calculate the household surplus. This is then split between you both. She can keep her share and use this for whatever she wants. Clearly if she has debt payments she can pay them using her share.
By Leerhendy1
#33576
Hi James and Geraldine,

Thank you both for the excellent advice, it has been very much appreciated and has helped me make the decision to go bankrupt, which has been accepted.
I am waiting for the OR to call to arrange the interview for which I am a little nervous but feel I can now start to plan for the future where before I saw no way out.
James, with regards to my SOA and my partners debt, I haven't included this in the budget and all income has been included so our surplus calculation is correct with her debts to be paid from her surplus and any efficiencies we can make in our monthly budget so hopefully no issues with the OR there.
Best regards, and thank you both once again, Lee