after trying to pursue IVA routes to no avail

[vjl]

We are seriously considering bankruptcy after trying to pursue IVA routes to no avail, we have a few questions we were wondering if anyone knew tha answers to.

1 - What is the NT tax code that people are put on during bakruptcy? Is this standard practice and surely it results in your employer finding out - If this is the case is it best pratice to inform your employer that you are filing for bankruptcy?

2 - We own a car that is worth £7000 as valued by the local dealer. My husbands car is a company car and he works away during the week. We are very reluctant to loose our family car as it is necessary for childcare etc and when my husbands PCP runs out in two years it is unlikely he will gain credit for another one and will then have to rely on the family car. We have read somewhere that a relative can buy the equity on a car in the same way they can the equity in a house... Is this the case?

3 - Our fixed rate with NR ends on our mortgage (we are in negative equity) and are concerned that it will be impossible to remortgage during the six years that the bankruptcy is on our credit files.... is it common for people to have to sell up during this time anyway dues to the inability to remortgage or are there deals out there based on affordability?

Thanks

[Adam Davies]

Hi
You will be on a nil tax code for the first tax year of your bankruptcy.There is no need to inform your employer and if they put two and two together then that's upto them,you should have confidentiality at work regarding your private affairs.There could be other reasons for nil tax code such as overpayment of tax etc.
A car worth 7k will be sold by the OR and you will be allowed to purchase another for approx 2k if you can show that you need the car.Other experts have advised to sell your car and purchase a cheaper one prior t your bankruptcy,keeping the invoices and money for your Official Receiver.A third party could but out the equity in your car,no problem.
You will be unable to remortgage whilst you are bankrupt,but once discharged[usually 12 months or less]you will be able to,however this will be at a premium rate.You may find that the NR variable rate will be better than you will get else where.
Regards

[vjl]

Hi Andy,

Thanks for your quick reply!

The tax code thing maybe a problem as I work in a very small company and have only been there since September. I am concerned about the repercussions although bankruptcy isn't mentioned anywhere in my contract.

The NR variable rate maybe through the roof though as I am in a together mortgage and I have heard one or two things about them being less than helpful if any of the attached unsecure amount is included in an IVA or bankruptcy. I have even seen one posting saying that by declaring yourself bankrupt is violating the terms of your mortgage and they start reposession proceedings even if you can afford the mortgage....

Car information very useful. If the car is worth £7000 and a relative bought it for £5000 would that be acceptable considering the £2000 allowance..

Thanks for your advice.. This site is a saviour!

[Adam Davies]

Hi
Starting with the car,as long as the ORs policy is 2k allowance AND they agree that you need a car then yes this will be fine as long as your valuation is accurate.ORs vary from one region to another and there would be no harm in phoning your local one and discussing your situation.
You have the same job protection that we all have,your employer can't 'sack' you because of bankruptcy unless it is in your terms and conditions.Bearing in mind that there will be a small advert in the local paper it may be better to inform them of your impending bankruptcy.
I would speak with NR,are they your only secured loan on the house ?.If so then they will be reluctant to repossess as they will loose the negative equity in the bankruptcy
Regards

[Reviva UK]

hi there vjl

some things to consider.

1. About the car - If you sell the car (worth £7k) for £5k that is what the OR could term as a "transction under value", i.e. you are hiding assets and this would disadvantage your creditors.

Definately worth sorting the car prior to B be either downsizing or turning up at the OR's office with a chequ for the value difference. You might also deduct the £970 for the joint B costs.

2. The NT ( No Tax ) code is usually applied for the balance of the financial year. So if you went B before April, you would have a code change but it would revert to the normal code in April. Basicall the tax you would have paid is paid directly to you and then you have to forward this monthly to the official rceivers agents ( usually Clarke Willmot & Clarke based in Taunton)

There are loads of reasons why you might have an NT tax code - doesn't only mean you are in B. You might have overpaid previously so they are evening it out.

3. Fixed rate Mortgage - firtly the mortgage market has changed considerably over the last 9 months so deals that were available then are long gone.

If your NR mortgage is 95% then your are highly unlikely to get a deal anything like that for 3 years. You can certainly get a remortgage within the 6 year period but it will be dependant upon the equity as well as credit score.

Is is a posibility to speak to NR to change deals now for a 5 year fixed ( not remortgage just deal swap) even if the rate is slightly higher in the short term it would probably be cheaper overall.

Can't see that they would take the house back if you went B. They want to lend money not loose it and they wpuld certainly have huge costs in evicting you even if the judge allowed it and without any arrears I just can't see it happening.

I would be more concerned about the equity in the house and ensuring that your family have the funds to buy the beneficial interest rather than worry about the car.

[Skippy]

Regarding the NT code, you will only get one for the remainder of the tax year when you go BR, and only if HMRC set it up in time. I went BR on 29th March last year and never had an NT code as the new tax year started on 6th April.

[vjl]

Thank you all for your replies...

Reviva,

We have a 95% mortgage with nr but also a secured loan that takes us to being in negative equity by 10% with a different company. Even with the most optimistic valuation there would be no financial gain from anyone selling our house, we have been assured from many angled that the home is safe. We also have a diposable income of £600 to pay into an income payments order so if our mortgage went up considerably we should be able to meet payments along with a guaranteed payrise in 18 months etc.

The only reason I am concerned about the car is that I am on my own all week with a 14 mth old baby and my family live 250 miles away and during school hols (I am a teacher) I travel down for some company support and sanity. I wouldn't feel that comfortable doing this in a banger. I know we are in a monumental mess with our finances but over the six years we are blacklisted the car would mean a lot more to me than the money it would fethch if traded in.

When you say you could deduct the £980 fees is that from value of car? I thought we would have to find that from our standard salary. Does this mean that is the car is worth £7000 and we were allowed £2000 for a cheaper replacement we could technically send a cheque to the OR for £4200 taking the fees into account? I will call our local OR to discuss the situation but it would be good to be armed with the facts in the meantime...

Having read skippy's blog when you get the 'bankruptcy pack through' and have to supply all of your 12 months bank statements will they make you return items that you have purchased in the last twelve months lik our sons pushchair etc or is it just for admin reasons?

Also, does anyone know alliance and leicesters position on bankruptcy as we have just opened a new account with them and tranferred all of our debits etc

Thank you all so much - It is so much help!

vjl

[Adam Davies]

Paul
Can you just clarify the car situation.
If the car was valued at 7k and VJL had a third party prepared to gift them 5k and this was handed over to the OR[after confirming that the OR was happy to allow a 2k allowance for a car]then surely this would be acceptable ?
Regards

[vjl]

Hi Paul,

Also to clarify I have just been on NRs website and to change to a 5 year fixed rate would up our payments by £400 and the rate is higher than their standard variable rate. Is it better (if a little risky) to just revert to their variable rate after our 3 year fixed is up... will we have to be re-credit checked to deal swap then or can we deal swap during the BR? ie is it best to deal swap prior to declaring ourselves BR?

[Skippy]

I didn't have to hand anything back that I had bought and there were a few things that I was worried about. If I had bought a 50" plasma TV or an Bose stereo system then they would have probably seized these, but they won't worry about a pushchair.

[Reviva UK]

Hi VJL

sorry I wasn't clear - children are in bed now so am undisturbed.

CAR

If you are unemployed and are not actively seeking work then it is highly probable that the official receiver WOULD NOT ALLOW a car for your personal use during the bankruptcy period. Because you are unemployed you technically do not need a car to maintain an income therefore my experience would be that you would loose the car and in order to keep it would need to find the full value of the car.

Therefore the best way for you to 2 keep the car is to legitemately sell it to a family member for proper market value ( http://www.parkers.co.uk/cars/prices/) adjusting for condition and mileage. Lets say that the private sale value is £6400. You could legitimately use £970 of this for the joint court fees leaving £5430 to pay to the OR. You would also be able to deduct a modest amount from your living expenses for insurance, car tax, fuel, maintenance etc, but as it is the second car these cannot be extreme.

Income Payment Agreement
if you have £600 per month available - please check that you have used all your allowances first - then it is likely you will pay 70% of this figure for 3 years as a contribution to the debts ( i.e. about 15k in total)

Mortgage
You need to do the math regarding the mortgage. i.e. If you went for a 5 year fixed and your payments went up by £400 pm your disposable income would drop by £400 pm thus leaving only £200 disposable so you would end up paying 50% into an income payment agreement.

technically you would be £80 pm worse off

(£600 disposable of which £420 goes into an IPA = 180 left per month
vs
£200 disposable of which £100 goes into an IPA = 100 left per month)

So the decision is £80 per month extra availabe BUT remortgage ( or stay at standard variable rate ) in 3 years at an unknown rate.

I am not a mortgage advisor and am not regulated by the FSA so legally I cannot give mortgage advice so I would suggest you spend an our with a mortgage broker comparing figures. You need to know what the interest rate would be at todays figures for a remortgage if you were discharged from B. I suspect it is about the 8% range.


Giving back Stuff purchased in last year
The only way this is likely to happen is if you have been majorly reckless and have been on a huge spending spree and this would be identified by the statements.

The OR is looking for fraud, hidden assets, reckless spending knowing you were unliklely to be able to pay it back.

In truth the majority of people borrow from one lender to satisfy another debt so debt consolidation is usually huge in the year prior to B.

I always provide bank statements, credit card statements, loan agreements, mortgage redemption & estate agent valuation ( x2) plus similar house sale into from http://www.upmystreet.com/. i have always found that it is better to be over prepared and have a huge file to send to the OR as it makes their life easier so they seem more helpful to you.


Hope this helps - sorry it is so long

[vjl]

Hi Paul,

I am actually a full-time teacher with a salary of £36K not unemployed at all and I need the car to take my baby to childcare and to get to work particularly when my husband is working away during the week. Would be impossible to work without one.... Does this mean I can change the figures you have suggested to possibly allow for £2K allowance for car from the OR.

Really the last year has been debt consolidation and a house sale with the value of our previous house dropping by 15K the day prior to completion... would the OR consider this reckless and what happens if they do think you are reckless can you go to court/fined or worse??

VJL

[Reviva UK]

Hi VJL

sorry should have asked about a job earlier - just sounded like you were not working.

if you are working then keeping a car and asociated costs of running it are fine.

as you are working you don't need to sell car to a third party but they do need to buy out your "beneficial interest" in it LESS the allowance of 1500 - 2000. this does seem to vary dependant upon your geography. let me know where you are ( COUNTY only ) and I will check tomorrow for you.

from what you said about the debts doesn't sound reckless at all - just normal. If you are concerned you might find it helpful to have a brief chat with one of the forum experts just so you have some peace of mind.

would really help a lot if you had the documents regarding the house sale etc ad this will confirm your position and help the OR understand more quickly what has happened.

[vjl]

Hi Paul,

Many thanks for your reply, we are in Bury Greater Manchester.

Do you know how much the fees generally amount to when someone is buying our interest in the house. I realise it is a one off payment of £1 but people have quoted prices from £500 - £1000. With this and the fees how on earth can broke people afford to go bankrupt!

[Reviva UK]

Hi VJL

I will check out the car situation in manchester tomorrow and advise.

fees for purchasing the beneficial interest are £1 for the interest ( if in negative equity) PLUS the legal fees for OR of approx £230 PLUs your purchasers solicitors fees of £x.

suspect 6 - 700 ish